March 19, 2018
Article of the Week
Why Is Diversity in the Workplace Important to Employees?
Workplace diversity not only helps a business in reaching out to new customers, it benefits employees too. As workforce demographics shift and global markets emerge, workplace diversity inches closer to becoming a business necessity instead of a banner that companies wave to show their commitment to embracing differences and change. Employees reap tangible and intangible benefits from workplace benefits, not the least of which include respect from co-workers and business gains.
Workplace diversity fosters mutual respect among employees. Whether employees work in groups or teams comprised of co-workers with varied work styles, or colleagues who represent different cultures or generations, a synergistic work environment become the norm. Although an idyllic atmosphere may be difficult to achieve, employees nevertheless recognize the many strengths and talents that diversity brings to the workplace and they gain respect for their colleagues’ performance.
Conflict inevitably occurs in the work environment. However, employees who acknowledge others’ differences often also find similarities, particularly when there are common goals – production and quality. Respect for co-workers either reduces the likelihood of conflict or facilitates an easier road to conflict resolution. The ability to resolve workplace conflict minimizes potential liability for employee complaints that would otherwise escalate to formal matters, such as litigation. Workplace diversity preserves the quality of employees’ relationships with their co-workers and their supervisors.
Diversity in the workplace is important for employees because it manifests itself in building a great reputation for the company, leading to increased profitability and opportunities for workers. Workplace diversity is important within the organization as well as outside. Business reputations flourish when companies demonstrate their commitment to diversity through aggressive outreach and recruiting efforts. An organization known for its ethics, fair employment practices and appreciation for diverse talent is better able to attract a wider pool of qualified applicants. Other advantages include loyalty from customers who choose to do business only with companies whose business practices are socially responsible.
The importance of workplace diversity cannot be overstated when it comes to an organization’s ability to reach markets in foreign countries. The appeal of global markets creates two kinds of opportunities for employees: opportunities for promotion and employee development. A global marketplace opens doors for employees with diverse language skills and multicultural understanding to build global profit centers. Employees interested in learning multinational business strategy and who are available for possible expatriate assignments may also find new and challenging career opportunities.
A diverse workplace offers more than exposure to employees from different cultures and backgrounds. Employees learn from co-workers whose work styles vary and whose attitudes about work varies from their own. This is particularly true for employees within multigenerational work environments. Traditional-generation workers learn new technology and processes from workers who belong to the tech-savvy Millennial generation. Likewise, Generation X employees learn from exposure to the assertive, go-getter work ethic typical of many Baby Boomers.
March 12, 2018
Article of the Week
The most effective teams have regular, intense debates. The ability to disagree without causing offense is a crucial precondition for good communication and problem-solving. Yet whenever we ask the managers we speak with what they’d prefer–a team that’s almost always harmonious or one that has conflicts and arguments–the vast majority vote for the latter.
Not only is harmony overrated, but it undermines innovative thinking, particularly the kind that diverse work cultures are supposed to generate. Rather than encourage your team members to come to agreements quickly, effective managers do the reverse: They help their teams disagree–productively.
GROUND RULES FOR HEALTHY DEBATE
Teammates want the opportunity to challenge each other. As long as discussions are respectful and everyone gets a chance to contribute equally, most people thrive on this kind of debate, finding it not only intellectually stimulating but also helpful for unearthing the best solutions.
What’s more, teams typically feel more bonded and more effective when they have challenging discussions regularly, trading a wide range of ideas and perspectives. That’s even true when those debates get a little heated. After all, this is the whole point of diversity and inclusion–it’s about bringing in people whose points of view differ in order to spark new ideas and ways of looking at things. But facilitating these conversations takes some ground rules, like these:
- Treat each other with respect, and challenge the position, not the person.
- Listen to one another carefully before responding, and ask for clarification if needed. Gather facts; don’t jump to conclusions.
- Come to the debate ready to present facts and data, not suppositions.
- Do not compete to “win.” Debates are a chance to find and test the best ideas and to learn, not to score points.
