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The SESCO Report – June 2011

Department of Labor Revises Regulations

Government regulations continue to increase. On April 5, 2011, the Department of Labor, Wage-Hour Division, revised several long-standing positions regarding the Fair Labor Standards Act. These revisions are of significant importance to employers who utilize the Fluctuating Workweek Method of Payment, own or operate automotive/dealerships as defined or employ tipped employees.

Fluctuating Workweek Method of Payment The Wage-Hour Division has stated that any employer compensating employees via the Fluctuating Workweek Method of Payment cannot also pay bonuses, commissions or incentives — non-discretionary bonuses. The Fluctuating Workweek Method of Payment is still a viable and compliant pay plan; however, as stated, employers cannot provide additional monies via non-discretionary/incentive bonus payments.

Employers who are not aware of the Fluctuating Workweek Method of Payment should consider its use. This is a method of payment that allows employers to:

- Pay nonexempt employees via a guaranteed salary.

- Pay overtime at a rate of half-time (50%) vs. time and one-half (150%).

- The employee must maintain an accurate record of time.

- The advantage of the Fluctuating Workweek Method of Payment is that the employer can provide an employee a guaranteed salary without significant overtime liabilities. The employee receives a guaranteed salary wherein their compensation does not fluctuate nearly as much as it would on an hourly basis. There must be an agreement or understanding; however, the employee does not have to agree to such a plan, only that they understand how the pay plan works.

Service Writers Since the early 1970's, the automotive and dealership industry has relied on a Wage and Hour Administrator's issued Opinion Letter stating that Service Advisors and Service Writers are partially nonexempt (overtime only) as covered under the special Automotive 13(b)(10) Exemption.

Dealerships including automotive, equipment, truck, airplane and others have relied on this special exemption and have paid Service Writers on an hourly, salaried and/or commission basis without having to worry about computing overtime for hours worked in excess of 40 hours per week. With this unfortunate decision, Service Writers and Service Advisors are now eligible for overtime payments to include overtime based on hourly and salaried amounts as well as commissions and incentive payments. There is another "special exemption" opportunity available for the automotive/dealership industry for Service Advisors and Service Writers which is entitled the Retail 7(i) Commission Exemption. Please contact SESCO if you wish to explore this exemption from overtime only. Any retail business which derives 75% or more of its gross revenue from the ultimate consumer/public, can implement this special exemption Retail 7(i) if all requirements are met.

Tip Credits/Tip Pooling The Department of Labor's Wage and Hour Division has finalized for employers who take tip credits to offset their minimum wage obligations. Under the final rule, an employer is required to "inform" its employees that it intends to use the tip credit, but it also must inform the tipped employees (before it utilizes the tip credit) of the following:

- The amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;

- The additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minim wage of $7.25);

- That the tip credit claimed by the employer cannot exceed the value of the tips actually received by the tipped employee;

— That the tip credit will not apply with respect to any tipped employee unless the employee has been informed of the tip credit provisions; and

— That all tips received by the tipped employee must be retained by the employee except for the pooling of tips among employees who customarily and regularly receive tips (e.g., waiters, waitresses, bellhops, counter personnel who serve customers, bussers, and service bartenders).

The final rule does not require employers to provide written notification of these terms to their employees, but the Division notes that "employers may wish to do so, since a physical document would, if the notice is adequate, permit employers to document that they have met these requirements."

In Summary

Governmental regulations, both federal and state, continue to increase and place a heavy burden and responsibility on SESCO clients. It is wise that employers in all industries, no matter how small, conduct an annual compliance audit to include compliance to the Fair Labor Standards Act Wage and Hour regulations. SESCO specializes in conducting such audits as well as representing employers before the Department of Labor, Wage-Hour Division if ever investigated. Please contact SESCO to schedule your audit.

To Conquer Turnover, First Calculate Its True Impact

Issue: Retaining key employees is more important than ever.

Risk: Turnover is expensive.

Even in the day of penny-pinching, few CEO's understand how much money their companies lose by failing to retain key employees. Examples: Replacing an HR Manager in the automotive industry can cost $133,803. A machine-works company that loses a skilled, salaried machinist can lose $102,796 from its bottom line. And the loss of a Store Manager costs a fast-food chain $21,931.

Now, here's your chance to calculate the cost of losing one of your company's stars. Thanks to consulting firm Kepner-Tregoe, Inc. and the Saratoga Institute, here's a formula you can use:

Select a job function with a lot of turnover. Calculate the full cost of that function by entering the average wage for that position on Line 1 and then multiplying it by 130% to include benefits costs.

Next, multiply the total wage by 25%. This cost per employee may then be multiplied by the number of ex-employees on Line 6 to arrive at the total cost of turnover in this position.

No "Magic Words" Required by Employees to Request Family and Medical Leave

When employees ask for leave especially for unforseen circumstances they don't need to assert their FMLA rights by stating, "I need FMLA leave." In fact, they don't even need to mention the FMLA.

While employees must provide a general explanation of their reasons for leave, it's your responsibility to identify leave requests that qualify as job-protected FMLA leave.

If the employee gives enough information to draw a preliminary conclusion that the leave may qualify for the FMLA, consider yourself on notice.

