I'm a winnerIn an earlier post regarding payroll deductions, I promised to write about the unique aspects of deductions from a sales employee’s commissions. This topic is always ripe for discussion.  Why? Well, good salespersons will make great commissions! They are winners. They don’t like to lose sales – or money.  They are usually very aware of what they have sold and the related commission. Accordingly, when they see a deduction on a commission, or a commission less than they expected, naturally their radar goes on high alert.  I can’t blame them, this is their bread and butter after all – and this is what drives them; these are folks generally highly motivated by monetary compensation – which is the whole point.  They bring in revenue for the business and want to be rewarded accordingly.

There are actually two different aspects to salespersons commissions – with an extremely important distinction between the two. First, when can an employer deduct from commissions owed, due to errors or omissions? Second, when can an employer reduce a salesperson’s commission not due to the salesperson’s errors or omissions?  Hopefully I can help clarify. However, for purposes of this post, I should specify that this is all about employed salespersons – not independent contractors.  Commission salespersons who are independent contractors have their own prompt payment statute and that would throw us off track here.

Making Deductions From Commissions Due to Errors or Omissions

As I mentioned before, Minnesota law (Minn. Stat. 181.79) treats sales commissions differently when it comes to allowing wage deductions. Indeed, the wage deduction requirements for faulty workmanship, loss, theft, or damages do not apply when an employer has rules related to commissioned salespeople, when the rules are used “for purposes of discipline, by fine or otherwise, in cases where errors or omissions in performing their duties exist”.  
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24 HourWhile Jack Bauer may be by the wayside, Fox Network’s 24 is not going away any faster than an employer’s requirement to pay terminated Minnesota employees within 24 hours.  An issue that I frequently get calls about (usually somewhat frantic) is a terminated employee’s demand for payment within 24 hours. Unfortunately, too many employers without

Mother and childWell, I don’t want to say I called it but…on April 8, 2016, I wrote a post about Minneapolis’ proposed paid sick leave and managing paid sick leave laws in multiple states, suggesting that this issue is only going to spread. Indeed, it has.  Minnesota is proposing a paid sick leave fund comparable to the State of California – but even going beyond (one upping CA?! Impressive feat if passed). Though I didn’t know it then, I now know that on March 10, 2016, State Senators Sieben, Pappas, Franzen, Bakk and Hawj introduced SF2558, “a bill for an act relating to paid family medical leave benefits; establishing a family and medical leave benefit insurance program; imposing a wage tax; authorizing rulemaking; creating an account; appropriating money” and amending the state statutes accordingly.  The proposed law has been amended and is currently before the Finance committee in its 3rd engrossment. English = it is still pending and here is the latest version.  It proposes to be effective January 1, 2020, though the payroll tax will take effect 2018 (the State needs 2 years of taxes to have money to pay employees this proposed benefit).

Bill Proposes New Payroll Tax (Effective August 1, 2016) on Employers and Employees.

If passed as drafted, a new payroll tax will be imposed on employers with 21 or more employees (working in Minnesota during the past year) starting August 1, 2016.  Employees of covered employers would also suffer the new payroll tax.  The initial tax rates are 0% for 2017, 0.05% for 2018 and 0.1% for 2019.  The rates in 2020 have not been introduced yet.  The proposed bill seeks an appropriation in 2017 from the general fund to get the program started.

What happens to the money from the tax?  It will go into a new state-run trust fund to be used to replace between 55% – 80% of an employees wages for up to 12 weeks a year for leave to care for family member, pregnancy-related condition and/or to bond with a newborn child (whether biological or adoptive).  In addition, if the IRS determines that the benefits are subject to federal income tax, that tax would be withheld.

How Would This Work?
The Commissioner of Minnesota’s Department of Employment and Economic Development (“DEED”), currently Katie Clark Sieben, would be tasked with administrating the new benefit insurance program. Accordingly, DEED must create three application forms both for online applications and in paper: (1) family care benefits; (2) bonding benefits; or (3) pregnancy benefits.  Once the employee applies, the Commissioner would have 2 weeks to approve or deny the application.  If the application is determined “valid” and thus approved, the employee would then be notified of the week when benefits commence, the weekly benefit amount payable, and maximum duration.  The employer would also be notified and provided rights to participate in an hearing and appeal process.  Denied applications (deemed “invalid”) may be appealed, similar to unemployment, via a hearing before a newly created “benefit judge” (as well as challenges by employers).

