What Should Employers Know About Distributing Holiday Bonuses?
With the holiday season approaching, many employers are starting to think about rewarding their employees with some type of bonus. It has been a difficult year, so many businesses may still want to reward their employees for persevering through a difficult time. There are options for employers to show their employees gratitude. Regardless of what an employer decides, there are some things they should be aware of before making any major decisions.
What is the Difference Between a Holiday and Year-End Bonus?
Many companies give out holiday bonuses and some give year-end bonuses. These two phrases are not interchangeable as both are two different types of bonuses. Holiday bonuses are more universal rewards given to all the employees of a company. They are an equal amount distributed amongst the employees and can range from monetary gifts to a company-specific gift. They could also include extra paid time off.
Year-end bonuses are more performance-based rewards to certain employees. An employer might tie the amount to a person’s performance for the year or their longevity with the company. These types of rewards are a good way to boost motivation among employees and provide more incentives for the upcoming year.
Some employees may come to expect holiday bonuses from their employers and may even feel discriminated against if there is not one. For those companies that offer both bonuses, they should ensure enough time between when the two are dispensed. For instance, many might choose to give out holiday bonuses around Thanksgiving or early December and the year-end bonuses in January.
How Should I Plan for a Bonus?
There are several steps that employers should consider when determining which bonuses to disburse this year. Some things to consider include:
If it fits the budget: It has been a difficult year for a lot of businesses, with many forced to shut down for extended periods. Some were able to press on by having employees work-from-home, but it has been difficult. As a result, finances have slowed down this year, so employers need to ensure they can afford some type of bonus.
Chose an amount that is fair and consistent: If an employer plans to give out a holiday bonus, it should be a similar amount to previous years. If it needs to change dramatically for whatever reason, the company should announce that ahead of time and explain that it is a one-time thing to employees.
Include everyone: Employers that elect to give out holiday bonuses must include everyone in the office, and they must all receive the same amount regardless of their time or employment status.
Give time: For those companies that find that they can not afford a monetary bonus this year, they might want to consider giving the gift of time. It could mean a few extra days from work outside of the usual vacation and holiday schedule.
What are the Tax Consequences of Giving a Bonus?
Employers who give out monetary bonuses must report it as taxable income on an employee’s W-2 form. In addition, if an hourly employee receives paid time off, it has the same tax consequences as if the person were working. Some employees elect to offer the bonus and pay off the tax consequences as well so the employee can fully enjoy the bonus.
What are Some Non-Monetary Bonus Options?
Given this year’s difficulty, monetary bonuses might not be in the budget for some firms. That is an unfortunate side effect of the past year. Despite difficulties, many employers may still want to show gratitude to employees for remaining with them throughout the past year. There are several non-monetary options for employers. Some possibilities are:
- Time off
- Gift certificates
- Company-themed gifts
By explaining to employees that due to the circumstances, the company cannot provide monetary bonuses, should help lessen the sting of the change. However, it should be something that only happens once, otherwise it will start to have a negative impact on employee morale.
If you have any questions or concerns regarding employment matters, call the legal team at MacMain Leinhauser. For an initial consultation, call 484-318-7106 or contact us online to speak to someone about your case. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia, Chester County, and New Jersey.
Can Misclassification of Workers Lead to Penalties?
Employers may be tempted to classify their workers as independent contractors in order to save costs on employment-related taxes. However, misclassification of workers as either independent contractors or employees can have severe consequences for both the employer and employee. The number of workers being misclassified has been dramatically increasing the past few years across all sectors, including professional services, sales, and management. There is also an increasing trend toward employing gig workers in the delivery and transportation business.
Protections for Employees
When a worker is classified as an employee, federal law protects their treatment at the workplace. Employment laws protect employees from harassment, discrimination, and many other workplace difficulties. Employees may also enjoy certain benefits, such as paid time off or holiday pay, as well as insurance benefits. Employees can also seek compensation when injured in the course of performing their duties. To provide for these benefits and protections, employers must pay employment-related taxes, Workers’ Compensation benefits, and insurance benefits that can be costly.
