The SESCO Report – August 2016
SESCO's Election Year Tips for Employers
From now until the polls close on Tuesday, November 8, 2016, politics will be inescapably in the air – and in the workplace. Employees will be talking, and sometimes arguing, and sometimes participating in one campaign or another. Prudent employers should take note of what they may be required to do or prohibited from doing about their employees' desire to participate in the electoral process.
THE WORKPLACE IS NOT A "FREE COUNTRY"
Let's start with the basics: the First Amendment does not apply to the private workplace. The Constitution does not prevent private employers from restricting their employees' political speech. Employers generally can restrict employees' speech during work time and on work equipment, especially if the employer has a legitimate, business-related reason to do so.
YOUR MISSION MATTERS
Employees who bring politics into the workplace of a 501(c)(3) can jeopardize the organization's tax-exempt status. For some nonprofits, requiring employees to make clear that their partisan political activities are in their personal, not work, capacities may suffice. For others, such a distinction may be unworkable, requiring a total ban. Even if partisan political activity wouldn't threaten your tax-exempt status, such activity still may jeopardize your mission.
WHAT DO STATE LAWS SAY?
An employer's ability to regulate off-duty activity is governed largely by state law, and these laws vary.
Some states have few or no applicable laws. In Virginia, for example, employers may ask employees to refrain from engaging in problematic political activity even in their off-hours.
Conversely, other states, such as Louisiana, expressly prohibit employers from restricting employees' lawful off-duty political activity, even if such activity would conflict with the employer's mission or core values.
Most states, however, fall somewhere in the middle. For example, North Dakota, Colorado, and New York have broad laws permitting employees to engage in lawful off-duty activity, including political activity, but they make a narrow exception if the employer can demonstrate that a prohibition on the activity is related to an essential business interest. Connecticut bars employers from interfering with the exercise of rights guaranteed by the First Amendment, and largely applies rules to private employers similar to those applied to public employers under federal law. The District of Columbia prohibits discrimination based on party affiliation; while an employer could create a viewpoint-neutral policy prohibiting campaign activity, it would be essential to enforce it across the political spectrum.
Our democracy may aspire to lofty ideals, but prudent management of election-related issues in the workplace frequently boils down to nitty-gritty issues like the following.
May I prohibit my employees from using the office copier, phone, or other resources for political activity?
If your business is a 501(c)(3) nonprofit, you must restrict employees from using company time and organizational resources to support a candidate. Your employees may not make campaign flyers on the office copier or use the organization's mailing list to pinpoint potential campaign donors. You must prohibit employees from using their work-issued phone number, email address, office address, or your company's name when communicating with candidates or participating in a political campaign.
For-profit organizations are permitted, but not required, to restrict these activities.
May I require an employee to remove a political button, t-shirt, or campaign poster?
You may prohibit your employees from wearing campaign paraphernalia as a part of a neutral dress code. You may also tell employees not to post campaign signs in their cubicle, or tell them to take down a campaign sign from their cubicle.
May I require my employees to stop talking about the campaign, candidates, or political issues?
You may prohibit employees from engaging in conversations about political candidates or about controversial topics in the workplace during work hours. You should be careful that you do not restrict political speech that might relate to labor or working conditions.
May I prohibit employees from making campaign calls during their lunch break?
You may usually restrict your employees' activities during breaks if those activities are on your premises or use your equipment. For example, you may tell an employee not to make fundraising calls on her work phone.
May I prohibit employees from posting about controversial or political topics on social media?
In most states, yes, unless the speech is related to union activity. While some states protect employees' ability to engage in this type of political activity, most do not.
May I require employees to remove political bumper stickers from the cars if they drive their car for official business?
Generally, yes. However, if your organization is in a state that protects off-duty political activity, you will need to carefully evaluate whether your state's individual law will permit such a restriction.
How else might I get in trouble when restricting employees' political activity?
The short answer is: by enforcing your policies inconsistently or in an un-evenhanded way. Ideally, enforcement should be nonpartisan. In addition, any policies that prohibit political activity will likely be viewed more favorably if the policy captures political activity along with more neutral activities — for example, a dress code that prohibits all t-shirts will also prohibit political t-shirts, and a policy against general solicitation in the workplace can be enforced against employees soliciting donations for a candidate.
WHAT SHOULD YOU DO?
A policy. Do you have a policy regarding employee political activity? If not, call SESCO. If you do, review it to ensure compliance with current applicable law.