What Employees Are Eligible?

An employee would be eligible for leave if the employee performed services for the employer for at least 6 months before the request (note this is less than the 12 months required by FMLA) and for at least 20 hours a week (well, it’s a little more complicated formula, but basically – half-time employees).

What Could Leave Be Taken For?

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Yesterday was “Equal Pay Day” – this is the day that the average pay for women catches up to the average pay for men from the preceding year alone.  I had no idea until I received an EEOC email update proclaiming this to be true.   For what it’s worth, apparently today is National Make Lunch Count Day, National Scrabble Day, National Peach Cobbler Day, National Thomas Jefferson Day and, my favorite, National Bookmobile Day.  All worthy causes, to be certain.  On to the EEOC’s latest administrative burden on employers.

EEOC Seeks Revisions to EEO-1 Survey.

On February 1, 2016, the EEOC proposed revisions to add wage and hour information to employers’ yearly EEO-1 report.  This is old news, of course, but as the comment period closed on April 1, 2016, and the EEOC sent me the email of what’s on its radar, I thought it might not be bad to revisit what is likely coming down the pipeline.  The EEO-1 report is required by the EEOC, pursuant to its authority in Title VII of the Civil Rights Act of 1964 (Title VII), and sets forth information aimed at detecting discriminatory practices.  The proposed revision is the recommendation of a 2010 Equal Pay Task Force between the EEOC, DOL and the President’s National Equal Pay Task Force.

Who Cares?

The EEO-1 survey is used by the EEOC and the OFCCP (Office of Federal Contract Compliance Programs) to analyze and enforce non-discriminatory employment (such as a contractor who hires no minorities).  The EE0-1 survey must be filled out by all employers subject to Title VII with 100 or more employees (this includes corporate enterprises and/or shared ownership) and federal contractors / first-tier subcontractors subject to Executive Order 11246 (government contract over $10,000) with 50 or more employees and a prime contract or first-tier subcontract of $50,000 or more.

However, the EEOC has taken mercy – not all employers will have this additional pay and hours worked data burden (now called “Component 2” of the EEO-1).   
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USA MapMinneapolis is one of many cities giving increased attention to mandating a paid sick leave policy.  On March 16, 2016, the Minneapolis Workplace Regulations Partnership Group (WPG) (created by Mayor Betsy Hodges and the Minneapolis City Council) submitted its Findings & Recommendations to the Minneapolis City Council.  In a nutshell, the WPG recommended the City pass a sick time policy covering all employers “working in the City of Minneapolis regardless of employer location”.

The Proposed Minneapolis Paid Sick Leave Policy

The proposed Minneapolis policy (which I won’t get into great detail in this post), would require covered employers to provide employees with paid sick time for themselves or members of extended families and household for mental and physical health.  The proposal recommends that employees accrue sick time at the rate of 1 hour for every 30 worked, up to an annual cap of 48 hours.  Employees would be allowed to carryover up to 80 hours of accrued, unused sick time – but need not be paid this time out at termination.  WPG member Steve Cramer of the Minneapolis Downtown Council (business association representative) submitted a Minority Statement proposing an alternative means to address the Council’s sick leave policy goal and noting several issues with the proposed policy (such as employers who already have a successful flexible PTO policy may not mirror the City’s ordinance, but otherwise achieves the same objectives of paid time off for sickness).  It is those concerns that employers are raising – how can we possibly keep up with the nuances of yet another sick leave ordinance when we already have a comprehensive paid time off policy?

Various Paid Sick Leave Laws and Ordinances Already Exist Nationwide

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Mom and babyOn April 5, 2016, San Francisco became the first city/county in the U.S. to mandate that employers (with 20 or more employees) provide 6 weeks of supplemental compensation for paid paternal leave pursuant to the Paid Parental Leave for Bonding with New Child Ordinance.  While this may not affect many Minnesota employers presently, certainly other cities and counties may follow in a similar fashion and so I thought readers may like to see how this particular ordinance plays out.

