Archive for February, 2015

Now Is the Time to Prepare for Health Plan Audits

Compliance requirements of the Affordable Care Act are gradually being implemented, and with each new provision that employers must comply with, the more you have to keep track of.

But 2015 is really when the rubber hits the road for ACA compliance. This is the year you’ll learn more than you ever wanted to about the various ACA coverage and reporting requirements.

There are three federal agencies in charge of ACA compliance: the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), the Internal Revenue Service and the Department of Health and Human Services.

The main agency in charge of compliance will be EBSA and there are a number of areas the agency will be looking at.

Already, EBSA has set up a health benefits security project team to handle ACA enforcement. Getting numbers is difficult, but EBSA said in 2010 that it was hiring about 670 new investigators to help with matters such as ACA compliance audits. By now, hundreds of them are be on board, trained, and ready to investigate.

EBSA has the authority to conduct audits on benefit plans that are governed by the Employee Retirement Income Security Act (ERISA). DOL audits often focus on violations of ERISA’s fiduciary obligations and reporting and disclosure requirements.

The DOL may also investigate whether an employee benefit plan complies with ERISA’s protections for plan participants, such as the special enrollment rules or mental health parity requirements. Recently, the DOL has been using its investigative authority to enforce compliance with the ACA.

Penalties for noncompliance and other errors found during an audit can be steep. For example, during the 2013 fiscal year, more than 70% of audits resulted in monetary fines or other corrective action.



There are several factors that increase or indicate your likelihood of being audited.

Audits can be random or triggered for a variety of reasons. Some audits can be avoided through careful administrative efforts, while others can be initiated through no fault of your own.

Common triggers for a DOL audit include:

  • Enrollee complaints – If any of your plan’s enrollees complain to the DOL about potential ERISA violations, the plan will likely be subjected to an audit. According to a DOL audit summary, 775 new investigations in 2013 resulted from participant complaints.
  • Incomplete or inconsistent information – The DOL is more likely to investigate a plan that has incomplete answers on the plan’s Form 5500, or if information you report is inconsistent from year to year.


Another reason your plan might be selected for an audit is the DOL’s national enforcement priorities or projects, which focus investigative resources on certain issues.

According to the DOL, the following are areas of heightened importance for audits:

  • Major case enforcement – EBSA is focusing on major cases in order to best protect areas that have the greatest impact on plan assets and participants’ benefits.
  • Employee contributions initiative – EBSA is focusing on delinquent employee contributions in order to help protect employee contributions to their 401(k), health care and other plans.


But wait, there’s more!

In addition to the above, the DOL has several national enforcement projects that receive investigative emphasis:

  • Contributory Plans Criminal Project
  • Fiduciary Service Provider Compensation Project
  • Health Benefits Security Project
  • Rapid ERISA Action Team
  • Employee Stock Ownership Plans
  • Voluntary Fiduciary Correction Program


Remember, DOL audits can be triggered by mistakes you make, complaints by your employees (whether valid or not) or if your plan is swept up in an area on which the agency is focusing its enforcement efforts.


Be prepared

But even if you’re not at fault, if your plan is audited, you have to be prepared and have all of your documents and documentation in order.

The DOL has asked for the following in its audits during the last few years:

  • Plan documents for each plan, along with any amendments. (Content in all plan documents must comply with ERISA regulations.)
  • Trust agreement (if any), and all amendments.
  • Current summary plan descriptions.
  • Form 5500 and accompanying schedules for most recent plan year and previous three years.
  • Listing of all current service providers and those from the past three years.
  • All current contracts with administrative service providers on the plan, and the most current fee schedules.
  • All insurance contracts between plan and service providers.
  • Name, address and telephone number of plan administrator.
  • Sample HIPAA certificate of creditable coverage and proof of compliance with on-time issuance of COBRA notices.
  • Notice of special enrollment rights and record of dates when notice was distributed to employees.
  • Written eligibility criteria for plan enrollment.
  • Documentation regarding all mandatory employee notices, such as Statement of ERISA Rights, Women’s Health and Cancer Rights Act notice, etc.
  • Copy of most recent monthly bill for premiums from insurance company.
  • Copy of check, wire transfer or other method of payment for insurance premium.
  • Enrollment form(s) for the plan.
  • Employee handbook.
  • All documentation of claim adjudication and payment procedures.
  • Fidelity bond (if any).



