Earlier this year California became the 12^th state to enter into a Memorandum of Understanding (MOU) with the Department of Labor’s Wage and Hour Division, signifying that they will be working together to end the practice of misclassifying employees. In 2011, the Wage and Hour Division collected more than $5 million in back wages for minimum wage and overtime violations under FLSA (Fair Labor Standards Act) resulting from employees being misclassified as independent contractors, or otherwise not treated as employees.

Last year California passed Senate Bill 459 which imposes penalties of from $5,000-$25,000 for “willful misclassification” of an employee as an independent contractor. These fines are in addition to any employment taxes and insurance found owing.

Before you classify an individual as an “independent contractor” be sure you review the various resources available to avoid misclassification and the resulting costs and fines of doing so. California’s Employee Development Department’s (EDD)  Employment Determination Guide provides a Worksheet on Employment Status that includes a battery of questions that will help you determine classification.  The IRS uses 20 factors to evaluate the validity of independent contractor classifications:

1. Level of instruction
2. Amount of training
3. Degree of business integration
4. Extent of personal services
5. Control of assistants
6. Continuity of relationship
7. Flexibility of schedule
8. Demands for full-time work
9. Need for on-site services
10. Sequence of work
11. requirements for reports
12. Method of payment
13. Payment of business or travel expenses
14. Provision of tools and materials
15. Investment in facilities
16. Realization of profile or loss
17. Work for multiple companies
18. Availability to public
19. Control over discharge
20. Right of termination

More information about each of these factors is in the IRS publication. As always, consult with your tax advisor or an employment attorney for specific questions about classifications.

Many employers use independent contractors to supplement staff for a temporary increase in workload or to provide a missing skill set for a special project.  If the person is truly an independent contractor it can make good business sense. If, on the other hand, the nature of the person’s work or how they work does not meet the independent contractor criteria, it can be a very costly business decision.

Take, for example, a client of mine who hired a contractor to work on a project that was supposed to last approximately 9 months. The individual presented himself as a self-employed contractor with a business name and business cards. A contract for 9 months was written, and signed by both parties. The contractor worked mostly offsite, but was required to come into the office occasionally for meetings.  When he was in the office, he used the company computer, and he had a company email account.

About halfway through the project the contractor started missing deadlines.  He also missed meetings or would arrive so late that someone else would have to conduct the meeting on his behalf. Finally, management decided to let him go. Here’s where it got sticky. First of all, the contract did not have a severance clause. Secondly, the two parties could not agree on the amount owed to the contractor at the time of termination.

The contractor sought help from the Employee Development Department (EDD), filing for unemployment and also filing a claim that he had been misclassified. The EDD ruled in his favor and the company ended up paying more than $50,000 in back wages and legal fees.

There are two key lessons here: 1) Be sure your contracts are reviewed by an attorney and clearly state the requirements and obligations upon termination. 2) There are a number of factors that determine whether a worker is an independent contractor or an employee. Don’t assume that because the person uses their own equipment and has their own business name that they can be classified as an independent contractor. Become familiar with the classification criteria and consult an HR Professional or employment attorney if you have questions.

Next time we’ll talk about 20 factors you can use to help determine whether a worker is an independent contractor.

When you terminate an employee – or they leave voluntarily – there are a number of activities you need to complete to ensure a smooth and legal transition for both the company and departing employee.  These activities should be part of your standard employee processes. It’s a good idea to have a formal checklist that you use routinely so you don’t forget anything.

In addition to completing the checklist, it’s a best practice to conduct exit interviews with terminating employees. Candid feedback, especially from good employees who are leaving, may help you determine changes needed to retain top talent going forward.

If you are terminating an employee for performance issues, be sure you have written documentation describing the issue, the steps taken to resolve it and the results.  Even though California is an “at-will” state, detailed documentation is your best defense if a legal action transpires.  When in doubt, speak with a California employment attorney.

