The Importance of Human Resources

In our practice, we often encounter companies with little to no Human Resources department, division, or personnel. More often than not, small businesses assign the administrative HR tasks (processing applications, completing I-9s, administering health insurance plans, payroll, etc.) to other office personnel, whether it is an Office Manager, a Staff Accountant, or an Executive Assistant (or some combination/split thereof). While most small businesses view this as a cost-saving measure, these setups can be quite harmful to businesses in the long run.

While HR may not be a traditional revenue-generating arm of your business, HR certainly can save your company money and even may add to the bottom line. To see this, though, you must recognize HR is much more than a payroll and personnel paperwork administrator.

So how can HR save your company money? Any business that has been involved in significant employment discrimination/retaliation litigation should know this answer. In such litigation, the existence of HR personnel, as well as the HR personnel’s performance, is critical. Whether or not a case proceeds to trial (and by extension the risk of a large judgment against the employer) hinges on several key questions:

• Did the company have an HR department?

• Did the company have policies regarding discrimination/retaliation/harassment and complaint procedures?

• Did the company follow those policies and procedures?

• Did the company take steps to remedy any discrimination/retaliation/harassment?

These are issues a highly skilled and trained HR professional handles best. Your payroll clerk, benefits administrator, office manager or accountant may not have the time or skills to assess and address these vital issues adequately and appropriately. As a result, any failures may result in a large judgment assessed against your company. I’m willing to bet your small business does not have a line entry on your balance sheets for “large adverse jury verdict.” A competent HR department (or a competent HR employee) is your first line of defense against such judgments and, by extension, can save you significant money.

You may remember I said earlier that HR can make you money. I know you might be questioning my sanity at this point, but it is true. Statistics regularly show a happy workplace is a more productive workplace. Higher productivity often leads to higher revenue. For example, think about how much it costs you every time an employee quits and you must hire and train a replacement. So how do you get a happy workplace?

We’ll be blogging soon about the human side of HR (which absolutely leads to a happy workplace) but, in the meantime, HR can create a happy workplace if you:

• Act as a sounding board for employees

• Train first-line supervisors and managers about proper employee supervision, providing positive feedback, and resolving employee disputes

• Ensure all company policies and procedures are followed and uniformly applied

• Act as a company’s first-line mediator between feuding co-workers

I think we can agree we each want a happy workplace that is as productive as possible. After today, I hope we also can agree achieving that goal calls for a Human Resources department or, at a minimum, a skilled Human Resources employee.

Coles Corner Winning Wine: September 2009 (Archive)

September 2009: Wall 2006

Cabernet Sauvignon: For Cab

lovers a big and bold red

wine is a necessity. This Cab

is not quite as big and bold

as a classic Cab. But this Cab is ready to drink and delivers bright mixed berries and

a long finish.

"Salaried" Employees Are Not Always "Exempt"

Employers often hold a common misconception that salaried employees absolutely are exempt from overtime wages under the Fair Labor Standards Act (FLSA). This misconception, as well as the resulting consequences from misclassifying a non-exempt salaried employee, can be costly. Salary is merely one aspect of some FLSA exemptions. The employee's duties and not his or her title or method of pay truly determine an employee's exempt or non-exempt status under the FLSA. Paying a non-exempt employee a salary does not determine per se whether the employee is entitled to overtime wages.

To best determine an employee's status you should contact an attorney, but the most common exemptions (and those exemptions in which salary is included in the analysis) include:

• Professional Exemption: Primary duty requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized instruction OR primary duty is work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
• Administrative Exemption: Primary duty is office or non-manual work (must directly relate to management or general business operations of employer or customers). The employee must also exercise discretion and independent judgment on matters of significance.
• Executive Exemption: Primary duty must be management and the employee in question must regularly direct the work of two full-time employees (or equivalent). The employee in question also must have authority to hire and terminate employees OR recommendations on these issues are given particular weight.

Again these are simply the three most common exemptions (the FLSA includes a lengthy list of exempt employees) and even the particular requirements for these exemptions can be tricky. Assuming the employer properly classified the employee as exempt, an employer still can destroy this exemption by its actions. Some common actions that destroy exempt status are: docking pay for work quality or quantity and using exempt employees to perform non-exempt work.

Remember, your general conceptions regarding salaried versus non-salaried employees might not be entirely accurate. Ensuring you properly classify your employees as exempt or non-exempt will save you money in the long run.

q

Coles Corner Winning Wine: August 2009 (Archive)

August 2009: Terrunyo 2005 Carmenere: In a word, this wine embodies the quintessential red wine: rich fruit, smooth, and bold. The Carmenere grape is most commonly associated with Chile, and this wine showcases the grape and the Chilean contribution to the wine industry. Readers of this blog will know that we prefer light tannins and easily accessible wines and this wine is a prime example.

