Classifying workers as independent contractors is about to get a lot tougher in those states that are part of a cooperative effort with IRS and the DOL to nab employers and employees who aren’t following IC rules.

The participating states have agreed to work with the feds in various ways — some more extensive than others. For instance, some will step up enforcement through the state attorney general’s office, and some will work through the state labor department. The participating states are:

• Connecticut
• Maryland
• Hawaii
• Illinois
• Massachusetts
• Minnesota
• Missouri
• Montana
• Utah
• Washington

The agreement is part of the so-called “misclassification initiative” started last year by the DOL and announced in its budget proposals. The department has contended that too many businesses are misclassifying workers as ICs to avoid paying employment taxes and benefits.

And why are the IRS and states involved, too? You probably know the answer: revenue. The IRS and the states claim lots of workers who are falsely classified as ICs aren’t reporting and aren’t paying full taxes on their income.

The message: If you’re an employer, especially in one of the 11 states, be careful about classifying workers as ICs.

Here’s a riddle for you: When can five minutes cost your company six figures … or more?

Answer: When those five minutes aren’t compensated for day after day.

The Department of Labor and the courts are cracking down on overtime missteps – hard. And you might be surprised what they’re determining is “compensable time.”

Take a look at two types of wage and hour violations your peers recently found themselves on the losing end of, so you can be sure your company’s compliance is up to snuff.

Company No. 1

Everyone has start-of-the-workday rituals: power up the PC, go grab that first (or third) cup of coffee, straighten the desk. But what if your company were expected to compensate employees for those behaviors?

Worse – what if those few extra minutes each day pushed certain employees into OT territory, adding the extra burden of time-and-a-half pay?

That’s precisely what happened to a Los Angeles-based insurance company with its call center staffers. Each day staffers at Farmers Insurance powered up their workstations, logged into the company phone system and launched software applications to get going.

Probably doesn’t sound much different from what many of your own employees do every day. Except that the Department of Labor (DOL) just ruled that the time to do this, which took up to 30 minutes each week – barely 5 minutes a day! – constituted a part of employees’ workdays. And that meant they had to be paid for it.

It’s one expensive lesson. The employer now owes $15 million in back wages, including overtime pay. (DOL News Release No. 11-0976-SAN )

Company No. 2

But it’s not just the feds who are gunning harder and slapping firms with hefty bills for OT missteps. Employees are dragging their employers into court, claiming certain off-the-clock tasks are truly on-the-clock compensable parts of their jobs.

One biggie: donning and doffing protective equipment. One firm was recently sued by its employees, who believed they should be paid for the time they spent putting on, taking off and sanitizing their protective gear during the workday.

A federal appeals court sided with them, ruling that the time spent on these tasks at the beginning and end of their shifts counted as “work” and should be compensated for.

Note: The time spent on these tasks before and after lunch wasn’t compensable – it counted as part of the meal break. (Cite: Perez v. Mountaire Farms)

Every minute counts

In both of these cases, mere minutes per workday landed these employers in a lot of hot water. As every penny means more than ever to employees and the feds are ratcheting up enforcement, your company needs to ensure your FLSA compliance is spot-on. Two steps:

1. Have supervisors monitor their people’s routines. Encourage particular attention to the start and end of each workday. You’re not going to pay folks for their trip to the coffee pot. But if there are daily tasks employees can’t do their job without, you may need to be paying them for it.
2. Be certain all time is being recorded. Getting popped for back pay is costly enough – recordkeeping violations carry additional fines and penalties. Tough to pay people properly when you don’t have an accurate account of all time they’ve worked!

Introducing the new OSHA Recordkeeping Advisor.

This free, interactive online tool just released by the Department of Labor (DOL) leads your company through a series of questions that will help your company understand:

• if an incident was a work-related event or exposure, and
• whether the injury or illness counts as recordable.

And while there’s a ton of help for the taking, it does come with a catch. Read on for the lowdown.

What’s included

Not only will you receive a yes/no answer for the specific illness or injury, you’ll also get references to the specific OSHA regulations that justify that particular call.

And since the type of person impacted makes a difference, the tool accounts for things like whether that person was an employee or a visitor, on or off the job.

