Hot Topics in Total Rewards

Employers have just 30 days to respond to penalty assessments

By Stephen Miller, CEBS Nov 15, 2017

The IRS plans to begin notifying employers in "late 2017" of their potential liability for failing to provide health coverage compliant with the Affordable Care Act (ACA). The agency recently posted online a new set of frequently asked questions (FAQs) that explains the notification process and how employers can appeal the penalty determination.

On Nov. 2, the IRS issued Q&As 55-58, informing employers that by year's end the agency will begin notifying "applicable large employers" (ALEs) of their potential liability for an employer shared responsibility payment, if any, in connection with the 2015 calendar year. The determination will be based on information that employers reported to the IRS on Forms 1094-C and 1095-C and the individual tax return filed by the ALE's employees. In general, an ALE would be subject to a penalty fee if, for at least one month in the year, one or more of its full-time workers received a premium tax credit through the ACA's Health Insurance Marketplace because the ALE failed to provide ACA-compliant health coverage.

The IRS also posted an explanation of Letter 226J and described how ALEs should respond to this letter.

"Any ALE that receives a Letter 226J will be provided with 30 days to respond before a demand for payment is made by the IRS," said Ryan Moulder, a Los Angeles-based partner at Health Care Attorneys PC and general counsel at Accord Systems LLC, an ACA compliance software firm.

Penalty Refresher

The ACA added employer shared responsibility provisions under Section 4980H of the tax code. ALEs—employers with at least 50 full-time equivalent employees—must offer "minimum essential coverage" that is "affordable" and that provides "minimum value" to their full-time employees or potentially make an employer shared responsibility payment to the IRS.

However, "2015 was a phase-in year and an applicable large employer [was defined as having] 100 or more full-time employees," rather than 50 or more, said Craig Hasday, president of Frenkel Benefits, an employee benefit brokerage and benefit administration firm in New York City. For 2015, ALEs also were "required to offer minimum essential coverage which also met the minimum value standard to at least 70 percent of full-time employees and their eligible dependents," whereas beginning in 2016 the statutory threshold—at least 95 percent of full-time employees—took effect.

For plan year 2015, ALEs could face a $2,000 penalty for every full-time employee in the event there was no valid offer of coverage and a $3,000 penalty if the offer was not affordable. These penalties are indexed for inflation and rose slightly for each subsequent plan year (2017 and 2018 penalty amounts are described here).

Enforcement Guidance

The new guidance explains that:

• The IRS will notify an employer of potential liability for an employer shared responsibility payment via Letter 226J. The letter will list, by month, the employees who received a premium tax credit and provide the proposed penalty. It will also provide the employer shared responsibility response form (Form 14764) and the name and information for a specific IRS employee to contact with any questions.
  

• ALEs will have just 30 days from when the Letter 226J was dated to respond before the IRS demands payment. The ALE's response can either agree with the proposed assessment or disagree in whole or in part.
  

• The IRS will acknowledge the ALE's response with Letter 227, which describes further actions the employer may need to take.
  

• If the employer disagrees with the proposed or revised assessment in Letter 227, the employer can request a pre-assessment conference with the IRS Office of Appeals. Conferences will generally take place 30 days from the date of Letter 227.

Rapid Response Required

If an ALE does not make a timely response to the Letter 226J, "the IRS will demand payment in the proposed amount through notice CP 220J. Assessments are due only after the IRS has provided notice and demand for payment," noted Julia Zuckerman, J.D., a director at Conduent HR Services in Washington, D.C., and Richard Stover, an actuary and principal with the firm, in a recent blog post.

Employers "should also ensure that processes are in place to make these payments, as necessary. Even employers who are not expecting any assessments will need to prepare to respond to the IRS within the limited timeframe to appeal any incorrect assessments," they advised.

"Regardless of the reason an ALE member receives a Letter 226J, a timely, accurate response is necessary," Moulder emphasized. "It would be prudent for any ALE responding to the Letter 226J from the IRS to consult with an attorney who is familiar with the Forms 1094-C and 1095-C as well as other pertinent Affordable Care Act provisions."

"Subtract mailing time and internal routing time and you may have just two or three weeks to deliver to IRS your well-considered, written, well-documented, objection to a substantial employer mandate tax assessment," said R. Pepper Crutcher Jr., a partner in Balch & Bingham's Jackson, Miss., law office. "If you lack ready access to well-organized data about your 2015 group health plan enrollment, employee affordability, eligibility and IRS reporting of your coverage offers—including 2015 Forms 1094-C and 1095-C—you may find this a daunting task. If that data is hosted by a vendor, you should contact that vendor and verify access promptly."

"In an organization of any size, it might take a week or more for Letter 226J to reach the right department or person," said Alden Bianchi, a benefits attorney with Mintz Levin in Boston. "While the Q&A nowhere mentions extensions of time, one would hope that the IRS will be more flexible on this score."

Due to confusion surrounding the regulations and the complexity of the required forms, "the appeal process is going to be a mess," said Hasday. "No doubt, there are going to be a lot of angry and confused employers. Lawyers, accountants and insurance brokers are going to get very busy sorting all this out."

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Source: Society for Human Resource Management (SHRM) 

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-prepares-aca-penalty-letters.aspx

Employers’ contributions to plan premiums nearly the same year to year

By Stephen Miller, CEBS Nov 3, 2017

At the end of the year, health plan data-crunchers forecast health premium increases for the coming year and look back to verify how much premiums actually rose in the year that's coming to a close.

Premium renewal rates for employer-sponsored health plans rose an average of 6.6 percent this year—a significant increase from the five-year average increase of 5.6 percent—findings from the 2017 United Benefit Advisors (UBA) Health Plan Survey showed.

Last year, some forecasts for 2017 premium rates had predicted an increase closer to 6 percent.

The annual survey by UBA, a network of health benefit brokers and consultants, this year looked at health plans sponsored by 11,221 employers of all sizes throughout the U.S. UBA's findings tend to show larger cost increases than surveys that focus on large employers.

This year UBA found that:

• Employee contributions to plan premiums are up, while employer contributions toward total costs remained nearly the same.
  

• Co-pays—flat-dollar amounts often around $20-$50 that plan enrollees pay for health services after satisfying any deductible—are holding steady, but out-of-network deductibles and out-of-pocket maximums are rising.
  

• Pharmacy benefits have even more tiers and co-insurance (the percentage of costs that employees pay after satisfying the deductible), shifting more prescription drug costs to employees.
  

• Self-funding, particularly among small groups, is on the rise.
  

Details on these trends are presented below.