Remove exiting employees’ access to email, the network, the company intranet and any other programs or proprietary information meant solely for the use of employees. Be sure to collect any company-owned property from them. Also, ensure that you have their most recent address and contact information for W-2s and any other follow up communications. Ask them to contact you if they move prior to year end.

For a complete list of items to include on your Termination Checklist click here.

We’ve all seen the data on the cost of replacing a bad hire.  But what about the damage the bad hire does in the meantime? And how do you prevent it from happening again?

Consider this actual scenario. A client called me in to investigate complaints that an account manager was bullying coworkers. Through my investigation I discovered that the behavior had been going on for some time and, in fact, a couple of sales people had left because they did not want to work with this individual. Others were threatening to leave. Additionally, customers at two key accounts had stopped returning the account manager’s phone calls because they didn’t want to deal with him. At my recommendation, the client hired an attorney and they were able to terminate the employee. The process took a year and a half and nearly cost the company two major clients.

So how did this happen?  It began with a broken hiring process.  When the account manager was interviewed, two of the interviewers followed the structured process and asked questions directly tied to the job requirements. The other two interviewers merely had conversations with the candidate, and based their opinions on his charisma and the rapport developed during those conversations.  During the interview debrief, charisma and rapport won out over job requirements and fit. Red flag number one was doubts expressed (but ignored) during the interview process. Red flag number two was that none of the candidate’s references would give any information beyond the standard, factual, previous job confirmation.

Lessons learned?

1. Use a consistent, structured interview process. Always.  Prepare behavioral questions in advance and pre-determine who will ask what. The interview should be conversational, but should result in concrete examples of how the candidate has demonstrated the job requirements.
2. Consider the input of ALL interviewers. Look for patterns. Be sure you are evaluating the candidate and his/her qualifications objectively, rather than on a “gut” feeling or the “sell” factor.
3. 3. Listen for what isn’t being said when you check references.
4. Deal with bad behavior immediately. Even if your hire meets all the requirements and performs the job as expected, don’t ignore behavior that is negatively impacting those around them.  The fallout will be costly indeed.

Making good hiring decisions is essential to keeping your business productive and your team happy and harmonious. We’re all familiar with the direct costs of replacing “bad hires” but we often overlook the indirect costs such as employee morale, client relationships and, in some cases, company image.

Here are 6 tips for making sure that your hires are good hires.

1. Know what you want and don’t want. Develop a detailed job description, including both job specific and transferable or “soft” skills required for the role. What are the skills and competencies that have helped a “star” in that role succeed? What experiences and characteristics will help the ideal candidate succeed in your environment and culture? Also, consider the characteristics that would make a candidate less than ideal for the role or for your organization. A clear definition of what you want and don’t want will help you be more objective in your candidate assessments.
2. Create and use a structured hiring process. Developing a repeatable process makes life easier for everyone – interviewers, candidates and those who are coordinating the meetings. It ensures objectivity (which will keep you legal!) and provides a good first impression for potential employees. Remember, you are “selling” the company to them as much as they are “selling” themselves to you.
3. Ask behavioral questions. Getting the candidate to describe a specific example of how they demonstrated a skill or behaved in a certain situation will give you more insight than hypothetical “how would you…” questions. Build the questions around the skills and competencies defined in the job description. And ask the same questions of every candidate for the role so you have a consistent basis of comparison. There are plenty of books and websites that provide canned answers for behavioral questions so follow up with some probing questions for more detail.
4. Train your interviewers. Too often interviewers are handed a resume and asked to interview a candidate without any preparation or training. That’s unfair to both the interviewer and the candidate, and could lead to legal issues if the interviewer asks an illegal question or treats one candidate differently than the others. No one should interview candidates unless they’ve been trained in interviewing best practices and legal/illegal questions. Also, each interviewer should be prepared, in advance, to ask specific questions of each candidate for the role. That prevents candidates from being asked the same questions by five different people! After the interviews, convene the interviewers to share input on the candidates.
5. Check references. How many stories have we read about credentials that were fudged or experience that was bloated? Yes, checking references takes time, but may save you money and/or embarrassment in the long run.
6. Embrace diversity. It’s a well-known fact that people tend to hire people that are like them.  In theory, that would accelerate the acclimation process, but in practice it may not be the best solution for the team. A better option is to look for diversity of thought, skills and experience that will complement existing viewpoints, skills and experience to achieve organizational success. Someone once said, “if both of us think exactly alike, one of us is unnecessary.”