Fines can be substantial.

ERISA’s reporting and disclosure requirements carry a fine of $110 per day, per person, per violation for every plan participant who was covered under a single contract.

The fine is $200 for plan participants covered by a family contract.

ERISA fines represent just one flag from the DOL auditor and can cost the plan sponsor dearly. Most fines for noncompliance under the ACA are not tax-deductible, either.


auditor cube rendition

More Than Half of Employers Feel Unprepared to Manage ACA Compliance

A new study has found that more than half of large employers are not prepared to properly comply with all of the requirements of the Affordable Care Act.

The study by ADP, a payroll vendor, looked at how companies are gearing up to comply with the ACA’s regulatory requirements.

Because the research looked at the preparedness of large employers, which have sophisticated human resources departments, it is likely that small and mid-sized employers are even less prepared.

The study, “Affordable Care Act and Employer Confidence: Navigating a Complex Compliance Challenge,” found that while 70% of large employers are handling ACA compliance internally, these employers do not feel fully prepared to manage several critical compliance requirements, including:

  • Exchange notices (62% said they don’t feel prepared to deal with the notices)
  • ACA penalties (60%), and
  • Annual health care reporting (IRS Forms 1094/1095-C) (49%).

“As we meet with large employers, it has become clear that many don’t have the systems or processes in place to meet ACA compliance requirements,” said Vic Saliterman, senior vice president at ADP.

To clear the air, we provide the following guidance on these three areas of confusion:


Exchange notices  – The ACA requires employers to provide all new hires and current employees with a written notice about the option to purchase coverage through public health insurance exchanges. This requirement is found in Section 18B of the Fair Labor Standards Act.

In general, the exchange notice must:

  • Inform employees about the existence of the exchange and describe the services provided by the exchange and the manner in which the employee may contact the marketplace to request assistance;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes; and
  • Include contact information for the exchange and an explanation of appeal rights.


The Department of Labor has provided the following model exchange notices:

  • You can find the model exchange notice for employers that do not offer a health plan here:; and
  • You can find the model exchange notice for employers that offer a health plan here:

Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.


 ACA penalties

Applicable large employers can incur penalties, which are known as “employer shared responsibility taxes,” if they either:

  1. Do not offer minimum essential coverage to at least 95% of all full-time employees. The penalty for not offering coverage is $2,000 for each full-time employee.
  2. Do not offer a plan that provides minimum value and is affordable (9.5% of wages). The penalty for failing to do so is $3,000 times the number of employees for which the employer fails to offer minimum value and affordable coverage and if those employees receive a subsidy to purchase coverage through a state-run exchange.


The final regulations include transition relief for 2015 that allows employers with 100 or more full-time employees (including full-time equivalent employees) to reduce their full-time employee count by 80 when calculating the penalty.

This relief applies for 2015 plus any calendar months of 2016 that fall within the employer’s 2015 plan year.

But, under the final regulations, employers that change their plan years after Feb. 9, 2014, to begin on a later calendar date are not eligible for the delay.

In subsequent years, the penalty amount is expected to be indexed by the premium adjustment percentage for the calendar year.


Annual health care reporting

Applicable large employers must report to the IRS information about the health care coverage, if any, they offered to full-time employees. The IRS will use this information to administer the employer shared responsibility provisions and the premium tax credit.

Large employers also must furnish to employees a statement that includes the same information provided to the IRS. Employees may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.

Annually, large employers must file with the IRS no later than Feb. 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates:

  • IRS Form 1095-C (called “Employer-Provided Health Insurance Offer and Coverage”), and
  • IRS Form 1094-C (called “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns”)


Transition relief provides that employers do not have to file information returns with the IRS and furnish statements to their full-time employees until 2016 for the 2015 year.

