Category Archives: Labor Issues

by | September 22, 2010 · 2:52 pm

Hospitality Industry Employee Risk Management: IRS And State Agencies Are Set To Increase Scrutiny Of “Misclassification” Of Employees As “Independent Contractors”

As both Federal and State budgets become more strained, the IRS and state tax authorities sharpen their pencils further to extract as much in unpaid taxes possible.  The next target: misclassification of employees as independent contractors. 

Why all the fuss about misclassification?

When workers are classified as employees, employers must pay certain taxes and withhold certain taxes on behalf of taxing authorities from the workers’ pay.  These include:

  • Federal income taxes
  • State income taxes
  • Social Security taxes (both employer-paid and employee withholding)
  • Medicare taxes (both employer-paid and employee withholding);
  • Federal unemployment taxes
  • State unemployment taxes
  • State disability insurance taxes 
  • And more…

In the case of an independent contractor, none of these are due. The hiring company simply pays the agreed upon amount to the independent contractor and they are responsible for paying their own taxes.  It is generally believed that employers are more likely to withhold taxes than independent contractors are to voluntarily pay them.  So by misclassifying, the government is losing the difference between what the employer should have paid in taxes and withheld from the employee and the amount the independent contractor pays when it is due. 

I say “generally believed” because the last comprehensive study undertaken by the IRS to estimate the “misclassification” problem was conducted in 1984.  In 2009, the Treasury Inspector General for Tax Administration (“TIGTA”) issued a report asserting that misclassification is an important and growing problem, but failed to provide an actual estimate to how widespread the problem is currently.  The Joint Committee on Taxation, however, estimates that between 2010 and 2020 addressing the misclassification problem will generate an additional $6.9 billion in tax revenues.

Why does misclassification happen?

Misclassification can occur for a variety of reasons.  Many times it is ignorance of how to properly classify.  In some cases, employers may seek to avoid many of the costs and regulations associated with having employees which are not required with independent contractors. Other times the employee and employer work together and split the difference on the savings from intentional misclassification.  On the whole though, the employer benefits more than the employee, because the lost benefits of being classified as an employee are seldom made whole with any additional increase in pay.

Enforcement against misclassification

In order to address the problem of misclassification, the FY2011 Federal budget includes $25 million for the hiring of 100 new “enforcement personnel” focused on misclassification.  Part of the money will be used for grants to state governments to address the issue.  Earlier this year, the IRS began to conduct random audits of 6,000 businesses over the next three years to determine if they comply with five employment tax-related areas including misclassification. The businesses will be chosen at random.

New laws with stiff penalties in the works

In the Senate, the Employee Misclassification Prevention Act was introduced this year by Senator Sherrod Brown from Ohio and it currently has 8 cosponsors. The law amends the Fair Labor Standards Act (“FLSA”) by requiring every company to keep records of non-employees who perform labor or services and inform all new employees and non-employees of their classification and rights.  The proposed law would also make it unlawful to “fail to classify accurately an employee or non-employee”.  It also includes several punitive provisions, including fines of $1,100 for each violation going up to $5,000 per violation for repeat offenders. 

The law also uses the “stick approach” to coerce state governments to assist in dealing with misclassification by amending their respective state’s unemployment compensation law. The laws must establish auditing programs for companies that act in such a way as to undercount the employees that should be covered under state unemployment compensation coverage and establish penalties for companies that misclassify.  States that do not amend their laws will not be eligible for federal grants for state unemployment compensation funds.  With the current condition of state budgets, it is truly an offer they can’t refuse.

In the House of Representatives a proposed law by the same name was introduced by Representative Lynn Woolsey of California’s 6th district. The bill has 16 cosponsors and is identical to the Senate version.

There are several other bills that address misclassification so it is likely that at least one will become law in the near future.  If your business may be misclassifying it would be prudent to address the issue sooner rather than later.

For more:  http://www.openforum.com/idea-hub/topics/money/article/crackdown-on-misclassification-of-employees-as-independent-contractors-michael-periu

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by | September 20, 2010 · 10:39 am

Hospitality Industry Cybersecurity Risk Management: Hotel And Restaurant Management Must Protect The Privacy Of Company And Employee Emails From Unauthorized Viewing (Audio)

Think no one else is reading your work email? Think again. A new survey by Cyber-Ark Software found more than 40 percent of IT administrators have indulged in a little snooping around inside their own network, using administrative passwords to view sensitive or confidential information. Adam Bosnian is the executive vice president for the Americas and corporate development at Cyber-Ark Software. He says many snoop simply because they have the access. (Click on the microphone above to hear interview with him.)