Are You Prepared? USCIS Conducting Random H-1B Inspections

If you employ H-1B nonimmigrants you should note the U.S. Citizenship and Immigration Services (USCIS) is conducting thousands of random on-site inspections of employers who sponsor H-1B nonimmigrant employees. Several sources indicate USCIS intends to conduct upwards of 20,000 site visits in 28 cities. The purpose behind the visits is to verify information submitted in the nonimmigrant petitions by the employers. Specifically, USCIS is confirming the employer is paying the prevailing wage and the employee is employed in the position identified in the petition.

What do these inspections mean for employers of H-1B nonimmigrants? First, ensure you fully comply with the H-1B visa requirements, i.e. paying the prevailing wage. Second, properly maintain a Public Inspection file for each H-1B petition you filed. Included in this file should be a copy of the petition and any supporting documentation provided, a copy of the certified Labor Condition Application, proof of the prevailing wage determination, copies of all required posted notifications, and documentation evidencing compensation paid to the H-1B nonimmigrant employee. As many of these inspections are being conducted by contracted workers it is impossible to know the exact information an individual inspector will request. Maintaining a file with the documents identified above, however, should make any inspection less painful. In addition, you should contact your immigration lawyer if USICS contacts you or arrives at your site for an inspection. Your immigration lawyer likely has more knowledge regarding the information provided in the petition.

Keep DREAM-ing

In March 2009, we wrote a blog on the DREAM Act (http://colesfirm.blogspot.com/2009/03/dream-economic-stimulus.html), a proposed federal law to address, in part, the issue of illegal immigrants in the U.S. Someone recently asked me for an update on the status of the Act. Thus far, the DREAM Act has stalled in Congress. Not surprising, frankly. In this economic climate, granting additional rights for illegal immigrants is hard to sell to constituents. Perhaps we are not selling (or packaging) the benefits of immigration reform properly.

Recently, I was asked why states are not involved in this issue. Historically, many changes in public policy began at the state level. As states lead the way, federal legislation often follows. Additionally, state level efforts often provide an opportunity to test and refine legislative proposals in a real-world environment. With that in mind, I realized state governments have an opportunity to address the illegal immigration problem, even in ways the federal government cannot. Arizona attempted to tackle the problem by threatening businesses with revocation of their license for knowingly employing illegal immigrants. The Arizona statute also mandates employers use the federal E-Verify system to verify if employees are providing legitimate documentation. While that proposal certainly satisfies the anti-immigration forces, I cannot say the new law actually changes anything. Add to that the fact that the E-Verify system has acknowledged flaws and inaccuracies, and the Arizona statute may be more window dressing than legislative action.

Here are a few ideas for state proposals that may have an impact on illegal immigration:

1. Public education – Currently, illegal immigrants attend public elementary and high schools across the country. Post-secondary education, however, is not as available. The authors of the DREAM Act intended to address this issue, but have been unable to do so. States can intercede and institute a number of policy and regulatory changes, including permitting illegal immigrants to enroll in post-secondary institutions and requiring the illegal immigrant students to (a) perform on-campus work, (b) volunteer for community organizations, (c) pursue degrees in industries with labor shortages, like nursing and teaching, or (d) repay the non-resident cost of tuition over a specified term. These policy and regulatory changes provide an opportunity for those illegal immigrants who often reside in the U.S. through no fault of their own and who seek opportunities for greater integration into mainstream society but find most avenues blocked due to a lack of education. This policy and regulatory approach acknowledges the futility of a pure deportation approach and instead seeks to address the underclass of laborers who provide an environment ripe for unscrupulous and predatory employers.

As an aside, states also could offer high school graduates the privilege of a driver’s license. States could provide a license for those students who enroll in post-secondary schools, maintained a certain grade point average in high school or college, and/or otherwise comply with the laws of the state.

2. Corporate taxes – Most states tax employers based on profit and typically permit employers to deduct their employee costs from their gross revenue. States could enact a law or regulation that makes clear that employers may not deduct the salaries paid to individuals without correct Social Security Numbers. States can elect to use the Social Security Administration’s database to determine which employees do not have valid Social Security Numbers. The salaries paid to those employees, as shown by the employer’s quarterly state unemployment tax filings, could be added to the employer’s otherwise taxable revenue to create a greater tax base and effective rate. In effect, the employer does not receive a tax credit for employing illegal aliens.