The Ordinance is effective January 1, 2017 (for employers with 50 or more employees), July 1, 2017 (for employers with 35-49 employees) and July 2018 (for employers with 20-34 employees).  However, as the State of California already provides employees with 55% of their salary for up to 6 weeks for the care of newborns or newly adopted children under its state family leave insurance program, the California Paid Family Leave Act, employees working in San Francisco County (while the term “city” is used – the definition of the ordnance includes San Francisco County within the definition of “city” as the city is the only city within the county) will now be entitled to the remaining 45% from their employer (wherever located – including Minnesota).  The weekly benefit amount uses the employee’s highest earning calendar quarter during an approximate 12 month base period – as of January 16, 2016 the maximum weekly benefit amount is $1,129.

Who Is Eligible for Paid Parental Leave in San Francisco?

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DollarsIn an earlier post regarding the proposed changes to the FLSA white collar exemption, I reminded employers not to forget to recalculate the regular rate for overtime purposes following payment of a bonus – resulting in an additional payment to employees.  However, this is an often overlooked concept and can be confusing.  So, I thought it would be worth a quick post to help clarify as it came up the other day with another employer.

Section 7(e) of the FLSA states that non-discretionary bonuses must be included as part of the employees “regular rate of pay”.  Because overtime must be paid as time and one-half of the regular rate, the regular rate then increases the overtime rate.  But, let’s break this down.  First, discretionary bonuses do not change the regular rate – it is one of eight types of payments that does not need to be included in the employees regular rate.  29 C.F.R. 778.208.  However, a non-discretionary bonus is not excluded from the type of remuneration for employment and thus must be included into the employees “regular rate”.

How Are Bonuses Included Into the Regular Rate in a Single Pay Period?

Let’s start simple.  If a non-discretionary bonus is paid because of an employee meeting a weekly goal, for example, that money is added to the employee’s other weekly earnings and divided by the amount of hours the employee worked that week.  For example, let’s say the employee earns $15/hr and worked 50 hours/wk.

Straight time pay = $15 x 50hrs = $750 (regular rate is $15)

Overtime pay = $15 * 0.5 = $7.50 (overtime premium) x 10hrs = $75.00

Total compensation before bonus = $750 (straight time) + $75 (overtime) = $825

Non-discretionary bonus paid = $25

Straight time pay after bonus = ($825 + 25)/50 = $17 (new regular rate)

Overtime rate after bonus = $17 * 0.5 = $8.50 (new overtime premium)

Additional hourly overtime due = $8.50 – $7.50 = $1/hr

Total additional overtime due = $1 * 10 = $10

Total compensation after bonus = $860

So, in this scenario, the employee who worked 10 hours of overtime and received a $25 non-discretionary bonus, should also receive an additional $10 for overtime pay in the next payroll (assuming the bonus is calculated after the weekly payroll is run).

How Are Bonuses Included Into the Regular Rate When It Covers Multiple Pay Periods?

Now, real world.  
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Computer stethescopeOn March 11, 2016, the US DOL WHD extended the comment period through April 12, 2016 for its Notice of Proposed Rulemaking implementing Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors.
First published on February 25, 2016, the proposed rule seeks to implement the Executive Order signed by President Obama on

Computerized_time_clockAs will happen from time-to-time, several employers have called me with the same issue this week, “Do I have to pay an employee who quit and didn’t turn in their time sheet? I have no idea how many hours he worked as I’m in an office in Bloomington and the employee was on a job site!” Now, I know all you super-smart HR professionals (yes, you know who you are because you’re reading this!) know that the FLSA has a record keeping requirement. And I know you know that the employer has to keep records for 3 years of the employee’s time worked. However, this also means that the FLSA (and many state wage and hour laws) require the employer to keep the employee’s time – not the employee!

Yes, I’m talking in circles, but it’ll make sense shortly…
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