Premium Cost-Shifting

The survey showed that:

• Average employee premiums for all employer-sponsored plans rose to $532 in 2017 from $509 in 2016 for single coverage and to $1,272 from $1,236 for family coverage (a 4.5 percent and 3 percent increase, respectively).
  

• Average annual total costs per employee increased to $9,935 from $9,727. However, the employee share of total costs rose 5 percent to $3,550 from $3,378, while the employer's share rose less than 1 percent, to $6,401 from $6,350.
  

“Premiums have been holding relatively steady the last few years. And while this year’s increases are not astronomical, their departure from the trend does warrant attention," said UBA President Peter Weber.

Prescription Drug Plans

Employers have reduced prescription drug coverage to defray increasing costs, the survey found.

For a second year, there are more prescription drug plans with four or more tiers (with higher tiers that charge employees a larger share of the cost for expensive "specialty" pharmaceuticals) than there are plans with one to three tiers (traditionally for low-cost generic drugs, formulary brand drugs and nonformulary brand drugs).

Almost three-quarters (72.6 percent) of prescription drug plans have four or more tiers, while 27.4 percent have three or fewer tiers, the survey found. Six-tier drug plans now account for 32 percent of all plans, charging employees the most for drugs such as biologics, which are produced using recombinant DNA technology.

Out-of-Pocket Costs

Out-of-network median deductibles for singles saw a 13 percent increase in 2016 and a 17.6 percent increase in 2017, to $4,000 from $3,400, the survey found.

Both singles and families are facing continued increases in median in-network out-of-pocket maximums (up by $560 and $1,000, respectively, to $5,000 and $10,000).

Self-Funding

The number of employers using self-funding grew 48 percent for employers with 25 to 49 employees in 2017 (5.8 percent of plans), and 13.4 percent for employers with 50 to 99 employees (9.3 percent of plans).

Almost two-thirds (60.9 percent) of all large-employer (1,000+ employees) plans are self-funded.

"Self-funding has always been an attractive option for large groups, but we see self-funding becoming increasingly desirable to all employers as a way to avoid various cost and compliance aspects of health care reform," Weber said.

"For small employers with healthy populations, self-funding may be particularly attractive since fully insured community-rated plans under the Affordable Care Act don't give them any credit for a healthy group," he observed.

Strategizing to Meet Business Needs

"U.S. employers have had to wrestle with how best to plan strategically and innovatively around managing health care costs," said Hope Kragh, vice president of client services at Collective Health, a San Francisco-based health benefits administration firm.

"Rising health care costs not only impact the health and productivity of your employees, but they also weigh heavily on the health of your business," she noted. That, in turn has led CEOs and the C-suite to become more involved in health-cost management decisions.

Employers face health cost increases that "are three times the rate of increase for the consumer price index, and two times the rate of wage increases," Kragh pointed out. Many businesses are investing in health care more than they may be in research or other business-boosting expenses.

HR should form alliances throughout the organization when creating a strategy to deal with health care costs, said Brian Marcotte, president and CEO of the Washington, D.C.-based National Business Group on Health, representing large employers.

"For most organizations today, HR has to be joined at the hip with finance," he noted. When meeting with the CEO and leadership team, including the CFO and general counsel (and, in corporations, with the head of procurement), "you want to go in and be aligned with all of the stakeholders. Having already brought them up to speed on what you're presenting to the CEO is critically important to getting out of that room with a green light on your strategy."

He advised showing business leaders how to achieve the cost trend number that the CEO says is the bottom line given the level of business growth (or lack of growth in a down cycle, when the corporate budget has to be flat or down).

"If the [health care cost increase] trend is 6 percent and your CEO doesn't want [the company to absorb] any more than 3 percent, you've got to meet that expectation," Marcotte said. "Show them all the things you're going to do to achieve that number, presented as a business plan" aligned with the organization's priorities.

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Source: Society for Human Resource Management (SHRM)

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/workers-bear-rising-health-costs.aspx

By Roy Maurer

Oct 23, 2017

California employers will need to modify their job applications and update their training for those involved in the hiring process after California Gov. Jerry Brown signed two new laws, both effective Jan. 1.

Statewide Ban-the-Box Law Signed

California became the 10th state to require private-sector employers to "ban the box" on employment applications asking about applicants' criminal conviction histories when Brown signed A.B. 1008 on Oct. 14.

The law prohibits most public and private employers with five or more employees from asking applicants about criminal conviction histories until after a conditional offer of employment has been made. Positions required by law to undergo employment screening are exempted.

"It is not a surprise that California enacted this law given how many other states and cities have similar laws, including since several cities in California such as San Francisco and Los Angeles have recently enacted their own versions," said Michael Kalt, an attorney with Wilson Turner Kosmo in San Diego and the government affairs director for the California State Council of SHRM.

Kalt added that while well-intentioned, the new law's requirements may delay hiring decisions and increase HR's administrative burden. "The law may create unintended consequences such as employers avoiding conviction history checks, which may increase the likelihood of hiring someone who presents a danger, or encourage some employers to simply avoid making initial offers to people they improperly suspect may have a conviction history," he said. 

Assemblyman Kevin McCarty, D-Sacramento, who sponsored the legislation, said that the intent of the law is to give applicants with a criminal record the opportunity to be judged on their qualifications and not their criminal histories. "After a conditional offer has been made there is nothing preventing an employer from conducting a background check," he said.

Roughly 7 million Californians, or nearly one in three adults in the state, have an arrest or conviction record that can undermine their efforts to obtain employment, according to McCarty's office.

Nationwide, 29 states and over 150 cities and counties have adopted ban-the-box laws, and in 2013, California passed a similar law that applied to state agencies, cities and counties. Ten states and 15 major cities have adopted ban-the-box hiring laws that cover both public- and private-sector employers.

"For many California employers, this will necessitate revising initial employment applications to remove boxes or questions that ask applicants to disclose criminal convictions," said Benjamin Ebbink, an attorney with Fisher Phillips in Sacramento. "If the employer has a supplemental application or form that is only provided to applicants after a conditional offer of employment has been made, that document may continue to ask about conviction history."

If an employer wants to deny an applicant a position based on reviewing conviction history, it must make an individualized assessment and provide the applicant with an opportunity to respond before making a final decision, Ebbink said.

The individualized assessment must consider the nature and gravity of the criminal offense, the time that has passed since the offense and the completion of the sentence, and the nature of the job sought, added Jennifer Mora, senior counsel in the labor and employment department of Seyfarth Shaw's Los Angeles office. "The employer may but [is not required to] document the individualized assessment."