- After the team makes a decision collaboratively, everyone needs to respect and support it, even if they have their own reservations.
SIX QUESTIONS FOR FACILITATING SMART DEBATES
Mark Beck is the CEO of JELD-WEN, a global window and door manufacturer with 20,000 employees. He believes it’s leaders’ jobs to step in and protect people when things get heated–which they sometimes still do, even after laying down solid guidelines.
In some cases, Beck says, he might take the side of a person whose view is under assault, even if he personally doesn’t necessarily agree with it. This isn’t gamesmanship, it’s to show that the person is offering up a reasonable way of thinking that should be respected. “The attacker usually steps back a little and softens their tone when a leader does that,” he told us.
And, Beck adds, managers must take the lead in getting everyone to participate by posing the right questions. Here are six great questions we’ve heard effective team leaders like Beck throw out in debates:
- That’s a good thought. Could you walk us through the process you went through to reach that conclusion?
- What rules should we be breaking here?
- What’s our biggest risk in this, and what’s our fallback position?’
- What if we did nothing at all–what would happen then?
- Are we missing or forgetting anything?
- Aside from earning us a profit, how would this decision change lives and make the world a better place?
Beck said that smart questions can encourage active debate when a team has plateaued or is stuck in a safe zone. At times of such inertia, he’ll tell his direct reports, “The only way you can get your topic on the management-team agenda is to frame it out as a question, and collectively we have to come up with an answer.”
CHANGING THE QUESTION
These six questions aren’t the end-all-be-all, though. Sometimes you need to reframe a question you’ve already asked and revisit it from a new angle.
When Beck arrived at JELD-WEN, the company’s focus was on getting ready to issue an initial public offering (IPO). He changed the question to, “How do we get ready to become a Fortune 500 company?” JELD-WEN did wind up issuing a very successful IPO in 2017, “but,” says Beck, “that’s been because we were focused on building a Fortune 500 company,” he said. “If we had just focused on the IPO and seen that as the finish line, I don’t think our story would have resonated with investors in the same way.”
And ironically enough, because his teams stick to respectful ground rules while they disagree, Beck estimates that they’re able to come to a consensus about 99% of the time. “If it’s done right, there’s usually no need for a leader to have to make a decision–it’s become obvious to everyone.”
And from there, Beck says, his job is actually pretty easy: “I might just say, ‘Let me summarize what I think we are all saying’.”
March 5, 2018
Article of the Week
How To Reduce Turnover Among Your Best Hires
If there’s anyone more hopeful than a new employee showing up to her first day on the job, it’s the hiring manager who offered it to her.
Call us hopeless romantics, but we think there’s something really special about a candidate and a company coming to an agreement and choosing to embark on a relationship together–albeit a business one.
But what happens when the relationship goes south and the employee decides to move on? There may not be actual tears, but it can still feel like heartbreak to the recruiter, hiring manager, and leadership team that had high hopes for the future.
So, what can you do when you’re tired of losing employees to “better offers”? Here’s what five recruiting and hiring pros would do to reduce churn and improve employee engagement and retention:
1. BE HONEST ABOUT THE DOWNSIDES OF A POSITION
It makes sense to try to put your best foot forward in the first stages of the interview process. After all, that’s what job candidates are doing, too. But Chuck Solomon, cofounder and COO of LineHire, says that it’s in the best interest of long-term employee retention to be upfront about what a job is really like without candy coating the truth or trying to ignore potential challenges within a job.
“It may sound quaint, but I believe authenticity is key to reducing churn and increasing employee retention,” says Solomon. “Recruiters should be honest and accurate in describing both the pros and cons of the job–after all, once on board, the candidate is going to learn firsthand themselves. I’m not suggesting you should ‘air the company’s dirty laundry,’ but there are ways to tell a candidate that this is a challenging position. That way you’re only bringing in staff members that are up for the challenges.”