To round it out, you get a set of FAQs defining terminology and other common sources of confusion.

The catch

Of course, you rarely get something for nothing in this world.

And while there’s no denying this is a valuable tool worth checking out, make sure supervisors and HR understand there will be something expected on your company’s end: heightened compliance.

So whether or not your company actually avails itself of this resource, you can bet the DOL won’t be accepting any excuses for noncompliance based on ignorance of the regs.

Workplace accidents cost organizations plenty already – the last thing you want to do is to add penalties and fines for recordkeeping missteps. Talk about adding insult to injury!

The feds just issued final rules to make 401(k)s and the expenses that come with them easier for employees to understand. Too bad it won’t be easier on employers to administer them … or even understand what’s expected! You have 134 pages of very specific rules to get your arms around.

And while technically companies have until Jan. 1, 2012, to comply, the number of changes required of your business will keep you busy right until that date comes around.

Your best first step: Huddle with your retirement plan service provider soon to determine how you’re going to cover these five bases:

1. General plan information. Your company is now expected to disclose general plan data, like a list of current investment options. And get ready to offer up administrative expense info, including an explanation of plan-wide expenses, such as accounting, legal or recordkeeping fees.

2. Employee-specific plan info. You’ll need to explain, too, any fees and expenses that may be charged to or deducted from individuals’ accounts based on the actions they take. For example, fees and expenses for plan loans and for processing garnishments.

3. Quarterly disclosure statements to employees. Get ready to prepare and distribute a quarterly disclosure to participants on the amount of plan-related fees and expenses you deduct from participants’ accounts.

4. An online resource for employees. While you know you can’t offer employees investment advice, you’ll need to direct them to resources where they can get more info. Specifically, the new rules require you to provide participants and beneficiaries access to a website with specific additional info about the investment options for workers who want more or more current info. (You’ll have to provide a glossary of investment terms, too, which can be online.)

5. A standard of apples-to-apples comparison for investment options. Hope you have a finance staffer that’s good with graphics! The final rules require that your company provide employees with a chart comparing their investment options (DOL offers a model for you).

Two small rays of hope

Considering that this massive to-do lists is merely the highlights of the new rules, even the Feds understand this is a tall order for any company of any size. So the DOL included two bits of relief:

• A limited transition rule. You’ll get up to 60 days after the effective date to provide employees with info that’s otherwise due to them on or before the date they can first direct investments.
• Good-faith protection. Even if your company doesn’t comply to the letter of the law, you may not be sunk. The DOL is offering protection to firms that reasonably believe the info their plan service providers give you is correct and complete. So you shouldn’t be on the hook for their mistakes.

Info: For a DOL fact sheet and sample investment chart, go here.

President Obama has announced he’s extending benefits under the Family and Medical Leave Act (FMLA) to domestic partners caring for ill loved ones or newborns.

Think you missed a new law? There was none.

According to insiders at the Department of Labor (DOL), this latest expansion is merely a “new interpretation” of the decades-old law.

In fact, the DOL just issued a formal Administrator’s Interpretation clarifying the term “son or daughter” as far as FMLA eligibility to care for a child after birth.

The new and expanded definition of a caregiver now includes:

• unmarried partners
• stepparents
• same-sex partners, and
• grandparents.

Basically, your company’s new filter for eligibility is anyone who intends to provide day-to-day care and/or financial support now qualifies. (DOL Administrator’s Interpretation No. 2010-3)

Prepping for more requests

Of course, while you want all employees to have equal coverage, there’s no denying the FMLA is an extremely expensive and cumbersome law, especially for small businesses.

In light of this new extension, there’s no better time to make sure you can handle the absences. That means ensuring that employees are cross-trained and that all supervisors have contingency plans in place in the event staffers are out for extended periods of time.

It’s also a great idea to double check that your FMLA request policies are crystal-clear.

Info: www.dol.gov/compliance/topics/benefits-leave-FMLA.htm

The Department of Labor has put together new model notices for the program, which extends employee eligibility for the 65% premium subsidy until Feb. 28. The assistance period’s also been extended, from nine months to 15.

For information on the new notice requirements, go here.