Employers may be tempted to save on costs by simply labeling the worker as an independent contractor. However, various federal and state laws conduct a fact-based analysis to test whether a worker is truly an employee or an independent contractor. Simply labeling one or the other is not sufficient to maintain that status. The Internal Revenue Service (IRS) will classify a worker as an independent contractor if the entity that is engaging their services does not control the specifics of the work or how it should be done.
Factors Used to Determine Classification
Courts look at the facts surrounding the employment to determine whether an individual has been correctly classified as an employee or an independent contractor. Often, these fall into broad categories of whether the employer has behavioral and financial control, as well as the type of relationship involved. Factors include:
- The degree of control the employer exercises over the worker in terms of hours worked, where the work occurs, or how it is done. Independent contractors typically have more control of how they organize their hours, where they choose to work, or the method by which the work is accomplished.
- If the employee is employed full-time; independent contractors work on a temporary or seasonal basis.
- Whether the employer provides equipment and all the tools required to perform the job; if the worker is using their own equipment, workspace, and materials, they are independent contractors.
- How a worker is paid for the services; an independent contractor would issue invoices when the project is completed or other payment basis.
- Whether the worker only works for one entity; an independent contractor usually has several clients for whom services are provided.
Workers may anonymously report to state institutions about employer misclassifications. However, employer misclassification issues often arise when an employee has been terminated or due to other adverse decisions, such as discrimination or harassment affecting a worker. In a lawsuit alleging such harassment or termination, the worker may also allege additional damages for misclassification. The worker may claim payment for violations of wage standards and overtime pay. An independent contractor would not be eligible for unemployment or Workers’ Compensation, however, by arguing misclassification, this worker can try to receive benefits that were denied to them.
In addition to these issues, a misclassified employee could open the employer to liability for unpaid overtime which carries its own set of penalties.
The legal team at MacMain Leinhauser provides a full suite of employment-related representation, including human resource counseling and labor relation matters. For more information, contact us online or call us at 484-318-7106. Located in Pennsylvania, we serve clients throughout Chester County, Philadelphia, and New Jersey.
Supreme Court Rules that Title VII Protections Extend to LGBTQ Workers
Cases have grappled with the scope of Title VII of the Civil Rights Act of 1964. Since its passage, many administrative agency and litigation cases have tackled the question of whether Title VII applies to workers who are lesbian, gay, bisexual, transgender, or queer (LGBTQ). On June 15, 2020, the U.S. Supreme Court, in a 6-3 opinion, ruled that the prohibition against discrimination on the basis of sex includes discrimination on the basis of gender identity and sexual orientation.
The landmark ruling confirms that individuals may bring suit against an employer if an employer fires or otherwise discriminates against them because of their sexual orientation or gender identity. If the employment decision about the worker was based, in part, on sexual orientation or gender identity, that in itself is enough legal justification for the employee to file a claim.
Justice Neil Gorsuch, writing for the court, stated that from the time of Title VII’s adoption, “a straightforward rule emerges: An employer violates Title VII when it intentionally fires an individual employee based in part on sex.” Applying this rule, the Court stated “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”
Effects of the Supreme Court Ruling for Employers
The effects of this ruling for employers will be most impactful in states that do not have statutes protecting LGBTQ workers. The Williams Institute of the UCLA School of Law estimates that nearly half of the 8.1 million LGBTQ workers in America currently reside in states that lack such protections. New Jersey has some of the strongest anti-discrimination laws in the country. The New Jersey Law Against Discrimination (NJLAD) already protects workers who are transgender or who do not appear traditionally feminine or masculine. Pennsylvania’s laws are not as broadly written, but the state Human Relations Commission issued guidance years ago that aligns with, but pre-dates today’s Supreme Court ruling. The ruling by the Supreme Court will likely be somewhat more significant on employers in the Keystone state, but the ultimate message to employers is that discrimination on the basis of sex, sexual orientation, or gender identity are prohibited.