Mora explained that if the individualized assessment leads to a decision that the applicant's conviction history is disqualifying, then the employer must provide a written notice which goes beyond what the federal Fair Credit Reporting Act requires, including:

• The conviction at issue.
  
• A copy of the conviction history report.
  
• The applicant's right to respond to the notice before the employer's decision becomes final.
  
• A deadline for that response.
  
• An explanation that the response may include evidence challenging the accuracy of the conviction history and evidence of rehabilitation or mitigating circumstances.
  

The employer must consider any information the applicant submits disputing the accuracy of the conviction history before making a final decision, Mora said.

She noted that if an employer then makes a final decision to deny employment based on conviction history, a second written notification must be provided to the applicant, which must include:

• The final denial.
  
• Notice of any existing procedure to challenge the decision or request reconsideration, and the right to file a complaint with the California Department of Fair Employment and Housing.
  

Kalt added that the new law does not preempt conflicting municipal ordinances such as those in Los Angeles and San Francisco, adding to potential confusion, and that the law does not provide any protections against negligent hiring lawsuits. 

"Employers may find themselves in the uncomfortable position of choosing between not hiring an applicant with a conviction history and risking a lawsuit for employment discrimination or hiring the individual and risking a negligent hiring or retention lawsuit if there is a resulting incident or problem," Ebbink said.

There is also concern about how the law would relate to or overlap with the new California Fair Employment and Housing Council regulations on criminal history and adverse impact, and whether employers will be confused about their obligations between the two.

Kalt provided the following tips for HR professionals doing business in California:

• Update applications to remove inquiries related to conviction history.
  
• Train hiring managers and supervisors, as well as any third-party recruiters, to avoid inquiring about an applicant's conviction history until after a conditional offer of employment has been extended.
  
• Train hiring managers and any third-party investigators on the types of information that may be obtained during a background search for conviction history information.
  
• Train those involved in the hiring decision about the factors that must be considered when determining whether prior convictions disqualify an applicant.
  
• Develop protocols and notices for the process where the employer notifies applicants of potentially disqualifying convictions and provides an opportunity to respond.
  
• Review local ordinances for additional requirements or limitations regarding conviction history information.
  

Questions About Past Salaries Are Soon Off-Limits

A.B. 168 restricts employers' use of salary history information, which includes compensation and benefits. Signed by Gov. Brown on Oct. 13, the law bars employers from requesting the pay history of job applicants. Employers may consider salary history information that an applicant voluntarily offers, however. Employers are also required to give applicants the pay scale for a position upon request.

California joins a growing number of states and cities preventing employers from asking about applicants' past salaries. San Francisco recently passed an ordinance that will go into effect on July 1, 2018.

Supporters of the law say that basing salaries on prior compensation allows wage discrimination to follow people from job to job. "However, employers have generally argued that they utilize salary history information for legitimate, nondiscriminatory reasons, such as matching their job offers to current market rates," Ebbink said. "Employers have argued that prohibiting them from reviewing salary history information will result in wasted time for both parties where the employee's expectations or requirements for compensation far exceed what the employer is able to offer for the position."

According to federal data from 2015, the median wages for women in California are 84.8 percent of those for men.

Prior to Jan. 1, HR should carefully review the company's employment applications and hiring processes to ensure that they do not inquire into, or rely upon, salary history information, Ebbink said.

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Source: The Society for Human Resource Management (SHRM)

https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/california-bans-the-box-prohibits-salary-history-queries.aspx

'Catch-up' contribution for those 50+ stays at $6,000, while contribution limit from all sources hits $55,000

By Stephen Miller, CEBS Oct 20, 2017

Employee 401(k) contributions for 2018 will top off at $18,500—a $500 increase from 2017, following two years without a boost—while the "all sources" maximum contribution (employer and employee combined) rises to $55,000, up $1,000, the IRS announced on Oct. 19.

Plan participants who contribute to the limit next year will be able to receive up to $36,500 from match and profit-sharing contributions ($55,000 minus $18,500).

For participants ages 50 and over, the additional "catch-up" contribution limit will stay at $6,000.

HR and payroll managers should plan to adjust their systems for the new year and to inform employees about the new limits in year-end open enrollment materials.

The employee 401(k) contribution increase "is the first since plan year 2015, and reflects a consumer price index increase of 1.97 percent between the third quarters of 2016 and 2017, the largest increase in the past six years," said Brian Donohue, a partner in the Chicago office of October Three Consulting, a retirement plan advisory firm. "Inflation has been historically low during the entire current economic recovery," he noted.

Due to a mild uptick in inflation, rounding rules required the 2018 contribution limits to be increased, while other plan limits that are tied to higher inflation targets remain unchanged. "Although inflation continues to be low, it was enough to finally push up the 401(k) and 403(b) contribution limit in 2018 by $500," said Harry Sit, CEBS, who edits The Financial Buff blog.

2018 Defined Contribution Plan Limits

In Notice 2017-64, the IRS highlighted the following adjustments taking effect on Jan. 1, 2018, for 401(k), 403(b) and most 457 plans:

HR professionals should convey to employees their plan contribution limits for next year. Not all plan participants will be able to fund their 401(k) accounts up to the maximum, of course, but the contribution cap is a goal they should keep in mind and may encourage those who can defer extra dollars for retirement savings to do so.

Conversely, high-earners may want to increase their contributions a bit to reach the full annual limit. They also may want to ensure that they don't hit the annual limit prior to year-end, which could mean losing out on employer matching contributions tied to paycheck deferrals, unless the plan sponsor has agreed to "make whole" with the full year's match those participants who max out prior to their final paycheck.

2018 Income Tax Brackets and Retirement Plans The IRS issued income tax bracket adjustments for tax year 2018 on Oct. 19.  The level of income that is subject to a higher tax bracket can influence how much salary employees choose to defer into a traditional 401(k), which reduces taxable income for a given year by the amount contributed, or whether to participate in a nonqualified deferred income plan, if that option is available through their employer.

After-Tax Contributions

ARoth 401(k) is funded with after-tax dollars and withdrawals are tax-free during retirement, while a "traditional" 401(k) is funded with pretax dollars and withdrawals are taxed as income during retirement.

Some plan sponsors will allow employees to make additional after-tax—but non-Roth—contributions to a traditional 401(k) once the 2018 participant contribution limit of $18,500 (or $24,500 after age 50) is exceeded, up to the "all sources" contribution limit of $55,000 (or $61,000 after age 50).

