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Overcoming Year-End and New Year Employment Challenges

Jan 3, 2018

Overcoming Year-End and New Year Employment Challenges
Paul Kramer

Paul Kramer

Director of Compliance

Remember when you were a kid, how much you enjoyed the holiday season: presents and parties, visiting relatives, no school, holiday songs, screaming “happy New Year!”

Well, this time of year can present challenging issues for employers which, if not managed properly, can lead to employee disputes and possibly lawsuits.

Below is a review of four of these year-end/new year challenges we hope you’re handling correctly so you can enjoy a happy, litigation-free 2018.

Holidays and FMLA Leave

Calculating FMLA leave during a holiday week can be tricky.

If an employer holiday occurs during a full week of FMLA leave, the holiday has no effect on the leave calculation and the entire week counts as FMLA leave. For example, if an employee gets New Year’s Day off as a holiday and is on FMLA leave the remainder of the workweek, the entire week is considered FMLA leave, despite the holiday.

On the other hand, when a holiday occurs during a week when an employee takes less than the full week as FMLA leave, the holiday does not count against their FMLA leave entitlement. So, if an employee gets Monday off for Christmas, works Tuesday, and then takes off Wednesday, Thursday, and Friday for FMLA reasons, only Wednesday, Thursday, and Friday count against their leave entitlement.

Failing to properly track an employee’s FMLA leave use is a common employer mistake. This failure often gives employees more time off than they deserve, but the greater risk is that an employer may wrongfully believe an employee’s FMLA leave entitlement is exhausted when it is not.

The Effect of Bonus Payments on Overtime Pay

It’s not unusual for employers to provide employees with end-of-the-year bonuses. The Fair Labor Standards Act (FLSA), however, mandates that overtime pay be computed using the employee’s regular rate of pay, which generally includes all remuneration paid to the employee during the workweek.

Under the FLSA, however, certain compensation may be excluded from the regular rate calculation, including “discretionary bonuses” the employer decides to pay near the end of the period for which it was paid, and which is in no way required by contract, agreement, or promise.

On the contrary, non-discretionary bonuses must be included in the regular rate calculation used to determine overtime pay. Non-discretionary bonuses are promised to or expected by an employee and commonly depend on the quality, quantity, efficiency, and productiveness of work hours.

If non-discretionary, the year-end bonus must be apportioned back over the workweeks in which it was earned and the employer must recalculate the regular rate of pay for those workweeks and compensate the employee for any additional overtime owed.

Including non-discretionary bonuses in regular rate of pay is something many employers miss. It is also a mistake that can lead to significant financial liability if the error involves numerous employees.

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Minimum Wage Increases

Many states and cities had minimum wage increases take effect on January 1, 2018.

Employers must keep track of these increases and pay their employees appropriately. Workers who believe they have not been paid the proper minimum wage often pursue their claims in class action lawsuits, which can involve thousands of workers and lead to large settlements or verdicts.

Minimum wage increases also have ripple effects on other wages. For example, if an employee’s hourly wage rises due to a minimum wage increase it also increases their regular rate of pay for calculating overtime.

Employers should monitor the effect this rising wage expense has on their cash flow and decide what changes, if any, they need to make to their business model to keep their company profitable.

New Employee Leave Entitlements

The beginning of a year is often when new employee leave entitlements take effect.

New York Paid Family Leave, Nevada Domestic Violence Leave, and the parental leave mandate for smaller California employers are three examples of new leaves beginning January 2018.

Employers should consult with legal counsel to ensure they fully comply with any new employee leave entitlements taking effect in the New Year.

As the New Year begins …

A resolution for all employers should be to know and understand the laws affecting their employees and be ready for any legislative changes in 2018.

Remember, compliance is the key to a happy and productive workforce and therefore the key to happy customers.

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