Q&A on Department of Labor's New FLSA Overtime Rule
SESCO Management Consultants has been conducting teleseminars and webinars for the past months with various national and state trade and business associations as well as individual clients on the new final rule regarding overtime regulations. The seminars have been well received and highly-attended. Should your trade association or organization wish to schedule a conference with SESCO Management Consultants, please contact Kim Tester at firstname.lastname@example.org.
The following are questions that attendees have asked in these seminars and SESCO is sharing the Q and A’s as we feel these are informative.
Q: In summary, what do I need to understand about these new overtime requirements?
A: The Department of Labor has issued white-collar exemptions. These exemption tests have not changed under the new rules. If any of your organization’s positions meet a white-collar exemption test, then your organization does not have to pay that position overtime or require a time record to be maintained. These white-collar exemptions include the Executive, Administrative, Professional, Outside Sales (no salary requirement), Computer, and Highly-Compensated. Each one of these white-collar exemptions have requirements (tests) that your position must meet in terms of performing certain duties. In addition to meeting the duties tests, the position must also be paid on a guaranteed salary basis. This guaranteed salary basis is being increased effective December 1, 2016 from $23,660 ($455 a week) to $47,476 per year ($913 per week). The salary threshold for the Highly-Compensated White-Collar Exemption is increasing to $134,004 per year.
In addition, the guaranteed salary threshold will be automatically updated by the DOL every three (3) years based on certain economic benchmarks with the first increase scheduled to occur on January 1, 2020.
The bottom line for employers is that they must in one fell swoop increase an exempt employee’s salary to the new $47,476 per year for the position to remain exempt from overtime, or change the position from exempt to nonexempt and thus implement a nonexempt pay plan that yields overtime
Q: Is paying an employee above the salary threshold the only requirement needed to avoid overtime?
A: No, just because an employer compensates an employee via a guaranteed salary that meets the new threshold ($47,476) does not mean that he or she is not entitled to overtime. The position must meet one of the white-collar exemptions from overtime and receive the guaranteed salary.
Q: Do these new rules affect the Fluctuating Workweek Method of Payment?
A: No. The Fluctuating Workweek Method of Payment was not affected by the new rules nor does the Fluctuating Workweek Method of Payment require a guaranteed salary of $47,476. The Fluctuating Workweek Method of Payment is a viable nonexempt pay plan option versus hourly with time and one-half (150%) over 40 hours per week. The Fluctuating Workweek Method of Payment provides for a guaranteed salary (only has to yield minimum wage for all hours worked) and the only requirement for the employer is to pay half time (50%) for hours worked in excess of 40 hours per week. This pay plan can be considered very positive for employer and employee alike.
Q: I am a non-profit employer, must I comply with these regulations?
A: Yes. There are no special exemptions for non-profit employers, religious organizations or carve outs for small businesses. If your organization, regardless of IRS status, is considered an enterprise you are covered by these regulations.
Q: If I change an exempt employee’s pay plan from salary to hourly with overtime, can I restrict their hours of work?
A: Yes. This will be one of the more common solutions in that employers will restrict employees from working overtime to avoid a significant increase in labor costs. As labor costs are all employers’ largest single, controllable costs, employers will closely manage rates of pay and working hours.
Q: Do these new regulations affect any of the nonexempt, partial exemptions (overtime only)?
A: No. Partial exemptions from overtime (only) still remain in effect for retail dealerships (automotive, equipment, aircraft, and boat), retail operations and their commissioned employees, motor carriers and healthcare, re: 8/80 overtime rule.
Q: Are there any organizations or positions that are not covered by these new regulations?
• Higher Education Sector – Rules do not apply to:
- Bona fide teachers
- Graduate and undergraduate students
- Academic administrative personnel
• State and local governments
• Politicians and their staff
• Non-enforcement for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. Threshold does not become effective until March 17, 2019.
• Teachers in secondary education, doctors, lawyers
Q: How should I prepare for these new regulations for those exempt salaried positions who fall under the new salary requirement of $47,476?
A: SESCO recommends the following process be implemented:
• Require those who are currently exempt but will not meet the new salary threshold of $47,476 to start recording hours worked.
• Over the next several weeks and months, determine how many hours the position is actually working. If it is 40 or less, then no action necessarily needs to be taken as anyone can be paid on a salaried basis.
• If the position is working a significant number of hours over 40, determine if those hours can be reduced to 40, thus limiting your overtime liability.
• If the position is required to work overtime and you cannot increase the exempt salaried basis to the new $47,476, then you must determine whether or not you are going to implement an hourly rate with overtime or the Fluctuating Workweek Method of Payment with half-time over 40.
• In either case, the time records as maintained between now and December 1st will be vital to serve as a benchmark so that when employees receive overtime, hours do not escalate beyond what is expected and thus increase your labor costs.