2. CLOSE THE LOOP ON NEW HIRE DATA
Find the best person, hire them, and move on. Sound familiar? If that’s your approach to most of the positions you fill and you want to reduce churn, Mikaela Kiner, CEO and Founder of uniquelyHR, wants you to think about following up and tracking how your candidates work out in the role.
“Recruiters always believe we’ve found the absolute best candidate for the job, says Kiner. “After all, that’s why we hired them! But too often, we don’t know what happens once that person joins the company. Did that person become a superstar, did they plateau, or were they eventually let go for poor performance? If recruiters can work with HR and hiring managers to get data on the quality of the people they’ve hired, they can spot trends and then use that data to improve the screening and recruiting process.”
“For example, what skills and qualities are common to the most successful hires?” continues Kiner. “Failures are also a good source of learning, because if you make a note of red flags during interviews of people who don’t succeed, you can be on the lookout for similar candidate qualities in the future.”
3. LISTEN TO AND REWARD EMPLOYEES BEFORE THERE’S A PROBLEM
Brianna Rooney, founder of software engineer recruiting company Techees, works in a high turnover industry placing software engineers at tech-focused companies in the Bay Area. In her line of work, it’s common for people to leave every year, and if someone has been with their company for three years, it’s a downright miracle. Why? Because most companies say they don’t have time to deal with employee retention or simply don’t want to know the bad things about their company.
“I can’t tell you how many times a company will try to give a raise or actually listen to an employee when it’s way too late,” says Rooney. “Everyone wants to save money. It’s hard to keep giving raises. Yet, think about how hard it is to find good people. People you trust to work hard, honestly, and efficiently.”
“If you don’t have the budget for a salary increase, make sure they understand that,” Rooney continues. “Talk to employees, make them know how important they are. Don’t just wait for quarterly or yearly meetings. You need to care before you ‘have to,’ and it has to come naturally.”
4. RECRUIT QUALITIES THAT MAKE FOR GOOD OFFICE POLITICS
Are office politics always a bad thing? No, says CEO and The Compass Alliance author Tim Cole. They can be good or bad for an organization depending on how they are directed. But if you’re in a position where you need to reduce churn, your politics are likely unproductive. It’s critical that you start screening candidates for qualities that are conducive to healthy office politics.
“Bad office politics implies backstabbing and conspiring for personal gain,” says Cole. “An organization that tolerates that type of behavior faces the long-term effects that always follow, like low engagement, loss of productivity, and attrition.”
Cole adds: “Companies that recruit for collaboration skills and capacity for problem solving can often direct office politics in a more positive direction and use them to streamline workflow with behind-the-scenes discussions and gain consensus on critical job decisions away from the boardroom.”
5. RALLY YOUR TEAM AROUND A COMMON “WHY”
Low employee retention and low engagement go hand in hand, so if you’re struggling with a need to reduce churn, you are likely struggling with employee engagement, too. Zach Hendrix, cofounder of the lawn service app GreenPal, grew one business from 1 to 100 using a simple but profound engagement strategy: rally employees around the central “why” of their jobs and the business as a whole.
In his first business, much of Hendrix’s operating core was comprised of Guatemalan immigrants who would come to the United States for several consecutive lawn mowing seasons and save as much money as they could to improve the lives of their families back home by building homes, ranches, and setting up farms stocked with cattle.
To fuel his team through the tough times, including the economic recession of 2009, he rallied them around their “why.” At weekly meetings, they would give progress reports on how projects back home were coming along and display picture collages of homes, farms, and businesses in Guatemala in the office and shop.
There’s nothing more frustrating than waving farewell to an employee you had hoped would stick around long-term. And while there are many reasons you’ll need to say goodbye to employees over the years–relocations, promotions, and career changes among them–there’s a lot you can do to make sure that your company isn’t the reason employees leave. Consider how you can apply these tips to your recruiting and hiring process to reduce churn to help your candidates stick around.
February 26, 2018
Article of the Week
Facebook's Recent Change Might Ruined Your Social Media Marketing Strategy. Now What?
