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Have you ever heard “be careful what you put in writing?” This phrase is especially true when making written offers of employment. Perhaps you were lucky enough to find ideal candidates to fill unique positions; some of which may have been difficult to fill in the past. While this is good news, these sharp candidates have a keen eye to quickly identify operational errors, wage and hour law missteps and inappropriate activity. Their ability to do so can prove to be very costly for a small business.

So, before you or one of your supervisor’s makes an offer to that ideal candidate, make sure you understand the three most common job offer mistakes.

1. Promising a long term employment relationship

In nearly every state, unless a formal contract states otherwise, employees are hired at-will. “At-will” means that there is no legal binding agreement between the company and employee you hire for a guaranteed period of time. It also means that the company OR the employee has a right to end the employment relationship at any time, for any reason, so long as it is not an illegal reason. Finally, “at-will” means there is no guarantee of employment terms, conditions or benefits except those that are made in writing by the owner or a designated and authorized executive level manager. Simply put, it means there is no guarantee that the employee will be promoted quickly, given a raise at a particular time, will always report to the same manager, always have the same health care, etc.

It is considered a highly encouraged best practice to include “at-will” and it’s meaning in written offers of employment and to reinforce that standard in the company’s employee handbook. It is equally important to remember that all verbal and written communication with your employees should be consistent with an at-will employment relationship. It is recommend that you avoid language in an offer letter such as “we look forward to a long term working relationship” or “we will guarantee a promotion after you meet or exceed our expectations in this role”.

We never want to believe that the person we have chosen to hire will end up becoming someone who legally challenges the company. Nor do we want to think they we will ever have to terminate them. But there are no guarantees. Not for the employee and not for the company.

When you decide to change benefits plans, who is to say a current employee won’t use a poorly worded promise of specific benefits against you? What about the employee that could end up becoming a poor performer or a policy violator? Don’t let promises you have made in writing in the offer letter interfere with your right to terminate the employee with as little risk as possible.

2. Not knowing the FLSA classification

As a small business owner, do you understand the Fair Labor Standards Act (FLSA)? Do you know what it obligates you to do? Another common mistake when making an offer of employment is not identifying if an employee should be exempt (is not eligible for overtime wages) or non-exempt (must be paid overtime). Under the FLSA, each job in your company must be classified as exempt or non-exempt. Employees who are classified as non-exempt are entitled to overtime pay after they physically worked more than 40 hours in a standard seven day period (a.k.a. work week). Employees who QUALIFY to be classified as exempt are typically paid a salary are paid to get a job done, not for their hours worked – so, no overtime payment is required.

Employers who improperly classify an employee as exempt, and do not provide payment for overtime, run the risk of costly wage and hour fines and violations, including back wages. According to the Department of Labor, “willful violators may be prosecuted criminally and fined up to $10,000. A second conviction may result in imprisonment. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil money penalties of up to $1,100 per violation” .

So before you extend a verbal and written job offer, we recommend you make yourself familiar with the Department of Labor’s Fair Labor Standards Act Advisor. In order to minimize risk, identify the correct job classification as exempt or non-exempt in the new hire’s offer letter and in the job description. Be prepared to explain the classification decision, and make sure the employee Handbook clearly defines these categories. Finally, determine if your employees are properly set up in your payroll system; the job title and the exempt or non-exempt classification. Above all remember, just because you pay the person a salary DOES NOT automatically make them exempt.

3. Not following up on required paperwork

You just hired a new employee, and today is their first day. Great news. You know they need to complete Form I-9; a form required by immigration to prove the employee is authorized to work in the United States. But, the new hire forgot their identification. What now? That’s fine. They must be provided no more than three business days to provide it and complete the form. Off to work they go. But who is following up on that three day requirement?

Picture this. It has been six months, and you still have not received the employee’s documentation. Did you know under The Immigration Reform and Control Act of 1986 there is federal penalty that ranges from $375 up to $16,000 per worker for this or a related type of action(s)? What were you supposed to do after those first three days? Suspend the employee from payroll until they satisfy form I-9 requirements? To not do so is a willful violation of this law.

To avoid this risk, use the written offer letter to remind your new hires of the importance of providing their documentation to your company on the first date of employment. Emphasize if they do not provide this information on their first date of employment, they will have up to three business days from the date of hire to provide this information or they will be suspended or terminated from your company. This policy should be reinforced with the immigration law compliance policy for in your employee handbook.

In order to avoid losing valuable time and incurring unnecessary losses, before writing an offer letter, ask yourself these questions:

1. Does the offer letter imply a long term relationship between my company and the employee?

2. Does the letter imply any other promises that the company may not be able to deliver?

3. Do I have any language in the letter that may imply that the employee would have a right to remain at my company even if his or her performance or behavior do not meet or exceed the expectations for this role?

4. Do I have a job description for this new hire (and for each job in my company) and does it have the correct FLSA classification?

5. Does the offer letter include information about the immigration law compliance?

6. Did the company fully complete form I-9 for the employee, including proper notation of the identification presented by the new hire?