Q: In some of our pay classifications, we have positions that are currently being paid over the $47,476 and some that are being paid less. Can we have two (2) separate pay scales (exemption statuses) for the same job classification?
A: Yes. For those over the $47,476, you can continue to pay them on a salaried exempt basis. For those under the $47,476, you can elect not to increase their guaranteed salary and convert them to a nonexempt pay plan, re: hourly with overtime or Fluctuating Workweek Method of Payment with half time (50%).
Q: What challenges might present themselves should I increase salaried exempt staff from their current salary to the new salary threshold of $47,476?
A: When increasing existing salaries for one class of employees and not others, this can create significant pay compression within your compensation program, thus creating internal inequity — which is far more important than external equity. It can also create internal morale issues as a class of employees will receive pay increases and others will not. Finally, when hiring in new exempt employees to the new $47,476 threshold, they will be hired in at salaries normally paid to more experienced, tenured employees. Therefore, labor costs and internal equity/morale issues will be a reality. Organizations must be able to answer these difficult questions that will be raised by staff. Compensation systems will also need to be developed and/or revised to address these pay compression issues.
Q: I saw in the media that U.S. Senator Lamar Alexander and others have vowed to vote out the new overtime rule before December 1st and that we will not have to worry about the regulations. Is this possible?
A: While anything is possible, it is highly doubtful and more than likely, these senators are merely posturing. Moreover, even following the presidential election, if the Republicans win the White House, we view it as highly unlikely that the new rule will be unwound or repealed. As with most all employment regulations, there is a slim chance that they will be repealed and/or revised and employers must become familiar with the new rules and be prepared to comply.
Q: Can SESCO assist us with our exemption classifications and help us prepare for the new salary threshold?
A: Yes, SESCO can be of assistance on or offsite in assessing the exemption status of your positions as well as in preparing for changes from exempt to nonexempt pay plans as required as well as in revising and updating compensation systems to control labor costs.
For more information on these new FLSA overtime regulations and how they will affect your business, and more importantly how you can comply in a cost effective manner, contact SESCO Management Consultants at 423-764-4127 or email@example.com.
Special Thanks to New SESCO Clients!
Thibodaux Funeral Home
Aaron’s Car Care, Inc.
Community Tire Pros & Auto Repair
John Flannagan Water Authority
MedNorth Health Center
Harrisonburg Auto Mall
At Home Care Staffing
Virginia Tire and Auto
The Godwin Group
Homer Skelton Ford
Olive Branch, MS
SESCO Client Feedback
"Thank you so much for conducting the Wage-Hour teleconference, it was very informative and enlightening. NCSG really knocked it out of the park with this presentation. I look forward to the PowerPoint and Bill’s contact information." ~ Chuck Roydhouse — CSIA Board Member
"Thanks, Brenda. I appreciate all of the help and hard work you put into our handbook. It was a pretty hefty task, and you did a great job. Thanks again." ~ Tony Vermaas — Sobie Company, Inc.
"It is always a pleasure working with you, Kim. You make it easy for us all." ~ Mike Scheuren — White Horse Village
"Bill, did I tell you that you and your team are the bomb?" ~ Bryan W. Stasch, ATI Vice President — Automotive Training Institute
"Fantastic job today, Bill! I thought it was excellent, and I’m sure you’ll be hearing from lots of folks today." ~ Carmella Hansen, M.S.Ed, Director, Professional Development — National Funeral Directors Association
"Bill, thanks so much for the session this afternoon. Judging by our audience, getting 49 to attend and stay for the entire session is an achievement." ~ Dan Hilton, Director of Government Affairs — American Supply Association
Sesco Product of the Month — New Federal Posters Required
• 5-in-1 (Less than 50 employees)
• 6-in-1 (50 or more employees)
To order, email: firstname.lastname@example.org.
Fair Labor Standards Act: Rules Impacting Overtime and Exemption Status
Free Client Teleconference
Tuesday, September 30, 2016 • 2:00 pm EST
Wednesday, October 12, 2016 • 2:00 pm EST
Presented by: Bill Ford, President and CEO
Overview: It has been over ten years since the Department of Labor overhauled the Fair Labor Standards Act overtime regulations. Over two years ago, President Obama directed the Department of Labor to look at the regulations. As a result, the guaranteed salary to be exempt has been raised from $23,660 to $47,476 – effective December 1, 2016.
• Review white-collar exemption tests
• Prepare for the increase in the white-collar exemption salary requirement
• Discussion of the most common wage hour violations and financial liability
Target Audience: This webinar is appropriate for CEOs, CPA’s, Attorneys and HR Managers.