It's 2018, and social media pretty much rules all of our lives. People of all ages are scrolling through social feeds to find news, friends, brands and stories. (My 86-year-old grandma recently joined Facebook. I didn't think she even knew how to use a computer.) Social media is a prime outlet for brands to interact with and get to know their audiences, yet reaching and retaining customers is only becoming more difficult.
Facebook recently announced they are making changes to their news feed algorithm to prioritize personal connections and engagement. In short, the changes will favor active engagement over passive viewing and private content over public content. This means that content created by family and friends will be most prevalent, and public content from brands, businesses, and media organizations will be minimal.
For businesses, this change signals that it's time to review your 2018 social marketing strategy and rethink everything. Here's what you need to do to draw attention to your social media posts.
Every post needs to generate conversation.
Don't waste your time on passive videos.
While at one point videos may have been a great way to draw attention to your brand, many videos are passive. With Facebook's new change, your video or otherwise passive post has little chance of garnering attention (or even showing up on anyone's feed) if it's not promoting interaction and a conversation.
In a statement by Mark Zuckerberg, he tipped off marketing departments by saying, "We've seen people interact way more around live videos than regular ones." Marketing departments: It's time to master Facebook Live and plan content that revolves around it.
Focus on value over volume.
While consistently posting and being top-of-mind is important, there's no way a business can stay top-of-mind if their posts aren't being seen. To increase your visibility, provide your followers with content that's useful, interesting and worthy of sharing.
Get to know your followers by spending time with them. Learn their habits, and ask why they do things rather than just watching their behavior. Also be sure to share real people's stories – your customers' and your employees' stories. Find out what your customers are passionate about and what makes them tick. In doing so, you can deliver content that is truly customer-centric rather than company-centric.
Here's an example. Let's say you own a meal delivery service (the Savory Spatula) that is focused on helping clients learn to cook. Get into the customer's mindset. Create posts from their point of view. One post could be: "Learn how to cook in less than 30 days and impress that special someone on Valentine's Day." There is a marked difference in the first post versus a more generic one that states: "The Savory Spatula can teach you how to cook a great Valentine's meal!"
Watch your competitors.
If you're posting several times a week to no avail, then you're not connecting with your audience. Take a look at what your competition is doing. This will give you insight into what topics are great conversation points and the type of content that is engaging your consumers. Once you have a greater understanding of your users and what they're interested in, you can better apply that to your marketing efforts.
A little controversy can spice things up.
While there are many controversial topics that your company should never dive in to – politics and religion – trivial matters are free game. In fact, a little controversy is encouraged as it is a great tool to create conversation and get your company noticed on social media. Controversies as silly as the correct way to place toilet paper on the roll (with the flap over or under) have generated mass discussions.
Also consider conducting research or sourcing credible research to back up your controversial topic or debate. An argument backed with data can reach a broader audience than an argument based on your opinion or experience.
Encourage employee engagement.
Rally the troops.
Engagement is more important than ever, which means that businesses can't just create good content and hope it will be seen. Your company must rely on engagement to keep content afloat. This is where employees come in. Encourage and incentivize employees to play a role in your company's social interactions.
One good tool to increase employee engagement is called GaggleAMP. With GaggleAMP, employees share content across various digital marketing platforms while earning points and rewards. Gabby Green, marketing communications employee at Jive Communications, said that after using GaggleAMP for five months, Jive's Facebook account saw a reach growth of 109 percent.
Never limit your social media outlets to Facebook alone.
Don't put all your eggs in one basket.
Facebook is a great tool that offers a massive network of potential customers, but it's not the only social channel that your target audience is using. When getting to know your customer base, identify the social channels that reach them, including Facebook, Twitter, Pinterest, Instagram, LinkedIn and Ello, the newest member.
Instagram especially is growing at an incredible rate. In 2017, the social media giant announced that approximately 800 million people use their platform each month and brands are seeing greater engagement on Instagram than other social media platforms. So, cover your social media bases and see where you get the most interaction.
Utilize influencers on various platforms.