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by | September 15, 2010 · 7:31 am

Hotel Industry Risk Management: “Optional Linen Service” And Other “Green Programs” Can Help Reduce “Repetitive-Use Injuries” And Chemicals Usage At Hotels

Categories include promoting environmental awareness through new employee training and workshops,  ….waste reduction, energy and water efficiency and air quality as well as green cleaning and housekeeping practices which include optional linen service – who really needs their sheets changed every day? Similar programs in Virginia Beach, Va., and Ocean City, Md., have been embraced by merchants and tourists alike.

The local tourism and hospitality industries have a vested interest in conservation of natural resources. Aside from the money hotels, restaurants and attractions can save reducing, reusing and recycling, preserving the environmental quality of our area preserves tourism itself. The South Carolina Green Alliance, a partnership between the South Carolina Hospitality Association and the state DHEC, is devoted to helping state lodgings, attractions and eateries go green. The program made its debut last year, and although only a handful of local business are listed on the Web site (greenalliance.com), Tom Sponseller, president of the state hospitality association, says that more are coming. “We have another 30 or so restaurants and hotels that will be added. We’ve only been doing this a short time, and the whole process from implementing changes to filling out the application to it being approved through DHEC can be a bit lengthy.”

Part of the process is working with local businesses to implement changes to reduce the large scale impacts the hospitality industry has on the environment. Businesses in the hospitality industry, as well as their suppliers, can go to schospitality.org for an application listing nine categories in which points can be earned. Depending on how many points earned, a Palmetto tree is awarded, with one Palmetto indicating a business has adopted and is beginning to implement a green plan, to three Palmettos, which indicates a high level of eco-initiatives have been adopted and utilized.

While only a small number of local businesses have made it through Green Alliance certification, that doesn’t mean our local hospitality industry isn’t taking the steps necessary to become more eco-friendly. The Myrtle Beach Area Hospitality Association (MBAHA) is working with the state program, and encourages its members to take those important first steps in going green. “Our industry wants to get more involved, and it’s a question of figuring out how to do that,” says Stephen Greene, president of the MBHA. “As a group, we’ve been moving forward, but it takes a lot of time and training,” In cooperation with efforts of the state and local hospitality associations, the Myrtle Beach Area Chamber of Commerce has encouraged its members to go green. As part of its Going Green program, the Chamber works to provide education, resources and support to its members in implementing energy conservation and waste reduction practices.

Read more: http://www.thesunnews.com/2010/09/09/1681777/oily-residue.html#ixzz0zbrCTJX5

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by | August 31, 2010 · 11:39 am

Hospitality Industry Health Insurance Trends: Large Employers Are Starting To Require Employees To Disclose “Unhealthy Habits” With Resulting Health Insurance Premiums Being Higher Than “Healthier” Workers

“…Navistar Inc. executives turned up the heat on smokers five years ago as part of a pioneering move to improve employee health and rein in medical costs…”

     Smoking employees are now required to disclose their habit during the open enrollment period for health insurance or, if they fail to truthfully answer, risk violating the company’s ethical business policy.

Some critics consider it intrusive and discriminatory to penalize unhealthy behaviors like smoking and reward people for taking positive actions such as losing weight. Nevertheless, other employers—fed up with rising obesity rates and related health costs—are following Navistar’s lead. Nearly two-thirds of large employers either have a smoking penalty or plan to impose one during the next three to five years, according to a 2010 Hewitt Associates Inc. survey of nearly 600 employers.

As long as Navistar employees continue to light up, they pay higher premiums—$50 more monthly. The policy applies only to nonunion workers, slightly more than half of Navistar’s 11,000 U.S. employees; union health benefits fall under a separate contract. Navistar realized the smoking surcharge could be controversial. “We were a little hesitant that we were setting ourselves up for some employee complaints,” says Dawn Weddle, wellness and behavioral health manager at Warrenville, Illinois-based Navistar, which makes trucks, RVs and other vehicles. Feedback was generally positive, with some “rumblings” but no formal complaints, Weddle says. “You have to remember: The majority of employees don’t smoke.”

     The insurance premium penalty is helping to reduce the number of smokers even more. The percentage of employees reporting that they smoke has declined from 10.3 percent in 2005 to 8.6 percent in late 2009.