7. Does the company have completed form I-9 for all current employees and recent new hires, including signatures in all required areas?

8. Does the company have an employee handbook that defines an at-will employment, exempt and non-exempt classifications, and the immigration law compliance?

As a small business owner, do you have all the tools and resources in place to minimize risk and protect your company’s P&L?

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Original Source

Although the Fair Labor Standards Act (FLSA) dates all the way back to 1938, many businesses–particularly small businesses–still don’t understand the basics of this law. Typically, small business owners or their office staff don’t always have immediate access to a crash course in ‘easy to understand’ employment laws. So a response to this law can quickly go from “I do not understand…” to “Why should I care?”.

At Infiniti HR, we’re here to help you understand the law and why it’s important. The main reason you need to be in the know is because payment of back wages, fines and penalties are a serious threat to a company’s profitability.

With few exceptions, the FLSA is a federal law that applies to nearly EVERY business. Yes, a business with just one or two employees on payroll will normally have to comply with this law. The FLSA sets minimum wage and regulates overtime, record-keeping and child labor standards.

Although many states follow federal law, some states have laws more generous than those set by the FLSA. When this happens, the business is required to follow state law. It is very easy to find out what your state’s wage and hour laws are. Simply Google: [state name] wage and hour. The first few links should direct you to your state’s Department of Labor or wage and hour website. There are some rules that vary a great deal state to state such as child labor and record keeping rules.

Let’s break this overwhelming federal law down to the four most common things people commonly don’t know.

1. Failure to pay overtime is expensive.

This means two to three years of back pay per affected employee, plus back payroll taxes and fines. The Department of Labor would be happy to investigate this charge. They will scrutinize your payroll records. If you don’t have them, they will side with the records the employees have kept. There is an app for that. Current and ex-employees will report you. If they don’t go to the Department of Labor, there is an attorney out there that would be happy to take the case free of charge up front; paid as a percentage of the settlement they get. Would you be surprised to know that a dental practice with only 12 employees ended up paying out close to $46,000 to settle a failure to pay overtime claim? Small businesses are not the only companies exposed to these claims. A large pharmaceutical company recently had to pay out $99 million to settle a failure to pay overtime suit.

2. Salaried does not mean the employee or the position is exempt.

Every employee you hire is either exempt or nonexempt. Nonexempt employees are typically paid by the hour and earn overtime wages for hours worked more than 40. Exempt employees are often paid a salary, and your business is not required to pay them overtime. Key point to note: a business cannot have it both ways with exempt staff. For example, you cannot work them more than 40 hours a week, and still treat them like hourly employees. They are paid a salary to get the job done, not for hours present. You should have them abide by an attendance policy but you must not ‘dock’ their pay by the hour for coming in late or leaving early. This reduces the role back to nonexempt and then overtime laws may apply.

3. A position must qualify to be exempt, before you choose this as the proper classification.

In order to qualify, you must determine whether the duties of the position match the standards set by the FLSA in one the following categories: executive, administrative, professional, computer, outside sales and highly compensated categories.

Although there are several criteria the duties of a position (in any of these categories) must meet in order to be classified as exempt, there are common misconceptions associated with each. For the executive classification, note that the role must regularly direct the work of two or more other full time associates or the equivalent. For administrative classification, the employee’s primary duty involves evaluating possible courses of action and having the discretion to act without immediate supervision. A professional must be a learned professional with an advanced degree such as lawyer, doctor or dentist.

4. Overtime is earned for hours physically worked more than 40 in a standard seven day period.

Just because your business runs your payroll bi-weekly, does not mean your employees earn overtime bi-weekly. It is possible to earn overtime in week one and not in week two of your pay cycle. Remember, overtime is for hours physically worked. If you pay eight hours of holiday pay in a week, and the employee still physically works 40 hours, that is 40 hours of straight time and eight hours of holiday pay – not eight hours of overtime.

Wonder what happens if an employee worked unauthorized overtime? You still have to pay it. However, you can counsel them for a policy violation as outlined in your company employee handbook.

In closing, the Department of Labor expects written justification of an exempt classification. We urge your business to issue written offer of employment letters that clearly identify the position (not the employee) as exempt or nonexempt. If you feel the duty of a position qualifies the employee to exempt, be prepared to defend that decision. Make sure those involved with hiring and employee management understand how to comply and what your standard processes are. If investigated, the Department of Labor will be looking for your compliance plan. Within it should be a stated policy and workflows that outline how you arrived at exempt or nonexempt classification decisions. When in doubt, the Department of Labor has readily accessible workflows tools to help answer any gray areas.

As a small business owner, these are four important things you should know about the FLSA. Ask yourself whether you’re truly prepared to face or settle a failure to pay overtime charge in the event that one arises. Also consider of you are delegating classification decisions to a supervisor or administrative staff, are they trained well enough to protect your company from this looming liability?

Check back next week for more on human resources, payroll, insurance and benefits.

*Original Source: http://inspiringhr.com/flsa-made-simple-4-things-every-business-should-know.html