After getting to know your audience and finding out which social media outlets they're using, consider using influencers in your marketing strategy. Especially since consumers will generally trust influencers over brands. In fact, 92 percent of consumers trust recommendations from other people – even those they don't know – over branded content.
Facebook's announcement may have felt like a stab in the back, but it's not the first time we've had to adapt with algorithm changes, and it certainly won't be the last.
Focus on creating engaging content, utilizing Facebook Live and other social media platforms, finding influencers, encouraging a bit of friendly controversy, and involving your employees in the conversation. These tips will be a great springboard to building (or rebuilding) your 2018 Facebook and social media strategy.
February 19, 2018
Article of the Week
2017 Tax Act: How Does It Impact Business Owners?
By: Judy Cahee, CPA, Partner, BST & Co. CPAs, LLP
Having been in the profession for more than twenty years, I have not experienced legislation that changed the federal tax landscape as significantly as the 2017 Tax Cuts and Jobs Act (“TJCA”). The nearly 500-page bill changed laws that are decades old involving corporations, businesses, individuals, estates and more.
This article highlights some considerations for business owners, including tax implications and evaluating choice of entity. The changes are generally effective for tax years beginning after 2017, however, certain planning opportunities, such as an S corporation election or converting an S corporation to a C corporation, must be made within the first seventy-five days of 2018 to be effective in 2018. With a few exceptions, such as the 21% corporate tax rate, many provisions revert to the
old rules in 2026 so be careful in tax planning that you can live with the outcome in future years or that you can unwind if you don’t want the consequences when and if the rules change back.
The type of legal entity you own impacts how the changes apply to you. There are a variety of entity types including C corporation, sole proprietorship, single-member limited liability company (“SMLLC”), and pass-through entities such as a partnership, multiple-member LLC, or S corporation. C Corporation Changes: Many of us have heard on the news the mention of the flat 21% corporate rate. C corporations pay tax at the entity level, but keep in mind that the income is taxed a second time to the shareholder(s) in the event of dividends so 21% is not the only tax consideration. Under prior law, the tax rates ranged from 15%-35%. In general, the decrease in rate is favorable to most corporations, but you may not agree if you previously paid 15% because your taxable income was less than $50,000. If you operate a professional service corporation, such as a medical practice or law firm, the tax rate is also 21% and not the previous flat rate of 35%.
Pass-Through Changes: If you own a pass-through entity, will your individual taxes go down? The answer is complicated. In general, your federal tax should go down because the individual tax rates decreased and there is a new deduction under Section 199A for qualified business income (“QBI”). The reality is that you may not be better off. It depends upon many factors including: if you have a service business, the amount of income you generate, if you pay wages, the type of entity you operate, the state in which you live, adverse changes to deductions, and more.
How have the individual tax brackets changed? Under the new law, the tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Under prior law, the tax rates were 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. For ordinary taxable income, a
married filing joint taxpayer will reach the top rate of 37% at $600,001 of taxable income whereas under old law the 39.6% rate applied at $480,051 in 2018.
What is the QBI deduction? TCJA created a new deduction based upon an owner’s share of a pass-through entity’s “qualified
business income.” In general, QBI is domestic business income other than investment income. The deduction is the lesser of 20% of QBI or 20% of taxable income. The deduction is limited to the greater of (a) 50% of W-2 wages or (b) the sum of 25% of W-2 wages plus 2.5% of the unadjusted basis of “qualified property.” Qualified property means depreciable tangible property, including real estate, owned and used by the qualified business. The W-2 wage limitation doesn’t apply until taxable income exceeds $315,000 (married filing joint) with full phase-in applicable at $415,000 (married filing joint).
What type of business owners are eligible for the QBI deduction? TCJA applies to certain types of pass through businesses such as sole proprietorships and singlemember LLCs that report on Schedule C, rental activities on Schedule E, S corporation shareholders, and owners of partnerships.