3. Automobile insurance – It is a commonly-accepted fact in some parts of the country that illegal immigrants create a population of uninsurable drivers. The tax-paying citizens of the state bear the cost of the accidents caused by these drivers. First, uninsured motorist coverage reflects the reality that insured drivers and their passengers need coverage in the event of an accident with an uninsured motorist. Second, county healthcare facilities (and, thus, the taxpayers in the county) often bear the cost of treating patients without insurance coverage. Third, hit-and-run accidents are to be expected when the driver fears deportation for a minor traffic offense.

To be clear, not all uninsured drivers are illegal aliens. That said, culling illegal aliens from that group would decrease the risk of an accident with an uninsured motorist and reduce the cost to taxpayers. But doing so would require states to issue illegal immigrants drivers licenses and mandate insurance companies offer automobile coverage without regard to the driver’s immigration status. States could enact a policy simply stating insurance companies may not charge discriminatory rates or refuse coverage to any driver in possession of (1) a valid license issued by the state and (2) a valid Social Security Number or Individual Taxpayer Identification Number (ITIN). This would encourage illegal immigrants to obtain an ITIN and further the common goal of reducing the cost of illegal immigration. Insurers certainly could charge rates using other factors which apply equally without regard to immigration status.

4. Unemployment tax rates – Most states tax employers 2-3% for unemployment taxes. This rate may be increased by an “experience rating,” which measures an employer’s history of unemployment claims. States could modify their formula to include an increase in unemployment tax rates for employers hiring illegal immigrants. Much like the corporate/franchise tax proposal, this proposal focuses on wages reported by employers and uses the state’s taxing authority to discourage hiring illegal immigrants.

As a final note, these proposals may not work in every state. Some laws and/or regulations currently in place may prevent a state from enacting such a law or pursuing such a policy or regulatory shift. The point of this blog is two-fold. First, we should work collectively and creatively to address a widespread issue that will not go away if we ignore it. Second, purely punitive efforts aimed at illegal immigrants typically punish the community and encourage the criminal.

Employee Codes of Conduct Reconsidered

This time of year is big news in Dallas, and Texas in general. As high school, college, and professional football seasons begin, even the most casual sports fan will find it impossible to avoid conversations about Cowboys and Longhorns.

In the HR context, recent news from the NFL has focused attention on Employee Codes of Conduct. As you likely heard, two NFL players have been suspended for at least part of the 2009 – 2010 NFL season. Michael Vick, recently released from prison for operating a dog fighting ring, faces an uncertain future; NFL Commission Roger Goodell suspended Vick for his off-field conduct and recently “conditionally reinstated” Vick. When Vick will play in his first game for his new team is a question only Commissioner Goodell can answer. Donte’ Stallworth, however, absolutely knows he will not play NFL football until after the upcoming season ends. Commissioner Goodell suspended Stallworth without pay for the entire 2009 – 2010 season after Stallworth pleaded guilty to DUI manslaughter. Commissioner Goodell suspended Vick and Stallworth, in part, based on the NFL’s personal conduct policies.

The Vick and Stallworth cases are fairly easy cases, at least in the HR context. Both Vick and Stallworth pleaded guilty to criminal acts. An Employee Code of Conduct that prohibits illegal acts hardly raises an eyebrow. But what about acts that are not illegal? Off-duty policies may prohibit a wide range of personal (perhaps private) conduct. Intoxication, smoking tobacco, and nudity are not per se illegal. When and where you do it determines if you violated a law. When, why, and how may an employer regulate such off-duty conduct, especially when such conduct is not prohibited by any state law?

Oddly enough, state and local laws provide some guidance…but in the opposite direction. Several states have enacted “lifestyle discrimination” statutes that protect employee conduct that occurs off-duty and off-premises, so long as that conduct is legal. The vast majority of these statutes protect smokers, while only a handful protect “any legal activity.” In the absence of these legal protections, employers may discipline and/or discharge at-will employees for off-duty conduct wholly unrelated to their work.

To be clear, some employees, some employers, and some conduct are of the sort that bad publicity can be severely detrimental to an employer’s business. In an era where everyone seems to live their private lives in an online public forum, Employee Codes of Conduct have and serve a legitimate business purpose. Most, if not all, businesses will benefit from an Employee Code of Conduct. If nothing else, a candid internal discussion about such a policy will create a more enlightened (and hopefully more self-aware) workforce that understands their role as ambassadors for their organization. Let’s face it, a Code of Conduct is not an attempt to impose a one-life-fits-all approach. At its core, such a policy should remind us that we live each day as representatives of our friends, families, schools, clubs, and employers. Coaches regularly remind their players that they represent their organization and serve as role models in the community. It may shock employees to learn the same applies to them.