If the plan document allows contributions to a non-Roth after-tax 401(k), then by following the correct steps employees can convert these contributions to a Roth individual retirement account (IRA), so that the after-tax traditional 401(k) contributions become, effectively, Roth IRA contributions. This approach gives heavy savers who contribute up to the standard limit more access to Roth contributions than would be the case if they relied solely on direct Roth 401(k) or Roth IRA contributions.

Nondiscrimination Testing Affected

The annual ceiling on employee compensation that can be used to calculate employee-deferral and employer-matching contributions is increasing to $275,000 from $270,000. "The pay cap increase will lessen the impact on annual nondiscrimination testing of maximum deferrals taken by high-earners," at least somewhat, Donohue said, referring to the annual nondiscrimination tests—the actual deferral percentage (ADP) test and actual contribution percentage (ACP) test—that a qualified retirement plan must satisfy.

But other factors could make passing nondiscrimination testing more difficult, depending on workforce demographics. For instance, the dollar limit used to define a highly compensated employee (HCE) for nondiscrimination testing will stay at $120,000 next year.

"When the HCE compensation threshold doesn't increase to keep pace with employee salary increases, employers may find that more of their employees become classified as HCEs," noted Van Iwaarden Associates, a retirement plan services firm in Minneapolis and San Francisco. As a result, "plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs."

Defined Benefit Plan Limits

Regarding defined benefit pension plans, sponsors of traditional pension plans should note that the IRS announced the following cost-of-living adjustments under tax code Section 415, also taking effect on Jan. 1, 2018:

• Annual benefit limit. The maximum annual benefit that may be provided through a defined benefit plan rises to $220,000 from $215,000.
  

• Separation from service. For a participant who separates from service before Jan. 1, 2018, the annual benefit limit for defined benefit plans is computed by multiplying the participant's compensation limit, as adjusted through 2017, by 1.0196. This is an increase from the previous year, when the participant's compensation limit, as adjusted through 2016, was multiplied by 1.0112.
  

Separately, the federal Pension Benefit Guaranty Corp., which insures private-sector defined benefit pension plans, posted 2018 premium rates for single-employer and multiemployer pension plans.

​"PBGC premium rates will increase a lot next year—more than 7 percent for headcount premiums and almost 12 percent for variable premiums," Donohue observed. "These increases come on top of huge increases sponsors have already seen in the past few years, which tripled total premiums paid between 2011 and 2016."

SEPs, SIMPLES and Other Plans

• For SIMPLE (savings incentive match plan for employees of small employers) retirement accounts, the maximum contribution limit remains unchanged at $12,500.
  

• For simplified employee pensions (SEPs), the minimum compensation amount remains unchanged at $600.
  

• For employee stock ownership plans (ESOPs), the maximum account balance in the plan subject to a five-year distribution period will increase to $1,105,000 from $1,080,000, while the dollar amount used to determine the lengthening of the five-year distribution period rises to $220,000 from $215,000.
  

IRA Deduction Phase-Out Ranges

• The limit on annual contributions to an IRA will stay unchanged at $5,500. The additional catch-up contribution limit for individuals ages 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  

• Traditional IRA deduction phase-out. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his/her spouse was covered by a retirement plan at work, the deduction may be phased out until it is eliminated, depending on filing status and income. The phase-out ranges for 2018 are:
  

• For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
  
• For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is$101,000 to $121,000, up from $99,000 to $119,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between$189,000 and $199,000, up from $186,000 and $196,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains$0 to $10,000.
  
  

• Roth IRA income phase-out. The adjusted gross income (AGI) phase-out range for taxpayers making contributions to a Roth IRA will be:
  

• For singles and heads of household, the income phase-out range is$120,000 to $135,000,up from $118,000 to $133,000.
• For married couples filing jointly, the income phase-out range is$189,000 to $199,000,up from $186,000 to $196,000.
• For a married individual filing a separate returnwho makes contributions to a Roth IRA, the phase-out range is not subject to an annual cost-of-living adjustment and remains$0 to $10,000.

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Source: Society for Human Resource Management (SHRM)

https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/2018-irs-401k-contribution-limits.aspx?utm_source=SHRM%20Friday%20-%20PublishThis_HRDaily_7.18.16%20(1)&utm_medium=email&utm_content=October%2020%2C%202017&SPMID=00330610&SPJD=07%2F25%2F1996&SPED=04%2F30%2F2018&SPSEG=&SPCERT=&spMailingID=31109088&spUserID=ODM1OTI0MDgxMjMS1&spJobID=1142601600&spReportId=MTE0MjYwMTYwMAS2

By Lisa Nagele-Piazza, SHRM-SCP, J.D. Oct 10, 2017

As devastating wildfires spread through Northern California's wine country, threatening to destroy homes and businesses in the area, organizations must activate their workplace safety and emergency action plans.

We've rounded up the latest news on how the fires are affecting employers. Here are SHRM Online resources and news articles from other trusted media outlets.

The wildfires have spread rapidly since Sunday evening through Napa, Santa Rosa and Sonoma counties. The destruction has left more than 15 dead, caused about 20,000 to evacuate and ruined more than 1,500 structures—including homes, wineries and other businesses.

(The New York Times)

Fires Hit Crops at End of Harvest Season

Napa and Sonoma county wine-country workers would ordinarily be picking and processing ripe grapes on Oct. 9 at the end of the harvest. Instead, many wineries were closed due to power outages, evacuation orders and roadblocks that kept employees from getting to work. A few wineries in the area have been destroyed and many others have been damaged after the wind-fueled fires spread at a rapid pace. The Napa Valley Vintners trade association said that most of the grapes had already been picked, but it's hard to say how smoke and other damage will affect the crops this year. "I think we'll be OK, but it's not an ideal situation," said Alisa Jacobson, vice president of winemaking at Joel Gott Wines. "But more importantly, all our employees seem to be doing OK."

(The Chicago Tribune)

Employee Safety Is First Priority

A natural disaster can hit suddenly, and employers should know in advance how to account for workers. Local fire authorities ordered Medtronic, a global medical technology company, to evacuate several of its facilities in Santa Rosa on Oct. 9, because of their proximity to the fires. Medtronic initiated its business continuity plans and a spokesman said the company is keeping in contact with workers. The company also had to activate emergency preparedness plans last month when its manufacturing facilities in Puerto Rico were affected by Hurricane Maria. "We are closely monitoring the wildfires in Santa Rosa and Sonoma County, and our first priority is the safety of our employees, many of whom are being evacuated," the spokesman said.