Why does it matter if you operate a service business? “Specified service businesses” are subject to a phase-out of the QBI deduction at $315,000 of taxable income with full phase-out at $415,000 (married filing joint). Specified service businesses
include the fields of health, law, accounting, financial services, and more (but not architects or engineers).
Why does it matter if you pay wages? The QBI deduction is limited to a percentage of wages if married filing joint taxable income exceeds $315,000. Keep in mind that pass-through entities have different rules regarding wages. S corporation shareholders are paid wages but sole proprietors are not. Partners receive guaranteed payments instead. Because different wage rules apply to each type of pass-through entity, there does not appear to be parity in the amount of deduction for the owners of sole proprietorships, partnerships, and S corporations. Hopefully, further guidance and clarification on the topic will be provided soon by the Internal Revenue Service.
Why does the state that you live impact your federal tax? News of the $10,000 limitation on the state tax deduction (inclusive of both income and property) was widespread the last week of December. In a state with higher taxes, such as New York, it’s
uncertain if the reduction in federal income tax rates be enough to offset the loss of the state tax deduction. The answer will depend on an individual’s specific fact pattern. The standard deduction significantly increased (now $24,000 married filing joint), but exemptions were suspended. Federal alternative minimum tax could also impact the outcome. A notable exception to the $10,000 limitation is real property taxes associated with a trade or business.
What are the some of the adverse changes to deductions? In addition to the state tax deduction limitation previously mentioned, TCJA includes a limitation on business interest expense if gross receipts exceed $25 million. The deduction for business-related entertainment is disallowed after 2017. Also disallowed is the Domestic Production Activities Deduction.
How might changes in these deductions impact your business? Thus far, I’ve outlined considerations regarding the type of business that you operate. Regardless of entity type, there are some favorable business changes. Here’s a few notable ones:
- The Section 179 deduction increased to $1 million in 2018 (up from $510,000 for tax years beginning in 2017) and the phase-out threshold increased to $2.5 million.
- First-year bonus depreciation increased from 50% to 100% for qualified property placed in service between September 28, 2017 and December 31, 2023. Thereafter, the percentage is reduced with expiration of the provision after 2026. A significant change is used property now qualifies!
- Changes were made in accounting methods. Gross receipts thresholds were increased to reduce use of the percentage of completion method for contractors and Section 263A UNICAP rules for inventory, as well as expand qualification for use of the cash method of accounting.
As you can see from the above information, the rules are complex. TCJA has far-reaching implications but brings an opportunity for tax planning strategies to help lower your taxes in 2018 and beyond. Consult your tax advisor for insight into how the changes impact your business.
February 12, 2018
Article of the Week
Wage and Hour Class Actions Can Cost Employers Millions
Employers that fail to comply with federal and state wage and hour laws could face class-action lawsuits that lead to expensive settlements with workers.
"Wage and hour disputes seem to lead the pack relative to employment class-action litigation," said Charles Krugel, an attorney in Chicago. "These types of lawsuits are cash cows for plaintiffs' attorneys because attorney fees are relatively easier to obtain than in other forms of commercial litigation and because liquidated damages may be included."
Even if the employer's mistakes are minor, the business may still be liable for such fees and damages, he noted. These cases tend to settle quickly because lengthy litigation can result in higher fees.
The dollar value of workplace class-action settlements skyrocketed in 2017, according to the annual Workplace Class Action Litigation Report by law firm Seyfarth Shaw. The top 10 employment-related settlements in 2017 totaled $2.72 billion—up from $1.75 billion in 2016, the report showed. Workplace discrimination, employee benefits and wage and hour claims were among the top actions.
The growth in wage and hour settlements—which rose the past two years to a combined value of $1.2 billion—is the No. 1 exposure for corporations heading into 2018, said the report's author, Gerald Maatman Jr., an attorney with Seyfarth Shaw in Chicago and New York City. He noted that HR professionals and business executives should focus their efforts on prevention.
"A dollar spent on risk management and compliance is better than a dollar spent on settling a class-action lawsuit," Maatman said. "These statistics bring to life the conversation that must happen in the C-suite about why businesses need to spend money on compliance."