Thus, under this relief, the first statements to employees must be furnished by Jan. 31, 2016, and the first information returns to the IRS must be filed by Feb. 28, 2016 (March 31, 2016, if filed electronically).

Although the first information returns and employee statements are not due until 2016 for the 2015 year, employers may choose to file for the 2014 year.

The IRS has encouraged employers to voluntarily comply with these information reporting provisions for 2014 in preparation for the full application of the provisions for 2015. No penalties will be applied for failure to comply with these information reporting provisions for 2014.

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Supply Chain Risk Lessons from the Ports Strike

The West Coast ports strike illustrates the dangers of just how fragile most companies’ supply chains are, as disruptions to the delivery of crucial items threatened the viability of many businesses during the industrial action.

Retailers waiting for shipments had empty shelf space where some items were supposed be, carmakers suspended operations because key parts were sitting on the docks or waiting to be unloaded, and some companies were forced to lay people off due to the ports’ inability to take in more cargo.

The fallout should come as no surprise. Whenever there is a supply chain disruption, companies suffer as products and key parts deliveries are delayed indefinitely. As more companies rely on just-in-time manufacturing and the supply chain stretches to all corners of the globe, small hiccups can turn into big problems.

Prudent companies address these challenges by building safeguards into their supply chains, and planning that includes contingencies. They enhance those risk management efforts by purchasing contingent business interruption insurance, which will cover lost profits if an event shuts down critical suppliers or major customers.

And while it’s typically the woes of big companies that make the news, the impact is felt far and wide – and small companies are especially vulnerable. That’s why it’s important that you create a solid plan for dealing with disruptions to your supply chain, as most every company has one to some extent.


Understanding your supply chain

You’ll be best able to reduce the effects of supply chain disruptions on your business by identifying the risks within your supply chain and developing ways to mitigate them. You should document this process in your risk management plan, which is part of your overall business continuity plan.

There are four main types of external supply chain risks, which are largely out of a business’s control:

  • Supply chain risks that are caused by any interruptions to the flow of products, whether finished goods, raw material or parts, within your supply chain.
  • Environmental risks, which are related to economic, social, governmental, political and climate factors – including the threat of terrorism – that affect the supply chain.
  • Business risks, which can be caused by factors such as a supplier’s financial or management stability, or purchase and sale of supplier companies.
  • Physical plant risks, which can be caused by the condition of a supplier’s physical facility and regulatory compliance. For example, if your key supplier has a machinery breakdown and can’t produce, or regulators shut the facility down, your supply chain will be affected.


Developing a plan

The best way to manage a supply chain disruption is to prepare for it. You should undertake a business impact analysis to prepare your business to address the impacts of supply chain disruption.

Form a team of key personnel that should include shipping and receiving, and management and supervisors involved in your key processes. The team should:

  • To mitigate risks caused by disruptions, consider lining up alternatives to critical suppliers in advance, as finding a new supplier in the midst of a crisis situation could be challenging. It’s important this is done in advance so that you aren’t trying to hunt down a new supplier during a disruption. Even if you find one, you still have to certify that it is able to meet your quality standards, which can be a time-consuming process.
    One option is to contract with a supplier in advance, so the contractor has already been certified and has capacity available as soon as a company loses a critical supplier.
  • Model the impact of disruptions on your sourcing and inventory strategies. You should do this for the four disruption types listed above, so that all contingencies are covered. Under these scenarios, think about how non-delivery of a key part or material would affect your operation. Examine the likely fallout and build contingencies based on those results.
  • Outline the steps that need to be taken for all of the “what if” scenarios that would affect your operations. Be realistic about assessing your capacity to respond to these scenarios. If you would be rendered unable to cope, start now in developing plans.
  • Engineer an actionable contingency plan for failure of any supply chain pillars. Identify key thresholds for executing risk-mitigating decisions, like sourcing from alternative partners, channels or alternative manufacturing and distribution systems whose risks are divorced from the preferred options.
  • Most disaster situations lead to chaos due to the non-alignment of multiple departments within the same company. That makes centralized decision-making based on real-time information from all sources crucial. Institutionalize a contingency management team that will champion all actions during times of disruption. This team must be comprised of senior people who can exercise influence over the various decision levers of the company.
  • Make sure your supply chain is flexible to dealing with risks. Look at opportunities to alleviate current supply chain bottlenecks, model alternative transportation network configurations and look for alternative sources of supply.