The Affordable Care Act has been back in the news lately, and there are several changes and deadlines you should be aware of.

First, the employer mandate has been delayed until January, 2015. This component, originally set to go into effect January 1, 2014, requires employers with more than 50 fulltime employees to provide health insurance or be fined up to $3000 per uninsured worker.  Although the delay gives you a bit of breathing room, it’s a good idea to begin planning now for how you will meet the requirement. Providing healthcare coverage is one of the best ways to attract and retain your top talent.

Another delay is the requirement for state run exchanges to verify whether individuals have employer-sponsored healthcare insurance. Those without employer-sponsored coverage can get tax credits to purchase individual plans. Exchanges will have until 2015 to develop their individual coverage verification process.

The individual mandate, requiring all individuals to have healthcare coverage, is still set to go into effect January 1, 2014, although there is some push to delay this mandate in light of the employer mandate delay.

Mark October 1, 2013 on your calendar. Starting that day you must provide information to all current and newly hired employees about the availability of health exchanges, using the Model Notice to Employees of Coverage Options.

We will continue to keep you posted as new changes and clarifications about the Affordable Care Act are released.

In my last blog I wrote about the key requirements for an Injury and Illness Prevention Program (IIPP). Once the plan is developed, many employers form a safety committee to help implement the program. This fosters more employee participation, broader communication channels and thereby the foundation for an organizational culture of safety. Here are some tips for successfully implementing your team and program.

1. Be sure team members have a health and safety mindset. Whether you ask for volunteers or assign someone from each department, be sure they represent your health and safety vision. Encourage the team to develop creative ideas for involving all employees in the focus on health and safety. Some examples are a health/safety suggestion box, safety awards, or a safety poster contest.
2. Walk the talk. Ensure that the entire leadership team consistently demonstrates the safety best practices outlined in the IIPP and participates in the communication and education elements of the plan.
3. Communicate consistently. Hold safety committee meetings at least quarterly. Hold general employee safety meetings semi-annually or annually. More frequently if you are in a high safety risk business, such as construction. Use posters, newsletters, emails and department meetings to reinforce your commitment to safety and drive the safety culture.
4. Reward safe behavior. Establish a safety awards program whereby individuals or teams who have made suggestions for improving safety or have a clean safety record for a specified period of time are recognized.
5. Review and reinforce your safety plan regularly.  Be sure that it always reflects the current needs of the organization.

Once your IIPP has been created and your committee is in place, hold an employee meeting with your entire company.  Make sure they are aware of the safety plan.  Introduce committee members so employees know who to contact when reporting a workplace injury or other issues.

For more information on safety and injury prevention visit your local OSHA website.  In California, you can visit: http://www.dir.ca.gov/default.html.

According to the Occupational Safety and Health Administration (OSHA), lost productivity from injuries and illnesses costs companies $60 billion annually.

In California, every employer is required by the state to have an effective Injury and Illness Prevention Program (IIPP). It is your responsibility to provide a safe and healthful workplace for your employees.  Once you reach 10 employees, the plan must be in writing.