(Minnesota Star Tribune)

Employers Must Be Prepared

October marks the start of fire season in California—and fire dangers pose a threat to more than just the northern part of the state. In Southern California, Santa Ana winds—that originate inland and move west—bring winds, dust, dryness and fires toward the coast. Employers should be prepared for a natural disaster caused by such conditions by keeping emergency supplies on hand, developing evacuation plans and ensuring that workers leave promptly when there's a threat. Employers should also know the legal risk-management requirements for their locations. In Ventura County, for example, property owners in fire-prone areas must remove brush that is within 100 feet of a structure.

(Ventura County Star)

California Marijuana Growers Also Harmed

Medical (and soon recreational) marijuana use is legal in California, and the northern part of the state has the world's largest concentration of cannabis farms. Sonoma county surveys estimate that there are between 3,000 and 9,000 cannabis gardens in the county—which are now threatened by the wildfires. Not only are crops being destroyed just before the harvest, but smoke-exposed crops are vulnerable to disease and unhealthy levels of mold, mildew and fungus. CannaCraft, a Santa Rosa cannabis manufacturer employs 110 workers—but it shut down on Monday and told employees to stay home. For employees who couldn't go home, the manufacturer opened its headquarters (located outside the evacuation zone) as an evacuation center.

(SF Gate)

State Encourages All Businesses to Have a Plan

The California Division of Occupational Safety and Health (Cal/OSHA) says it's a good idea for all businesses to have an emergency action plan, even if such a plan isn't explicitly required under Cal/OSHA or city or county law. The division suggests that employers form an emergency committee that involves different department representatives and a mix of employees and managers. Plans should address state and local safety laws and must comply with governmental agency regulations.

(California Department of Industrial Relations)

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Source: Society for Human Resource Management (SHRM)

https://www.shrm.org/ResourcesAndTools/legal-and-compliance/state-and-local-updates/Pages/California-Wildfires-Trigger-Employer-Emergency-Action-Plans.aspx?utm_source=SHRM%20PublishThis_CaliforniaHR_7.18.16%20(24)&utm_medium=email&utm_content=October%2010%2C%202017&SPMID=00330610&SPJD=07%2F25%2F1996&SPED=04%2F30%2F2018&SPSEG=&SPCERT=&spMailingID=30972107&spUserID=ODM1OTI0MDgxMjMS1&spJobID=1141346855&spReportId=MTE0MTM0Njg1NQS2

A $100-a-month employer contribution can get workers out of debt years sooner

Oct 2, 2017

Helping employees pay off their student loans as a workplace benefit continues to generate a lot of buzz even though it's offered by a small minority of employers—just 4 percent according to the Society for Human Resource Management's 2017 Employee Benefits survey report, based on a January/February poll of the organization's members.

WorldatWork, an association of total rewards professionals, conducted a January benefits survey and also found that 4 percent of employers provided loan repayment assistance, while 8 percent of companies with 40,000 or more employees did so.

Despite these relatively low numbers, in September the Consumer Financial Protection Bureau—a federal consumer protection agency—predicted that loan repayment programs could grow quickly as employers recognize the value of offering financial well-being benefits.

"We are seeing an increasing number of employers adding student loan repayment assistance to their benefits programs as a powerful differentiator in attracting and retaining employees," said Heather Coughlin, solution leader for financial wellness at Mercer, an HR consultancy.

"Student loan repayment assistance has the potential to affect more than 44 million Americans burdened by student loan debt," said Scott Thompson, CEO of Tuition.io, a benefit administration firm. "The $1.4 trillion student loan crisis has … heightened financial stress, which can lead to disengagement in the workplace," he noted.

"We know student debt weighs heavily on people—more than a third of Fidelity retirement plan participants surveyed have student debt, and 80 percent of those say it delays retirement planning," said Kevin Barry, president of workplace investing at Fidelity Investments.

Advantages for Employers and Employees

"Companies are choosing to help their employees get out from under student loan debt because it can help them become an employer of choice. And when they are, they can hire faster, retain talent longer, and even improve gender and cultural diversity," said David Aronson, CEO of Peanut Butter, which helps employers offer student loan assistance as a benefit, when he spoke at the September EBN Benefits Forum and Expo held in Boca Raton, Fla.

"Many employers are targeting a $100-a-month contribution," Aronson said. "The average person with student debt has $31,000 outstanding. They're paying it off over 10 years at a 6 percent interest rate, so $100 extra a month is going to help them save $11,000 in principal and interest, and get out of debt two years faster than they otherwise would."

A Success Story

"This is one of those benefits that we probably get the most questions about when our new employees are starting or when we're going through the talent acquisition process, because it's something new and very exciting," said Nicole Skaluba, director of employee services at Rise Interactive, a Chicago-based digital marketing agency that began offering student loan repayment assistance to its 233 employees just over a year ago.

"The average age of our employees is 27, and they were telling us they couldn't invest in our 401(k) plan because they needed to pay off their student loan debts first," said Skaluba, who co-presented with Aronson at the EBN Benefits Forum.

Rise Interactive launched its program by offering a loan-repayment contribution of $50 per month because "we want to get a sense of who would enroll and what that would mean to our bottom line," she said.

"We talk about this in great detail during our recruitment process," Skaluba added. "We want to get people excited about it because we know it's a strong recruitment tool for us. I can make this a selling point for people I want to bring into the organization."

Rise Interactive had 10 percent of its employees enrolled on the day the program went live, "and we're now up to 25 percent of our people enrolled," Skaluba noted. "As we bring into the organization roughly 10 people per month, we're seeing the bulk of them join, so we know it has had a tremendous impact."

Aronson and Skaluba drew these lessons from Rise Interactive's experience:

• Start slow and grow. "Although we see $100 as the most common monthly loan-repayment contribution target, we see $50 as the most common starting point," said Aronson. "You have more control over your budget by starting at a lower dollar amount and can always increase the contribution."
  

• Keep it simple. Rise Interactive made all employees eligible to receive contributions from their starting date of employment. "There aren't any special tiers or requirements related to the plan, so it's easy for HR to communicate and for employees to understand," Skaluba said.
  
  There are exceptions to this advice, however. "While most commonly we see employers offer one flat-dollar monthly contribution to all employees, that's not right for every organization," said Aronson. A retail organization, for instance, "may choose to offer one amount to their corporate employees, a different amount to store managers and another to part-time associates. You can target your benefits that way as well."
  

• Have shared accountability. At Rise Interactive, employees must continue making at least the minimum payment on all their loans to participate in the program. "Employers should ensure that participants are making loan payments through direct debit from their bank because "almost every loan servicer across the country offers a 25 basis point [0.25 percent] discount for borrowers who make loan payments through direct debit from their bank," Aronson said. "If employees aren't already doing that, we help them to put this in place," he added.
  