The insurance backstop

Companies can address supply chain risks either through business interruption insurance or contingent business interruption insurance. Business interruption insurance covers lost profits after a company’s own facility is damaged by an insured peril, while contingent business interruption insurance covers lost profits if an insured peril skips over the policyholder’s own facilities but shuts down its critical supplier or a major customer.

Contingent business interruption coverage is triggered if there is:

  1. Direct physical loss or damage to a dependent property (supplier or customer);
  2. The loss or damage is caused by a covered cause of loss; and
  3. The loss results in a suspension of operations at a covered location.


supply chain

Injured during the Commute, or in the Company Parking Lot? How Does Workers’ Comp Fit in?

When employees are injured on the job they are eligible for workers’ compensation benefits, but not if the accident occurs on their commute to or from work – in most cases, at least.

But how about if an employee is injured in your parking lot, or on the walkway outside your office building, which you don’t own but in which you rent space?

There are basically two rules that govern at which point a worker is eligible for workers’ comp benefits if they sustain an injury:

  • The coming and going rule, and
  • The premises rule


The coming and going rule

Usually, an employer is not liable for providing workers’ compensation benefits for injuries sustained during a daily commute. This is known as the “coming and going” rule. However, like most things with law, there are exceptions and the rule is not as cut and dried as it would seem.

The exceptions to the “coming and going” rule usually consider whether the travel of the employee was somehow a benefit to the employer, and if it was closely related to the employee’s job duties. While there are many exceptions to the “coming and going” rule, they generally fall into four categories:

1. The employee has no fixed place of employment and travels to multiple job sites –  If a worker has to use his personal vehicle to travel to multiple job sites in one day and gets injured en route to one of these sites, the injuries would typically be compensable.


2. The employee injures himself while traveling to a location away from his normal job site –  Another exception applies when an employee is injured while away on a business trip. The general rule is that an employee is considered to be acting in the scope of his or her employment the whole time while away on business.

3. The employee is on a special assignment for the employer  Although an employer is customarily not liable for injuries sustained by an employee en route to work, an injury is compensable if during his regular commute the employee also is performing a special errand or “mission” for his employer.Employers should think twice before asking an employee to perform a special task for them before coming into work.

4. Travel is a significant part of the employee’s job duties –  When an employer requires its employee to travel in order to accomplish their job duties, the “coming and going” rule does not apply.

Remember, the big question is whether an employee’s injuries occurred while they were performing their normal job duties. This rule would apply to outside sales people or repair persons, as well as pilots, bus drivers and truck drivers. For all of these individuals, travel is well within the scope of the employee’s course of employment.


The premises rule

The premises rule stipulates that if you as an employee are on the premises of your place of employment (including the parking lot), you are more or less “at work” already and should qualify for benefits if injured there.

In other words, if the employee is injured in the parking lot or on the walkway into the office, even if they had yet to clock in and start work, they would be eligible for workers’ comp benefits.

An employer’s premises are not limited under the rule to the areas owned or leased by the employer, but also to areas under their control. Various courts have held that employment starts when an employee arrives at a parking lot owned, maintained or used by the employer.

Even if the employer leases the building and the parking lot, they are still exercising control over the lot if their employees are directed to park there.

The premises rule also extends beyond the employer’s sphere of influence. For example, if a worker doing a job away from his main office is injured when he slips and falls during a stop for coffee or to use the restroom, he would likely be eligible for benefits since it occurred during the normal course of employment.


The takeaway

One recent case dealt with both of these issues when an employee for a private military contractor was injured while driving to work. He crashed his car after entering an Air Force base where his employer had mulitiple worksites. He was injured one mile from the base entrance inside the base, but still three to five miles away from his worksite.