The IIPP must be a written plan that includes policies and procedures on topics such as safe work practices, periodic inspections, what to do in the event of an accident, safety training, and recordkeeping. There are 8 specific elements that must be included in the plan:

1. Management commitment/assignment of responsibilities
2. Safety communications systems with employees
3. System for ensuring employee compliance with safe work practices
4. Scheduled inspections /evaluation system
5. Accident investigation
6. Procedures for correcting unsafe/unhealthy conditions
7. Safety and health training and instruction
8. Recordkeeping and documentation

If you employ fewer than 10 employees, you can:

• Communicate to and instruct employees orally about safe work practices.
• Choose to maintain records of inspections only until the hazards identified are corrected.
• Document training by maintaining an instruction log that you provide to a new employee or to an employee reassigned to new duties.

Seasonal employers can use a model program designed specifically for seasonal employers, available at the Division of Occupational Safety and Health (Cal/OSHA) website. Additional IIPP requirements apply to specific industries, such as the construction and petroleum industries.

Keeping accurate, timely records is an essential part of an effective IIPP. The Cal/OSHA recordkeeping system requires that you record each injury, fatality or illness that is work related on the Cal/OSHA Log of Occupational Work Related Injuries and Illnesses (Form 300) and prepare an Injury and Illness Incident Report (Form 301). You also need to annually review and certify the Cal/OISHA Form 300 and post the Summary of Work Related Injuries and Illnesses (Form 300A) no later than February 1 and keep it posted where employees can see it until April 30. Records need to be maintained in your files
for 5 years.

If you need help developing your IIPP plan, please contact me at Michelle@connecttohr.com.

It probably seems like just yesterday that you laid out your goals for the year. And now the year is nearly half over. Have you taken the time to assess progress on your goals? More importantly, have you communicated that progress to your employees?

As I mentioned in my previous blog, keeping your employees informed – whether good news or bad – is key to keeping them engaged and motivated. Also, remember that communication is a two-way street. Provide ample opportunities for your employees to ask questions and provide feedback. And demonstrate that you are listening to their feedback, even if you are not able to act on it. Many companies conduct employee surveys and then never do anything with the resulting information. Communicate those results to your employees and let them know what actions you are and are not able to take in response to their feedback.

In his book The 8^th Habit, Stephen Covey shared the results of a survey of 23,000 employees drawn from various companies and industries:

• Only 37% said they have a clear understanding of what their organization is trying to achieve and why
• Only 1 in 5 was enthusiastic about their team’s and their organization’s goals
• Only 1 in 5 said they had a clear “line of sight” between their tasks and their team’s and the organization’s goals
• Only 15% felt that their organization fully enables them to execute key goals
• Only 20% fully trusted the organization they work for

Make ongoing, two-way communication a habit!

If you’ve been reading any articles about leadership or employment recently you know that employee engagement is a hot topic. And for good reason.  Companies with engaged, loyal employees have been shown to have higher profit margins and less turnover than their counterparts with low engagement scores.

Although there are many factors that contribute to employee engagement, ongoing, open communication is a common thread among them. Communication between the direct supervisor and the employee. Communication from upper management to employees. Team and intra-organization communication.

As a result of the economic downturn over the past several years, many employees are feeling less than confident about their jobs, the stability of the organization they work for, and the sense of loyalty their organization feels to them.  In fact, various studies show that about one in three employees is searching for a new job.

Giving your employees a sense of connection to your organization by keeping them informed will improve their engagement and loyalty. Here are some tips for doing that.

1. Provide regular, effective feedback. Employees need to know how they’re doing. Don’t wait until the annual performance review to praise their accomplishments or address opportunities for improvement.
2. Communicate company goals and objectives.  Let each employee know how he or she contributes to achieving those goals. When employees see a direct correlation between what they do and company results they feel more connected and valued.
3. Share good news…and bad. “We’re doing fine,” will most likely be met with skepticism. Share as much detail as you can. If there are problems, enlist your employees’ support and ask for – and listen to- their ideas for turning things around.
4. Provide – and communicate – growth opportunities and a clearly defined career path. Let employees know that you see a place for them with the organization for the long term.
5. Say “thank you.” Loud, clear, early and often.