The benefit can be integrated with payroll administration, although "if not, it generally takes about one-half hour of HR staff time per month to administer," Aronson said.

He and Skaluba suggested that companies also provide advice on how employees can consolidate and refinance all their borrowing, to help those in debt to improve their finances as they pay down their loans.

While some companies provide a roughly equivalent benefit to employees without student loans—such as subsidized gym memberships—most don't, "and we haven't seen this becoming an issue," Aronson said. "Employees seem pleased to work for a caring employer, whether they benefit directly from this program or not." 

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Source: Society for Human Resource Management (SHRM)

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/launching-student-loan-repayment-benefit.aspx

Businesses affected by Hurricane Irma in parts of Florida and elsewhere have until Jan. 31, 2018, to file certain tax returns and make tax payments, the Internal Revenue Service (IRS) announced this week.

The IRS also announced that 401(k)s and similar employer-sponsored retirement plans can expedite loans and hardship distributions to victims of Hurricane Irma and members of their families. This is similar to relief that the IRS granted last month to victims of Hurricane Harvey.

Eligible retirement plan participants can access their money more quickly with a minimum of red tape, the IRS said. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

A person who lives outside the disaster area also can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.

Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. Plans can ignore the reasons that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement as described in IRS Announcement 2017-13.

The IRS emphasized that the tax treatment of loans and distributions remains unchanged. Ordinarily, retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less. Under current law, hardship distributions are generally taxable and subject to a 10-percent early-withdrawal tax.

Additional 401(k) Relief Sought

House Ways and Means Committee Chairman Rep. Kevin Brady, R-Texas, is considering legislation that would not only suspend, in hurricane-affected regions, the 10 percent penalty imposed when 401(k) plan participants tap their 401(k) retirement savings before age 59.5. "It will include tax provisions, some of which will help people access their retirement funds without penalty for rebuilding activities," he told reporters on Sept. 7.

Tax Filing Relief

The tax-relief action announced by the IRS postpones various tax filing and payment deadlines starting on Sept. 4, 2017, in Florida and Sept. 5, 2017, in Puerto Rico and the Virgin Islands. Affected businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were due during this period, including quarterly estimated tax payments.

In addition, the IRS is waiving some late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period, which began Sept. 4 in Florida. The IRS is offering this relief to disaster areas designated by the Federal Emergency Management Agency, as listed on the disaster relief page at IRS.gov.

Hurricane Irma "has been a devastating storm for the southeastern part of the country, and the IRS will move quickly to provide tax relief for victims, just as we did following Hurricane Harvey," said IRS Commissioner John Koskinen in a statement. "The IRS will continue to closely monitor the storm's aftermath, and we anticipate providing additional relief for other affected areas in the near future."

Pension Payment and Filing Relief

The IRS, the Department of Labor and the Pension Benefit Guaranty Corporation (PBGC) alsoannounced in Notice 2017-49 that they are providing affected employee benefit plan sponsors with relief from certain filing requirements under the Employee Retirement Income Security Act.

Separately, the PBGC said that it is waiving certain penalties and extending certain filing deadlines for defined benefit pension plan sponsors in response to Hurricane Irma. For example, if affected plans have premium filing deadlines from Sept. 4, 2017, through Jan. 31, 2018, the PBGC will waive applicable penalties but not the applicable interest charge.

Preparing for the Next Disaster—or Everyday Emergencies

While many plan sponsors will focus on the immediate impact of Hurricanes Harvey and Irma, "plan sponsors might also take this time to plan for the future or to refine existing policies designed to assist employees year-round," Jack Towarnicky, executive director at Plan Sponsor Council of America, a trade group, advised in a blog post.

Leave-sharing and employee donation plans are examples of policies that employees can have in place for personal emergencies as well as natural disasters.

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Source: The Society for Human Resource Management

https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/Hurricane-Irma-tax-filing-relief.aspx?utm_source=SHRM%20Thursday%20-%20PublishThis_HRDaily_7.18.16%20(71)&utm_medium=email&utm_content=September%2014%2C%202017&SPMID=00330610&SPJD=07%2F25%2F1996&SPED=04%2F30%2F2018&SPSEG=&SPCERT=&spMailingID=30600092&spUserID=ODM1OTI0MDgxMjMS1&spJobID=1121693306&spReportId=MTEyMTY5MzMwNgS2

ADA and GINA regulations were arbitrary, court decides

By Allen Smith, J.D. Aug 24, 2017

The Equal Employment Opportunity Commission's (EEOC's) rules about the fees employers can assess workers who do not participate in wellness programs were ruled arbitrary by the U.S. District Court for the District of Columbia on Aug. 22. Rather than vacate the rules, the court sent them back to the agency for redrafting in an attempt to avoid business disruptions. But the decision still creates "confusion and uncertainty" about employer wellness programs, said Ilyse Schuman, an attorney with Littler in Washington, D.C., and co-chair of the firm's government affairs branch, the Workplace Policy Institute.

HR professionals should know that the decision threatens the viability of wellness programs, and an employee may push back on an employer that uses financial incentives or penalties to encourage wellness program participation, said Ann Caresani, an attorney with Tucker Ellis in Cleveland and Columbus, Ohio.

"The EEOC's regulations were helpful to employers because they finally resolved the long-pending question of what EEOC would consider to be a permissible incentive under ADA [Americans with Disabilities Act] and GINA [Genetic Information Nondiscrimination Act]," said Frank Morris Jr., an attorney with Epstein Becker Green in Washington, D.C. "This permitted employers who wanted to use incentives to design [them] with reasonable certainty that they would be lawful under the two statutes."

Employers should keep in mind, however, that the court's decision does not vacate the EEOC rules, said Sarah Bassler Millar, an attorney with Drinker Biddle in Chicago. "In the absence of other guidance, it would be prudent for employers to take steps to ensure compliance with the final ADA and GINA regulations in their current form," she said. 

But Erin Sweeney, an attorney with Miller & Chevalier in Washington, D.C., recommended that employers closely examine wellness program incentives and penalties in light of the decision.

Rules Permitted Raised Premiums

In a lawsuit filed Oct. 24, 2016, AARP challenged the portions of the EEOC's 2016 workplace wellness regulations under the ADA and GINA that let employers impose greater premiums of up to 30 percent of self-only coverage on employees who refuse to disclose medical and genetic information through wellness programs at work.

"The court found that the rules are unlawful because the EEOC did not justify its rules: it didn't consider any factors relevant to whether penalties make these exams and inquiries coercive and did not respond to comments raising significant concerns about the hardship workers would face if they exercise their right to keep private information private," said Dara Smith, an attorney with the AARP Foundation.