A California appellate court ruled that he was eligible for benefits under the workers’ comp premises rule.

The lesson for employers here is that there are some instances where even the best workplace safety regimen can’t prevent an employee from sustaining a workplace injury. If they have an accident in the parking lot of the business building where you have an office, there is a good chance they could file a workers’ comp claim and receive benefits.

On the other hand, other dangers on your premises – think icy walkways – can be minimized with proper risk management, by alerting your landlord (if you rent) if there are such dangers, for example.

parking lot crash

Don’t Forget Drills to Prepare Employees for Emergency Response

Remember in school when we had the occasional fire drill or some other disaster drill? The bell rang unexpectedly, and everybody knew to form a line and calmly walk outside onto the schoolyard.emergency

Maybe there was never a fire, but we had it in our heads what we needed to do if there was one. And that knowledge may well have saved us from injuries, or even death.

And these days, with disasters seemingly being reported in the news on a regular basis, emergency drills are something businesses need to do, not put off.

It’s true, drills can be a pain to take the time to organize and conduct. But in an emergency they will more than pay for themselves as a short-term investment for a long-term gain. They’ll go a long way toward keeping the business as damage free as possible and employees informed on how to stay out of harm’s way should chaos unexpectedly erupt.

It’s crucial that company leaders buy into these response drills to stress their importance to employees. Otherwise, complacent attitudes among employees can bring confusion and risk during a real emergency.

Emergency response plans are always in need of refining, maintaining, and updating. And scheduled drills are the best way to do that. They allow companies to test how well their disaster preparedness plan works and how it can be improved.


There are three types of drills that can help keep your emergency response plan a well-oiled procedure:

  • Table Top – This is an analysis of potential emergencies done by staffers sitting around a table in a stress-free atmosphere. Everybody involved can chat about how to smooth out glitches in the existing disaster response plan.

These sessions work best when the discussion group comes to a consensus on needed changes. In this type of drill, there is no disaster simulation, no resources or equipment are used, and there is no time pressure to come up with improvements. This is the simplest drill to organize.

  • Functional – This type of drill simulates an emergency, and attempts to be as realistic as possible. Its goal is to see how well an emergency plan works when put into play.
  • Full-scale – This drill orchestrates planned emergency activity on site, with people, emergency equipment and systems put into action as they would in a real disaster. If this drill is performed well, it will pay the most dividends in a real emergency, maximizing safety and minimizing damage.


Because local police, fire and emergency response agencies are part of a catastrophic scene, they should be invited to take part in planning the company’s response drill. They will more than likely be happy to help out.

Drills are only one part of an emergency response plan. The four areas of emergency procedures are planning, response, mitigation and recovery. Most drills focus only on response, but all four need attention.

Mitigation is hands-on practice of evacuation skills. Recovery involves mop-up action needed after an emergency is over. It can include handling communications, resuming business operations and resetting equipment.

Beware of the ACA Whistleblower Complaint

By now you should be aware of the various penalties that can be levied against employers for not providing health insurance to their full-time employees once the employer mandate takes full effect.

But are you aware of another liability contained in the Affordable Care Act – the whistleblower complaint?

The ACA prohibits an employer from discharging or in any manner discriminating or taking retaliatory action against any employee because the employee or an individual acting at the request of the employee has:

  1. Received a credit or a subsidy for purchasing health insurance coverage on a public exchange;
  2. Provided, caused to be provided, or is about to provide or cause to be provided to the employer, the federal government or the state attorney general, information regarding a violation of Title I of the ACA;
  3. Testified or is about to testify in a proceeding concerning an ACA violation. Or if they assisted or participated, or are about to assist or participate, in such a proceeding.
  4. Objected to, or refused to participate in, any activity, policy, practice or assigned task that the employee reasonably believes was in violation of any provision of the ACA.


The task of investigating whistleblower complaints is the responsibility of the federal Occupational Safety and Health Administration. Employees that feel they’ve been wronged in terms of the ACA have 180 days to file an administrative complaint with the OSHA Whistleblower Directorate.