That's why it is important to teach supervisors how to listen for leave requests that would fall under the FMLA umbrella. As the following court ruling shows, even general leave requests, such as "I have a family emergency," could trigger FMLA protections.

Recent case: When an employee told his boss that he needed leave to deal with a "family emergency," the employer refused to grant him the time off. The employee sued under the FMLA. The court sided with him, saying his designation of "family emergency" was enough to put the company on notice of his need for FMLA leave.

FMLA regulations require an employee to give you only a "short and plain statement" of his or her need for leave.

If you determine later that the employee (or family member) didn't have a serious health condition that would qualify for leave, you can withdraw your FMLA leave approval at that time. (Christenson v. The Boeing Co., No. 150 LC 34924, D.Ore.)

Special Offering to
SESCO Clients!

SESCO has revised its Family and Medical Leave Administrative Guide which is now available to SESCO clients for a reduced fee of $30.00. This guide not only contains staff recommendations for compliance, but also sample policies, forms and letters to ensure compliance and ease of administration.

Order the manual by contacting SESCO at:

Phone: 423-764-4127
Fax: 423-764-5869

Termination-for-Cause Checklist

When an employee continues to pay no attention to rules and disciplinary action, where an offense is repeated, or misconduct is serious enough for discharge on the first offense, decisive action must be taken. To help guide you through this area, we suggest you stop and review very carefully the following checklist, before any employee is ever terminated. For your employees are your company's most valuable assets. Ask yourself these questions, before you discharge an employee:

1. Is the company policy, which has been violated, a reasonable one?

2. Has the company policy or rule been properly communicated to the employee?

3. Have I been objective and treated this employee the same as another would be treated for the same offense?

4. Have I accumulated all of the facts accurately?

5. If it is a repeated offense, has the employee been properly reprimanded in the past and have written corrections been issued?

6. Is the employee guilty by his/her own actions or by association with another employee?

7. Am I taking action against the employee because he/she has "challenged my authority"?

8. Does the punishment fit the offense?

9. Have I considered the employee's past disciplinary record and his/her length of service?

10. Was the employee's guilt supported by direct objective evidence, as opposed to just suspicion?

11. Has a top management official reviewed the facts and approved the discharge?

12. Should I try for a "voluntary resignation" instead of firing the individual?

13. Will the termination be a surprise to the employee? If yes, repeat discipline process.

14. Should I suspend employee first, to review all facts?

Remember, this recommended checklist is not very helpful after a discharge. If there is any question about facts or reasons for discharge, suspend the employee instead of firing, during an investigation of the facts.

New SESCO Publication!

Employee Discipline and Termination Guide

Due to the volume of client engagements regarding discipline and discharge of employees, SESCO has published a new guide assisting clients in all aspects of employee discipline, coaching and counseling as well as discharge. The guide contains sample policies, forms and suggested documentation.

Retainer Clients/Association Members: $35.00
Non-Retainer Clients: $55.00

Did You Know...

Personal injury attorneys and many areas of the Southeast are now targeting employees of businesses as potential clients for such issues as Wage and Hour, overtime, commission pay and bonus violations. Just the fact that personal injury attorneys are advertising on primetime TV should send a warning message to every business.

Special Thanks to New SESCO Clients!

Methodist Health Federal Credit Union
Memphis, TN

Meade Tractor
Abingdon, VA

Northern Virginia EMS Council
Gainesville, VA

Frontier Nursing University
Hyden, KY

Tennessee Hospital Association
Nashville, TN

Compass Minerals International, Inc.
Kansas City, MO

SESCO Client Feedback

"Bill, I would like to thank you for the great training class last Friday. Also, for the great material you presented. I feel each supervisor walked away with great knowledge and tools on how to handle this issue if it ever occurs." ~ Shay Barton, Human Resource Director Laurel Grocery

"Hi Jamie. Thanks so much for presenting at our webinar yesterday. You do a really nice job and you had some great information. One of our staff members who was working at home told me she listened in. She said she learned a lot. I'm sure our contractors did too. Thanks again." ~ Cindy Sheridan, CAE, Chief Operating Officer PHCC Educational Foundation

Union Free Consulting "Bill provided us with the education we needed in the timeframe we had available. We feel comfortable letting SESCO know what we need. They know our core business and how we strive to do the right thing for our residents, families, employees and communities. They are a knowledgeable group that we are happy to partner with. It is nice to know they are there if we need them." ~ Nancy Waters, LNHA, Director Staff & Community Relations Commonwealth Care

By The Numbers

1 in 3 employers (33%) to drop employee health benefits after federal healthcare law goes into effect published by McKinsey Quarterly.

$61.6 Trillion: The amount of unfunded entitlements owed by the U.S. Government $534,000 per U.S. household. Five (5) times the liability Americans have borrowed for items such as mortgages, automobiles and education. U.S.A. Today in an analysis of government liabilities.

Consumer Price Index: +.4% April 2011

Unemployment rate: 9.1% May 2011

#1 State: CNBC reveals Texas as America's top state for business 38% of all new jobs in the past two (2) years have been in the State of Texas. CNBC reports reasons include tort reform and less restrictive business regulations as compared to other states. The report notes Texas ranked No. 1 in the economy and infrastructure and lowest rank in cost of doing business.

34.8%: Average percentage of labor cost to net revenue (less benefits). VMG Benchmark Study