AARP argued that the penalties violate the civil rights statutes' requirements that any exams and inquiries in employee wellness programs be voluntary, Smith noted.

Court Rejects EEOC's Rationale

"While the court did note that it is likely difficult for the EEOC to figure out when exactly an incentive [or penalty] renders a wellness program involuntary, the court ruled that the EEOC needs to provide a well-reasoned and supported justification for setting the [percentage]. The EEOC failed to do so in this case," said James Plunkett, senior government relations counsel for Ogletree Deakins in Washington, D.C.

"The EEOC failed to develop any concrete data, studies or analysis to support its conclusion that a 30 percent incentive level made the incentive 'voluntary' under the ADA and GINA. It just borrowed the 30 percent level from the Health Insurance Portability and Accountability Act (HIPAA) regulations, where there is no 'voluntary' requirement," Caresani said.

"These regulations apply in addition to existing regulations under HIPAA and were intended to harmonize with HIPAA regulations, to the extent possible."

The EEOC argued principally that it adopted its rules to harmonize ADA and GINA regulations with HIPAA regulations on wellness programs and to encourage more individuals to participate in wellness programs, as that was a goal expressed by Congress in the Affordable Care Act, the court said.

The EEOC's regulations did not achieve consistency with HIPAA, which calculates the 30 percent incentive level differently: The HIPAA level is based on the total cost of coverage, which includes the cost of family coverage, rather than the cost of self-only coverage that the ADA rule adopted. The HIPAA regulations also place no cap on the financial incentive or penalty for participatory wellness programs (e.g., gym membership), which are more common than health-contingent wellness programs (e.g., reaching a goal weight in a weight-reduction program).

"Even assuming that the ADA rule had achieved consistency with HIPAA, the agency's failure to consider the fact that HIPAA contains no 'voluntary' requirement might be fatal to its chosen interpretation," the court stated.

Stacking of Incentives Not Considered

Further, the court questioned the potential cumulative effect of ADA and GINA incentives and penalties. "With the adoption of the GINA rule, an employee and his or her family may face stacked penalties or incentives for the disclosure of information," the court noted.

An employer may adopt a 30 percent incentive for the disclosure of an employee's ADA-protected information and a 30 percent incentive for the disclosure of the employee's spouse's GINA-protected information. "The potential cumulative effect of these incentives is surely relevant to the question of whether disclosure is voluntary or not. But beyond the mention in the final rule that stacking is possible, there is no indication that the EEOC considered this at all," the court said.

"The EEOC can appeal, but that won't relieve the agency of its obligation to start working on revising its regulations," Smith said.

This decision is AARP v. EEOC, D.D.C., No. 16-2113.

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Source: Society for Human Resource Management (SHRM) 

https://www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-law/Pages/AARP-EEOC-wellness-regulations.aspx?utm_source=SHRM%20Thursday%20-%20PublishThis_HRDaily_7.18.16%20(68)&utm_medium=email&utm_content=August%2024%2C%202017&SPMID=00330610&SPJD=07%2F25%2F1996&SPED=04%2F30%2F2018&SPSEG=&spMailingID=30315268&spUserID=ODM1OTI0MDgxMjMS1&spJobID=1102818013&spReportId=MTEwMjgxODAxMwS2

A legal perspective on human resources idiosyncrasies in the Golden State

By Mishell Parreno Taylor and Deidra A. Nguyen Aug 22, 2017

This is the second article in a three-part series about California-specific workplace compliance issues. Part One focused on four leave-law idiosyncrasies.

Wage and hour compliance in California can be complicated, particularly in light of the ever-changing landscape. On Jan. 1, 2017, alone, employers faced approximately 30 new or amended state or local labor and employment requirements—many of which focused on wage and hour compliance.

Below are just a few areas for businesses to be mindful of if they have employees working in California.

1. Daily Overtime

While the federal Fair Labor Standards Act requires overtime to be paid at one and one-half times a nonexempt employee's regular rate of pay for all hours worked beyond 40 in a workweek, the Golden State takes it one step further.

Employers in California must also pay nonexempt workers one and one-half times their regular rate for all hours worked over eight in a day.

In practical terms, this means that an employee who works less than 40 hours in a week may still be entitled to overtime if he or she works more than eight hours in a given day. The good news is that the law does not require employers to pay both daily and weekly overtime when doing so would result in paying overtime on hours that are already being paid at an overtime premium.

It is important to be mindful that California daily overtime requirements may be applicable to employees who work in California even on a temporary basis. Furthermore, employers should note that they must pay double time in some circumstances.

2. Rest Breaks

Under California law, an employer must "authorize and permit" employees to take a 10-minute rest break for each four hours or "major fraction thereof" worked. The following table illustrates what this means based on hours worked:

 

The good news is that if an employee's workday is less than three and a half hours, employers are not required to provide a paid rest break. Another piece of good news is that a critical wage and hour decision (Brinker v. Superior Court), rendered over five years ago, brought clarity to what is required of a California employer when it comes to rest break obligations.

As confirmed by the court in Brinker, a California employer only has to provide its eligible employees with the required rest breaks and does not have to force employees to take them.

Failure to comply can be costly. An employer that doesn't provide an employee with a timely rest period will face a penalty of one hour of pay for each day the break was not offered.

3. Alternative Workweek Schedules

The alternative workweek schedule is a tool, common in manufacturing industries, that provides employers some reprieve from daily overtime requirements while imposing very specific and unusual procedural requirements.

Nonexempt employees in a pre-existing, identifiable work unit or group may elect to work a defined schedule that differs from the standard schedule of eight hours per day, five days per week without receiving daily overtime.

For example, employees may elect to work a four-day schedule of 10 hours each. While such a schedule would ordinarily require payment of two hours of daily overtime for each day of the schedule, a properly adopted alternative workweek schedule obviates the requirement to pay daily overtime. 

To properly adopt an alternative workweek schedule, the employer must:

• Select an identifiable group or unit in the workplace that will work the alternative workweek schedule (e.g., a shift, department or facility).
  
• Disclose to employees within the affected group or unit how the alternative workweek would impact employees' working conditions, including their wages, benefits and hours.
  
• Conduct in-person meetings with affected employees to allow employees to ask questions about the proposed alternative workweek schedule.
  
• Conduct an election—at least 14 days after the meeting—by secret ballot, during which affected employees can vote on whether to adopt the proposed alternative workweek schedule.
  

If at least two-thirds of affected employees vote in favor of the alternative workweek schedule, the employer may require employees to begin working the new schedule no sooner than 30 days after the election and must report the results of the election to the California Division of Labor Statistics and Research.