So far there have been no Department of Labor (DOL) administrative tribunals for an ACA whistleblower complaint. That’s not surprising since the employer mandate has partly taken effect only this year for employers with 100 or more full-time or full-time equivalent employees.

While there have been no tribunals, the OSHA has received one complaint that was thrown out. Nonetheless, the complaint could be a reflection of what a complaint might look like in the future, after the employer mandate is fully implemented.


The case:

A woman employed as a “durational employee” by the Housing Authority of Columbus, Georgia, filed an ACA whistleblower complaint in August 2014.

She alleged that she was terminated in January 2014 – four months after she’d refused to sign and acknowledge that she understood “and agreed” with the terms of the company’s policy on health coverage for employees.

Those were laid out in a letter she’d received in September 2013, which stated that durational employees were ineligible for participation in the employer’s group health insurance plan and that only regular, full-time employees were eligible.

She said that after she had refused to sign, she received her first unsatisfactory performance evaluation and a significantly lower annual bonus based on the unsatisfactory review.

She alleged that adverse employment actions were the result of her refusal to accept the terms.

OSHA dismissed the complaint, on the grounds that it was filed to late – more than 180 days following the date of termination.

The woman appealed the decision to the DOL Office of Administrative Law, claiming that her complaint was timely because she had attempted, unsuccessfully, to file timely complaints within the 180-day limitations with other federal agencies, as well as with the White House.

But the administrative law judge threw out the complaint, saying the employer could not be held liable for retaliation prior to the effective date of the employer mandate.


The takeaway:

The case illustrates the most likely scenario under which an employee may gain ACA whistleblower protection after this year.

Other whistleblower complaints likely to surface in 2016 would concern complaints of adverse employment actions taken after an employer receives notice that one or more of its employees qualified for a tax credit or a subsidy for purchasing health benefits through a public exchange.

However, all complaints must be filed within 180 days of an adverse employment action.


whistle ref

How to Prevent Workplace Violence

Workplace violence refers to any act of intimidation, harassment or physical violence that occurs in the workplace, and may also refer to a threat of physical violence or harassment.

The perpetrator of workplace violence may be an employee, contractor, customer or visitor. Because workplace violence can disrupt the operations of your business and cause trauma to customers and employees, it is essential that you take steps to prevent it from occurring.

While there is no perfect method for predicting workplace violence, there are often warning signs. To prevent such violence, you must watch for potential problems and know how to deal with them.

One of the best ways to prevent workplace violence is to screen potential employees prior to hiring them. Through the use of interview questions, drug testing and thorough background checks, you can estimate the risk of future violence associated with each potential employee.

If a potential employee’s drug test or background information indicates that they may cause problems in the workplace, you can choose to hire someone else instead.

Another good way to prevent workplace violence is to educate current employees about their responsibilities.

Inform employees that they must treat co-workers, supervisors, customers and visitors with respect and dignity. If any violent or potentially violent situation does occur, employees must report the problem to management immediately, even if the problem doesn’t directly involve them.

Employees must also take all threats of violence seriously and avoid confrontation with threatening individuals.

Even with the best pre-employment screening and employee training programs, violence perpetrated by visitors and customers may still occur. To prevent this type of violence, you must develop a high-quality security system for each of your buildings.

For areas that aren’t open to the public, consider implementing a security guard service, installing coded key card readers, and issuing photo identification cards to all employees.

In areas accessible to the public, consider installing security cameras or stationing a security guard in the building.

No matter how great your prevention methods are, there is still potential for the development of a threatening situation. All employees and supervisors should know how to recognize and deal with any problem that occurs.


Warning signs

Indicators of impending workplace violence include aggressive behavior, belligerence, bullying, harassment and intimidation. Individuals who have multiple conflicts with co-workers, supervisors or customers may also pose a risk of workplace violence.

Finally, an individual who brings weapons into the workplace, shows evidence of substance abuse, or makes statements that indicate desperation over personal problems, may become involved in workplace violence.