         In Alabama, however, state officials have chosen a positive incentive to encourage high-risk employees to consult a doctor or seek other medical help. The state provides a $25 monthly discount on health insurance premiums to all employees who receive such wellness screenings, whether their medical risks are high or low. But employees identified as high risk must take an additional step, such as seeing a doctor or enrolling in a wellness program, to retain that discount. Alabama decided not to tie the incentive to specific health goals but rather to simply try to motivate employees to seek medical feedback, says William Ashmore, chief executive officer of the State Employees’ Insurance Board in Alabama.

For more:   http://www.workforce.com/section/benefits-compensation/feature/special-report-health-benefits-butting-in/index.html

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by | August 25, 2010 · 5:26 am

Hospitality Industry Risk Management: Management Must Train Staff To HALT If They Are “Hungry, Angry, Lonely And Tired” To Prevent Accidents, Mistakes And Bad Public Relations With Guests

 

"...Whenever (hotel employees) are hungry, angry, lonely or tired...(they) need to stop, HALT! In this state of being hungry, angry, lonely and tired (employees) are much more vulnerable to getting... buttons pushed...AND BAD THINGS ARE MORE LIKELY TO HAPPEN... "

Many hotel guests have all of these conditions going on upon arrival at the front desk. They have traveled a great distance, they are tired, and they may have not eaten in hours and as a result are angry or grumpy.  Any delays or unpleasant encounters will send this guest into a full fledge melt down going off on employees who may also be vulnerable. 

 In your hotel consider what investment goes into getting a guest to call and book a stay at your location?  How much advertising was done?  How many staff hired? How much time and energy in training with staff, operators and front-line?

How much patience and time was given to gain that guest trust?  Your building preparations and maintenance of the property? What did it take to have them call and give you their credit card and put their money into your hotel or establishment? 

Considering this investment is significant when in a moment that guest can be turned away by a negative encounter with one of your employees or managers. 

What took months and perhaps thousands of dollars to build can be lost in a moment. Your hotel and its ultimate success is only as good as its weakest employee. That might be a scary thought!  But even the best employee can be worn thin and not recognize their vulnerable condition.

For more:   http://www.4hoteliers.com/4hots_fshw.php?mwi=5338

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by | August 19, 2010 · 10:16 am

Hospitality Industry Employment Risks: Hospitality Management Must Have “Valid” Reasons To Fire Employees

  • Make sure that you have a valid reason for firing (or laying off) the employee. Some invalid reasons include: retaliation, complaining about OSHA violations, discrimination, alien status, and any violation of public policy.
  • Keep it confidential: a company-wide Eblast is probably not the best approach to alerting others in the company of the employees’ situation. Rather, only telling those individuals that need to know is the best approach to ensuring that the employee does not hear about his firing before it happens.
  • Plan ahead: sounds simple enough, but by considering all the legal requirements you need to comport with before firing the employee, you will also alleviate a lot of legal concerns that may occur post-firing. This may include: severance offers, monies due, terms in the employment contract, company policies, etc.
  • Keep a paper trail: keeping copies of performance reviews, relevant correspondence, and other personnel documents will help protect you should there be a lawsuit later on.
  • The employee should not be completely surprised by the firing or lay-off. Whether it is keeping employees abreast of the struggling finances of the company, or alerting the worker to poor job performance, there should be a dialogue before the employment termination.

Although a majority of the American workforce is based on “at will” employment, essentially meaning that the employer-employee relationship can be severed at any time, there are still some viable concerns over a wrongful termination suit in any situation. Making sure you have a valid reason for firing an employee, and planning the conversation ahead of time will help with the actual firing and protect your company from many of the legal issues that follow.

In the end, honesty is almost always the best policy, and usually appreciated as the employee can take your reasons with them as they job hunt.

For more:  http://www.reuters.com/article/idUS348304971720100817

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by | July 26, 2010 · 7:22 am

Hospitality Industry Workers’ Compensation Risks: Hotel Owners Forced To Pay Large Damage Award For “Failing To Provide A Safe Work Place And Not Procuring Workers’ Compensation Insurance” While Paying Undocumented Clerk In Cash

“…forced the owners of a large hotel chain to pay more than one million dollars in damages due to their negligence in failing to provide a safe work place and not procuring Workers’ Compensation insurance. The hotel chain had a practice of paying their employees cash and not providing Workers’ Compensation insurance…”

 In California, an employer can be sued directly by his employee, if the employer failed to obtain Workers’ Compensation insurance. This is true even if the injuries were primarily caused by the negligence or intentional conduct of third parties. McMahon’s client, a foreign citizen, was working without a visa and the owners were aware that he was an undocumented worker.