Although alternative workweek schedules are a useful tool because they eliminate the need for daily overtime, they greatly limit scheduling flexibility and impose costly repercussions for work outside of the defined schedule.

4. Fair Scheduling

Fair scheduling, also called predictable scheduling, represents a burgeoning area of the law that—like many employment laws—started in San Francisco and is systematically taking root across California (and in other states, too).

In November 2014, San Francisco passed two ordinances imposing scheduling requirements on private employers. The cities of San Jose and Emeryville followed suit, passing fair-scheduling laws that took effect earlier this year.

Outside of California, New York City and Seattle have passed fair-scheduling laws and Oregon just enacted the first statewide law.

Although the laws differ in each jurisdiction, they generally embrace one or more of the following requirements:

• A good-faith estimate of the employee's anticipated work schedule prior to or at the commencement of employment.
  
• Employees' right to request input into their work schedules.
  
• The right to rest between work shifts.
  
• Advance notice of the work schedule.
  
• Compensation for schedule changes.
  
• Offers of work to existing employees before hiring externally.
  

Employers should note that some of these laws apply to large retail and hospitality employers while others have a broader reach.

California's ever-evolving wage and hour laws, and the accompanying penalties for even minor violations, highlight the importance of periodically reviewing and possibly updating handbooks and policies on wage and hour practices. Additionally, training a workforce on an employer's updated policies and how to properly partner with human resources on compliance-related matters are key components of successful compliance.

Up next in our three-part series will be a discussion on the expansive and highly regulated area of anti-discrimination laws in California.  

Mishell Parreno Taylor and Deidra A. Nguyen are attorneys with Littler in San Diego. 

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Source: Society for Human Resource Management (SHRM)

https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/4-wage-and-hour-challenges-california.aspx

By Lisa Nagele-Piazza, SHRM-SCP, J.D. Jul 28, 2017

Flexible work arrangements—such as telecommuting and compressed workweeks—can benefit businesses and workers alike, but California employers that wish to offer such arrangements must tackle complex workplace compliance issues. Here's what employers in the state need to know.

Workplace flexibility or "workflex" options are important to employees. Having the flexibility to balance work and life obligations is among the top three benefits rated as "very important" to employees (just behind paid time off and health care benefits), according to the Society for Human Resource Management's (SHRM's) 2016 Employee Benefits survey. 

Many California employers are embracing workplace flexibility. SHRM research shows that organizations in the state are providing employees with the following workflex options:

• Telecommuting (63 percent).
  
• Flextime (48 percent).
  
• Mealtime flex (34 percent).
  
• Flexible break arrangements (30 percent).
  
• Compressed workweek (23 percent).
  
• Shift flexibility (21 percent).
  

"At its core, workflex is about improving business results by giving people more control over their work time and schedules," according to SHRM.

While there are many benefits to offering flexible work arrangements, unique challenges can arise for employers that offer flexible work arrangements in California, said Helen McFarland, an attorney with Cozen O'Connor in San Francisco and Seattle.

"The most important challenge that employers face in offering flexible work arrangements is to properly manage compliance with California's wage and hour requirements and the company's security policies," said Grace Horoupian, an attorney with Fisher Phillips in Irvine. 

For example, she said, employers may have difficulty ensuring that employees who are working remotely are not working off the clock and are accurately recording all hours worked.

Employers may also find it challenging to ensure employees follow the company's information security requirements when working from home, Horoupian added.

California Laws to Consider

Employers that want to offer workflex options should keep the following state rules in mind:

• Daily overtime pay. Nonexempt employees in California are entitled to daily overtime at a rate of time-and-a-half after eight hours and double time after 12 hours. "If an employer offered four 10-hour shifts rather than five eight-hour shifts, in California, unlike many other states, the employer would be required to pay overtime for the extra two hours worked each day," McFarland explained. "Ten-hour shifts would also mean potentially offering two meal periods rather than one," she added.
  
• Alternative workweeks. In certain situations, employees waive their right to daily overtime pay and work regular shifts that exceed eight hours in a day. Employees can vote by secret ballot to approve such an alternative work schedule for a work unit (such as a department, team or job classification)—but employees still must receive overtime pay if they work more than 10 hours a day or 40 hours a week under those arrangements. "Unless an alternative workweek is in place, a compressed workweek means that daily overtime requirements must be met," Horoupian said.
  
• Meal and rest breaks. Nonexempt employees must also be provided rest breaks and meal periods at certain times and for certain durations during a shift. "Employees working remotely lack supervision and would be responsible for documenting their own work hours and meal and rest breaks," McFarland noted.
  
• Make-up time. Employees can make up work time that is missed for personal obligations without counting the made-up time as overtime hours if certain conditions are met. The employee must voluntarily request the make-up time, and it must be worked in the same workweek as the missed time, and time worked can't exceed 11 hours in a day or 40 hours in the workweek.
  
• Business expense reimbursement. California employers must reimburse employees for all business expenses they incur, McFarland said. This can make remote work arrangements complicated because California employers must pay for and establish remote workstations, she said. "This could include Wi-Fi fees, additional computer equipment and other unforeseen costs."
  

HR's Role

"Employers should establish clear, written policies regarding all flexible work arrangements and make sure to apply their policies fairly and evenly," McFarland said.

Horoupian said remote work policy should address:

• The hours that the employee is expected to work.
  
• Specifics of how to comply with information security policies.
  
• The need to keep accurate recordings of hours worked.
  
• How and when to report work-related injuries.
  
• Office attendance requirements.
  
• The company's right to revoke the remote work option at any time.  
  

Employees should sign an acknowledgment that they received and reviewed the remote work policy.

"Employers should also have all hourly employees working remotely sign an attestation that their reported hours of work are accurate," Horoupian added.

"Communication regarding expectations is key," McFarland said. "It may be beneficial to set up a trial period to determine whether the new system is workable and effectively meets the employer's and the employees' needs."

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Source: Society for Human Resource Management (SHRM)

https://www.shrm.org/ResourcesAndTools/legal-and-compliance/state-and-local-updates/Pages/CA-flexible-work-arrangements.aspx?utm_source=SHRM%20PublishThis_CaliforniaHR_7.18.16%20(20)&utm_medium=email&utm_content=August%2008%2C%202017&SPMID=00330610&SPJD=07%2F25%2F1996&SPED=04%2F30%2F2018&SPSEG=&spMailingID=30097271&spUserID=ODM1OTI0MDgxMjMS1&spJobID=1100936027&spReportId=MTEwMDkzNjAyNwS2