Impact on Religious Institutions
The court declined to address what impact the ruling would have on religious institutions. The Court did state that the ruling of the Court today was not directed at religious institutions since the question was not raised. Additionally, the Court acknowledged the existence of the Religious Freedom Restoration Act and its prohibition on the federal government from burdening a person’s free exercise of religion unless there exists a compelling governmental interest. The Court stated that “because the RFRA operates as a kind of super statute, displacing the normal operation of other federal laws, it might supersede Title VII’s command in appropriate cases.” Courts in the past have upheld the decisions of religious institutions to follow the dictates of their beliefs when making employment decisions, even if the decision would otherwise be considered discriminatory on the basis of sex. Today’s decision, however, does not make a ruling on that issue.
If you are an employer or religious institution with concerns about the latest Supreme Court decision regarding Title VII of the Civil Rights Act of 1964, contact the legal team at MacMain Leinhauser. We have experience guiding employers in all aspects of employment law, including discrimination and harassment. For an initial consultation, call us at 484-318-7106 or fill out our online contact form. We gladly assist employers throughout Pennsylvania and New Jersey from our office in West Chester, Pennsylvania.
What Should I Know About My Public Employees’ Social Media Use?
Social media sites, such as Facebook, Instagram, and Twitter, have changed the way we communicate as a society. Now more than ever, we have a unique glimpse into the private lives of our acquaintances, friends, colleagues, and even employees. While we are endowed with free speech in this country, public sector employers should still be cautious about just how much their employees reveal in their online posts. If an employee works for a public school, government office, or law enforcement agency in New Jersey, they can get in trouble for a social media post, especially if it reflects poorly on their workplace.
New Jersey Law and Public Workers’ Social Media Use
New Jersey Public Law 2013, Chapter 155, addresses the interests of the public employer and the rights of the employee acting as a free citizen utilizing social media. The law prohibits the employer from seeking access to employees’ social media accounts, but it does not prevent them from viewing public posts or posts brought to their attention. Under the law, a public sector employer has the following rights when it comes to reviewing employee social media posts:
- A requirement to comply with state and federal laws.
- Enforcement of policies regarding the use of electronic communication during working hours on their devices or made for business purposes at any time.
- Ability to investigate issues of compliance with applicable regulations and laws brought to their attention as a result of social media activity and any unauthorized transfer of confidential information to a personal account.
- View, access, and use any information posted by a potential or current employee on public social media accounts.
Bad Social Media Use
Social media is important to both the employer and the employee. According to a 2018 CareerBuilder survey, about 43 percent of employers use social media to check on current employees. The following are social media behaviors that left employers with a bad impression:
- Provocative or inappropriate information
- Drinking or drug use
- Discriminatory comments
- Poor communication skills
- Bad-mouthing previous employers
- Sharing confidential information from previous employers
- Lying about an absence
- Posting too frequently
An employer can act on public posts that contradict the values of the public school, office, or department where the employee works; an employee does not have to give them access. If an employee retaliates and uses slander against the institution, they may be penalized under the law. An experienced employment lawyer can best explain your rights.
When it comes using social media, finding out where to draw the line at free speech is not always simple. At MacMain Leinhauser, our skilled West Chester employment lawyers handle complex legal issues facing public sector employers. To learn more about our services, call 484-318-7106 or use the online form to contact us today. Located in West Chester, Pennsylvania, we represent clients throughout Philadelphia, Chester County, and New Jersey.
Are Your Workers Misclassified?
Today’s businesses rely on temporary staffing, independent contractors, and outside consulting firms opposed to hiring employees to meet their needs. However, employers may be liable when they incorrectly classify these workers as independent contractors. It is important to classify workers appropriately or risk facing stiff penalties from the Internal Revenue Service (IRS) and the Department of Labor.
Businesses may be tempted to classify workers as independent contractors due to cost savings from not having to pay social security and employment taxes. Independent contractors are not covered under unemployment or Workers’ Compensation insurance, and they are not eligible for health care and leave of absence benefits. Their taxes are also not withheld by the company. However, employers are simply not aware of the nuances of employee classification and mistakenly believe that they correctly classified them as an independent contractor.
How Does Misclassification Occur?
A misclassification occurs when an employer classifies a worker as an independent contractor when they should be classified as an employee. Both intentional and unintentional misclassifications carry penalties for employers from the IRS and Department of Labor. When the misclassification is intentional, the employer may be liable for 100 percent of the worker’s taxes. Employers may be liable for almost 40 percent of the workers taxes when their misclassification is unintentional.