Here are some common wage and hour mistakes attorneys said HR professionals should try to avoid in their workplaces.
Exemption Classification Errors
Classification issues are a problem for employers that face the complexities of the Fair Labor Standards Act (FLSA), said Daniel Schlein, an attorney in New York City. He said one recurrent issue is that employers improperly classify workers as exempt and fail to pay them overtime wages.
Under the FLSA, the most common exemptions from overtime pay fall under the so-called white-collar exemptions for executive, administrative and professional employees. To qualify for one of these exemptions, workers must be paid on a salary basis, earn a minimum salary of $23,660 and regularly perform certain duties. For example, an exempted executive must regularly supervise two or more employees, among other things.
There are other exemption categories employers should note, including categories for certain computer-related positions and commissioned sales roles. Nonexempt employees who don't qualify for an exemption must be paid 1.5 times their regular pay rate for all hours worked beyond 40 in a workweek.
New York state has implemented in regards to minimum salary thresholds. The change requires that a salaried worker is paid a minimum salary of $40,560 per year, almost double the FLSA requirements.
Minimum Exempt Weekly Salary – New York State
Date Nassau, Suffolk, and Westchester Counties Remainder of New York State
12/31/16 $750.00/week $727.50/week
12/31/17 $825.00/week $780.00/week
12/31/18 $900.00/week $832.00/week
12/31/19 $975.00/week $885.00/week
12/31/20 $1,050.00/week $937.50/week
Misclassifying Gig Workers
"Another major issue is the misclassification of workers as independent contractors or interns," Schlein said. In the gig economy, employers are increasingly relying on independent contractors and freelancers to reduce their payroll costs and tax liabilities, he noted.
Gig workers and other independent contractors generally have more autonomy than employees regarding when, where and how much they work. If properly classified, gig workers aren't entitled to certain employment benefits like FLSA minimum wages and overtime pay. Thus, if employees are misclassified as independent contractors, they may be entitled to such benefits.
The Wage and Hour Division of the U.S. Department of Labor continues to receive many complaints from workers over misclassification issues, and the division has brought successful enforcement actions against employers that misclassify their workers. "Plaintiffs' attorneys are well-aware that the difficulty of complying with the FLSA renders the statute a promising area for collective actions," Schlein added.
Besides exposure under the FLSA, one trend employers should watch for involves "hybrid" wage and hour actions, Schlein said. A hybrid action is one in which plaintiffs bring claims under both the FLSA and the corresponding state law.
State wage and hour laws can offer more opportunities for overtime claims than the FLSA, often provide more time to file a claim and can provide broader coverage, he noted.
For example, the California Labor Code has strict rules for what must be listed on pay stubs, and employers can face steep fines for noncompliance.
The Golden State also has a higher minimum wage and exempt salary threshold, as well as a more stringent duties test for white-collar exemptions.
Connecticut, New York, Massachusetts and other states also tend to have more employee-friendly laws that businesses should understand.
Schlein said employers can decrease the chances of a collective action under the FLSA or state wage and hour laws by:
- Maintaining accurate time-keeping and record-keeping practices through up-to-date systems.
- Training managers on the differences between exempt and nonexempt employees and encouraging managers to report wage issues early.
- Conducting periodic wage and hour audits to ensure employees have been correctly classified as exempt or nonexempt.
- Assessing the type of work independent contractors are doing and how they are doing it.
Employers should maintain open lines of communication with employees when questions or disputes arise, Krugel said.
"Most lawsuits arise because the employer has records that are difficult to understand or doesn't properly communicate with employees," he added. "If an employer doesn't engage in good record-keeping, class-action wage and hour lawsuits become easy money for plaintiffs' side attorneys."
Workplace class actions should never come as a surprise, Maatman said. Businesses can reduce litigation risks by having solid HR practices in place and ensuring that employees feel that the doors to the HR office are open and that their grievances will be heard, investigated and remedied if needed.