The impetus for the move came in the form of a recent report titled “Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities.”

The report was based on face-to-face interviews with about 4,000 workers in New York, Los Angeles and Chicago. It was published by the Center for Urban Economic Development at the University of Illinois at Chicago, the National Employment Law Project and the UCLA Institute for Research on Labor and Employment.

A sample of the study’s findings:

• 76% who had worked overtime the previous week claimed they were not paid time-and-a-half for it.
• 26% said they were being paid less than the minimum wage.
• 75% of those interviewed earned less than $10 an hour.
• 69% of workers who were entitled to a meal break said they received no break at all, had their break shortened, were interrupted by their employer or worked during the break.
• 20% said they had made a complaint to their employer or attempted to form a union in the last year; of those, 43% said they’d experienced some form of retaliation — such as getting fired or being threatened with a pay cut.

So the violations that jumped out at DOL involve OT pay, minimum-wage violations, denied breaks mandated by law and illegal retaliation.

The study found that minimum-wage violation rates were most common in apparel and textile manufacturing, personal and repair services, and private households. Violation rates were substantially lower in residential construction, social assistance and education, and home health care.

Women were significantly more likely than men to experience minimum wage violations, and foreign-born workers were nearly twice as likely as U.S.-born workers to suffer a minimum-wage violation, according to the report.

Click here to see the full report in PDF format.

Based on activity among its member institutions, the Federal Reserve has released its predictions on which parts of the country are likely to see a rise, or a drop, in business.

The predictions come out of the Fed’s “Beige Book” breakdown of economic conditions in the 12 Federal Reserve Bank districts marked by cities. When the economic conditions show signs of increase, that’s usually followed by an increase in jobs.

Some highlights from the report:

• The New York, Cleveland, Kansas City, MO, and San Francisco regions are showing “signs of stabilization.”
• Chicago and St. Louis reported that the pace of economic decline appeared to be “moderating.”
• Boston, Philadelphia, Richmond, Atlanta and Dallas described activity as “slow,” “subdued” or “weak.”
• Minneapolis was the only region that indicated its downward slide in economic activity had worsened.

That’s the overall picture. The Fed also breaks down activity in economic sectors. For instance:

• Boston, Kansas City and San Francisco reported retail activity described as “modest increases or less negative.”
• Philadelphia, Atlanta, St. Louis, New York and Dallas regions reported “flat or mixed sales.” The remaining Fed regions described retail sales as “soft.”
• Auto sales were mixed; travel and tourism was down almost across the board.
• For manufacturing, Richmond, Chicago and Kansas City showed some improvement. St. Louis and Dallas said the rate of decline in factory activity is moderating. The Philadelphia and Minneapolis regions saw manufacturing activity drop, while the rest of the regions described activity at “low levels.”
• Residential real estate remained “soft” in most Fed regions, and commercial real estate dropped.

In a related story, the U.S. Department of Labor issued its report on what it calls the Employment Cost Index — essentially, the rise or fall in what it costs employers to provide wages and benefits.

DOL’s statistics for the 2nd quarter of ’09 show a rise of 0.3%, about the same as the figure for the 1st quarter. That measurement nearly matches the 0.2% figure estimated by economic forecaster Global Insight.

Click here to see the Fed’s full Beige Book summary.

That’s the upshot of a recent Opinion Letter from the Department of Labor (DOL), which clarifies the confusion surrounding the agency’s “two-day rule.”

FMLA regs require employees to provide 30 days’ notice for any leave that’s foreseeable (like childbirth). But when the need’s unforeseeable — like a sudden illness — the rules have been a little muddier.

That’s because a 1999 opinion letter stated that employees had two business days to let their employers know they’d be out on FMLA leave — and the employer couldn’t penalize workers who didn’t follow company notification procedures, if those procedures were stricter than the two-day requirement.

Early this year, FMLA rules were officially changed to allow employers to require that employees follow internal notification policies when asking for covered leave. The recent opinion letter reiterates the new FMLA rules and rescinds the 1999 letter.

Bottom line: You can ask employees to follow your normal notification procedures when asking for FMLA leave.

For a look at the recent letter (DOL Opinion Letter FMLA2009-1-A), go here.