If an employee notices indications of possible workplace violence from a customer, co-worker or subordinate, they should notify their supervisor immediately. If an employee notices indications of violence from their supervisor, they should notify the supervisor’s manager. The supervisor or manager informed of the situation must be careful to take it seriously, but not overreact.

If a violent incident does occur, an appropriate response from management is essential. Be sure to offer support to the victim of the violence and administer the proper consequences to the perpetrator. If the violent incident is traumatic to the victim, counseling may be necessary.



If you’re a business owner, workplace violence insurance can protect your business in the unfortunate event of an incident where someone attacks or even kills another person at your workplace.

The insurance covers various expenses related to workplace violence, including the cost to your business of:

  • Providing medical expenses and salary reimbursement to employees affected by workplace violence.
  • Offering a death benefit to the family of an employee slain in an episode of workplace violence.
  • Hiring mental health professionals to help employees cope after an incident.
  • Tapping the expertise and services of security experts, crisis management consultants and public relations professionals.
  • Reimbursing company revenues lost due to business interruptions in the wake of a violent incident.

workplace violence

Smartphones and the Wage and Hour Dilemma

Do you ever wonder if your non-exempt employees are sneaking a peek at work e-mail off the clock? Ever suspect their bosses of pressuring them to respond to calls and e-mails after the workday ends?

If those thoughts keep you up at night, it’s time to make sure your employees’ smartphones aren’t putting your organization at risk of violating wage and hour laws.

The proliferation of smartphones has led to a rapidly rising number of lawsuits by employees claiming they were required to work uncompensated on evenings and weekends when not on the clock. The lawsuits are often class actions stemming from overtime-eligible employees using smartphones to extend their workday without those after-hours tasks being compensated.

The problem for employers is that when one employee complains to the Labor Department that they are not being compensated for time working on their smartphones when away from work, the agency’s investigators won’t stop with the complaining employee. They also look at how many others are “similarly situated.”

A single employee’s complaint can turn in to a class action when all the other similarly situated employees are included.

Just a few minutes a day over months or years can add up to financial disaster if an employer has a number of employees regularly using their phones for uncompensated work.

In the last several years, the courts have seen a flood of lawsuits in which groups of employees claim the time they spend reading and responding to e-mail should be considered work time, and therefore paid.

The danger is that when a boss sends a worker a message off-hours and asks them to read something or send an e-mail, the employee will usually feel compelled to do as they’re told, even if they don’t want to. It’s unlikely a subordinate will refuse to a superior for many reasons, such as job security and also advancement possibilities. Who wants to look lazy when the go-getters are the ones who are recognized?

Employees often are expected to check their work e-mail, and it’s not too much of an overstatement to say many employees today are under pressure because they are required to respond to after-hours messages.

You might think that just a few minutes of after-hours work won’t cause a problem because the time is minimal. But when employees sue claiming they should be compensated for after-hours smartphone work, the employer typically uses the de minimis defense.

De minimis means very little, perhaps just a minute or two. The employer maintains that the time spent is de minimis, but it isn’t. Just five minutes a day adds up to almost a half hour a week. But there are precedent-setting court decisions that have said that even 30 minutes extra a week is not de minimis.

Also, besides federal law, you have our own state law to contend with.

Additionally, you may not even know that some employees are checking work e-mail at home whether they’re told to or not.

Just because the employer doesn’t require employees to stay tied to their phones doesn’t eliminate legal risk. The law defines work time as the time an employee is “suffered or permitted” to work.

So, an employer doesn’t have to require employees to answer e-mail and perform other tasks off the clock to run into trouble. Merely permitting that work without counting it as compensable time, puts the employer at risk.


What should you do?

The extension of work time made possible by smartphones and other electronic devices poses a new danger for employers.

To ensure you don’t’ find yourself the target of a wage and hour lawsuit, you need to put in a place a solid policy about non-exempt employees working on their smartphone after hours.

You should put the policy in place, communicate it to your staff in a meeting, as well as include the policy in your employee handbook. Passing out a memo on the matter is also helpful.

Once the policy has been communicated, you have to monitor and survey staff to make sure they are not breaching the rules.