The client, working as a night clerk, was summoned to a scuffle at a room in the hotel at 2:00am. He was attacked by guests when they were asked to keep the noise to a minimum. The plaintiff was rendered unconscious and spent almost four weeks at a local county medical facility with various broken bones, teeth, and a head injury. The attackers were eventually convicted of attempted murder and are serving lengthy sentences within the California state prison system.

For more:  http://www.onlineprnews.com/news/47075-1279302038-timothy-mcmahon-robert-allard-law-firm-of-corsiglia-mcmahon-allard-selected-as-superlawyers.html

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by | July 24, 2010 · 10:19 am

Hotel Industry Health Insurance: Nevada Hotel Operator To Subsidize Medical Insurance For Part-Time Employees In Effort To Reduce Turnover

“We recognize the importance of medical insurance for our team members and their families,” Gordon R. Kanofsky, Ameristar’s chief executive officer, said in a written statement. “This is another way we can show team members we appreciate their commitment to delivering outstanding service to our guests.”

Ameristar Casinos, Inc. said Thursday it will begin subsidizing medical coverage for part-time employees after researching methods for reducing part-time employee turnover.

The company, which owns and operates Cactus Petes Resort Casino and the Horseshu Hotel & Casino in Jackpot, Nev., will pay one-half of the premiums for part-time employees working less than 30 hours per week and their dependents.

“We recognize the importance of medical insurance for our team members and their families,” Gordon R. Kanofsky, Ameristar’s chief executive officer, said in a written statement. “This is another way we can show team members we appreciate their commitment to delivering outstanding service to our guests.”

Ameristar hosted focus groups with part-time employees to gauge how effective the program will be, officials said. Employee feedback led to Ameristar’s decision to make the care plan available to all part-time team members.

For more:  http://insurancenewsnet.com/article.aspx?id=209821

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by | July 23, 2010 · 5:53 am

Hospitality Industry Employees Risks: Hawaiian Hotels Violated State Law When Service Employees Not Given 100% Of Service Charges For Food And Beverage Service

“…The suit, filed by Turtle Bay employees in January 2009, claimed the resort violated a state law enacted in 2000 that requires hotels and restaurants to give 100% of service charges for food or beverage service entirely to employees – unless they tell customers that management’s keeping a portion, the Honolulu Star-Advertiser says…”

Employees of the Turtle Bay Resort on Oahu’s scenic North Shore won a $526,000 settlement  in a lawsuit over tips that had been split among workers and the company without customers knowing.

At least nine similar suits have been filed over the last two years against major Hawaii hotels, Brandee Faria – the Turtle Bay employees’ lawyer – tells the Star-Advertiser. And it’s not only the employees who are hiring lawyers.

Some of the suits were filed on behalf of hotel customers who thought they’d paid tips to staffers – not hotel management.

In a case against the Four Seasons hotels on Maui and the Big Island, the Star-Advertiser says that Hawaii Supreme Court in March ruled that hotel and restaurant employees may sue under the law.

The Turtle Bay settlement covers 130 employees who worked at the hotel between 2005 and 2009; the amount would mean $4,046 per employee if the settlement was shared equally, the story says. Settlement checks were mailed out recently.

For more: http://travel.usatoday.com/hotels/post/2010/07/hawaii-hotel-workers-win-526000-settlement-in-back-tips/100924/1

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by | July 17, 2010 · 10:40 am

Hotel Industry Employee Risk Management: Hotel Ownership Must Insure Compliance With State Laws Regarding “Service Charges” Being Withheld Illegally From Service Staff Which Can Result In “Triple Damages” Being Awarded

“…the case involved a portion of service charges — which are added onto bills at the end of banquets, weddings and large events — being withheld from servers, and all hotel and restaurant staff working at least eight-hour shifts were having 30-minute meal breaks deducted from their paychecks even though they weren’t receiving them.”

“What we alleged in this case was a portion of [the service charge] was going to managers, the sales department, and others who aren’t permitted under law to dip into this money intended for waitstaff,” he said.

“…state law ordering food establishments found to be withholding wages and tips to pay employees up to three times as much as they’re owed…”

The Orchards Hotel has agreed to a $240,000 proposed settlement in a class action lawsuit involving approximately 150 current and former hourly employees.

With state law ordering food establishments found to be withholding wages and tips to pay employees up to three times as much as they’re owed, the employees at The Orchards will receive between two and three times what they were owed in wages and tips, Holtzman said.

“The settlement is not only the recovery each employee is owed, but a multiple of what is owed,” he said.

For more:   http://www.berkshireeagle.com/local/ci_15528594

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