Governments lose considerable amounts of tax revenue due to employer misclassification of workers prompting a recent crackdown and increased scrutiny of employer classifications of their workers. Employment taxes withheld cause revenue losses for the Social Security Administration, Medicare, state unemployment, and workers compensation funds. Because of the losses incurred, government agencies, such as the IRS and Department of Labor, have an incentive to monitor and audit employers for misclassification. Furthermore, the Department of Labor wants to protect workers so that they receive all that they are entitled to as employees and prevent employer abuse.
Classification of workers as independent contractors may trigger audits by the IRS. When determining whether a worker is an independent contractor, the IRS looks at several factors to determine the degree of independence and control the independent contractor exerts in their work. The following considerations are used to determine the appropriate worker classification:
Behavior Factors: Behavioral factors include the degree of control the company has over the worker. Does the employer provide training, guidelines, equipment, and tools? Are the functions provided executive and managerial in nature?
Financial Factors: Financial factors look at how the worker is compensated. A true independent contractor would provide invoices that account for profits and losses. An employee is paid a steady amount on a periodic basis.
Our team of attorneys at MacMain Leinhauser provide human resource counseling, as well as employment-related services. It is not worth triggering an audit and risking penalties from the IRS or Department of Labor. Call us today at 484-318-7106 or contact us online for an initial consultation. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia and Chester County.
Should I Hire an Attorney to Assist with Employee Contracts?
One of the most important processes of hiring new employees is to draft appropriate, comprehensive employment contracts. Even if it is a small company, using only verbal agreements or policy handbooks may not be sufficient to protect employers from unforeseen situations that may arise after people are hired. Enforcing verbal contracts can be especially challenging for employers, especially ones that were not specific when discussed.
In general, an employment contract documents all the shared responsibilities and rights between an employer and a W-2 worker, 1099 contracted employee, or freelancer. There are standard items that should be in all employment contracts, as well as other variables that may apply.
A basic employment contract needs to include the employee’s full legal name, the position they are being hired for, their responsibilities, and their location and working hours. Whether the job is salaried or hourly, the compensation rate should be clearly stated, along with medical/dental benefits, time off, and life insurance, if applicable. An effective employment agreement should also cover employee stock options and retirement packages.
Other important items include if the employee is employed at-will. This means that the company may terminate the worker at any time without reason, and that the employee may also quit without reason. A process for resolving grievances should also be included, and it is common for these agreements to specify that disputes be resolved via arbitration.
Employment Agreement Clauses
The agreements may also have clauses for non-solicitation, non-disclosure, and non-compete. These can be very important, especially for employees that work in competitive industries and have valuable clients and confidential information. Non-solicitation agreements protect companies from having customers stolen by past employees. This is applicable to medical practices, hair salons, and many other lines of work.
Non-disclosures are designed to prevent employees from sharing sensitive information during and after employment. This applies to confidential details about the company and its clients. Non-competes prevent employees from going into competition with former employers for specified time periods and distances. In other words, should an employee that works for a computer consulting company quit, they may not open or work for a similar company within one year that is located 10 miles away.
How Problems Arise
Every state has different employment and labor laws, so drafting and enforcing an employment agreement may be difficult for a business owner. A disgruntled employee may decide to file a wrongful termination suit, and if the original employment agreement is lacking in any way, the employer may be vulnerable.
Employment agreements may be deemed invalid in court if they have incomplete information or are not worded clearly. If an employee begins working without a contract and signs it later, the contract may be termed as void, if its original terms do not correspond with the employee’s later duties. Other problems can arise if the agreement’s terms do not correspond with state laws. Federal laws, such as the Americans with Disabilities Act or the Family and Medical Leave Act should also be taken into consideration when drafting an employment agreement.
The knowledgeable employment lawyers at MacMain Leinhauser can be a valuable resource for creating employment contracts to best serve your company’s needs. For an initial consultation, call us at 484-318-7106 or complete an online form. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia and Chester County.