Editor’s note: Part I of this article, which appeared in the December 2014 issue of Skin Inc., discussed at-will appointment, setting employee expectations, posting requirements and workers’ compensation insurance.
Author’s note: The following is not legal advice and there is no attorney-client relationship created between the author of this article and the reader.
Most new employers are not aware as to the forms their employees must complete upon hire and the time frames for completing such forms. All states have a new hire reporting directory, which requires employers to report information about an employee to a registry, and some states require the reporting of dependent health insurance benefits and the date the employee qualifies for those benefits.
An employer should complete new hire reporting within the first month of hire. Employers must ensure that the IRS Form W-4 is properly completed, as well know that staying in compliance with the IRS rules is extremely important. The most recent Form I-9 was issued in March 2013. The Form I-9 must be completed within three business days of the employee’s commencement of employment. Employers may receive monetary fines up to $1,000 for errors on the Form I-9. Immigration Control and Enforcement (ICE) conducts random Form I-9 audits and issues fines, with the highest fines levied against employers who failed to even attempt to complete the Form I-9 for their employees.
The federal Fair Labor Standards Act (FLSA) covers or applies to all employees of certain enterprises. If a spa has an annual dollar volume of sales or receipts exceeding $500,000 it has enterprise coverage under FLSA. Even if a spa has less than the $500,000 threshold, employees can still obtain coverage under FLSA as it covers individual workers who are “engaged in commerce or in the production of goods of commerce.”
Courts have ruled that companies that regularly use the United States mail to send or receive letters to and from other states are engaged in interstate commerce. Even when employees use company telephones or computers to place or accept interstate business calls or orders, or swipe credit cards, they have subjected an employer to the FLSA. Under the FLSA, employers must pay the federal or state minimum wage—whichever is higher—to employees and pay overtime to employees who are not exempt from overtime under the FLSA. As most spas operate in a tipped environment, a consultation with an employment attorney is likely necessary to ensure the appropriate notification for, and the application of, the tip credit.
Determining worker’s status
Many employers think the way around all of these rules and record-keeping requirements is to hire only independent contractors or booth renters—it’s not as straight forward as that. Facts that provide evidence of the degree of control and independence fall into three different categories.
- Behavioral—Does the spa control or have the right to control what the worker does and how the worker does her job?
- Financial—Are the business aspects of the worker’s job controlled by the payer? These include how the worker is paid, whether expenses are reimbursed, who provides supplies and other pertinent specifics.
- Type of relationship—Are there written contracts or employee type benefits, such as paid vacations, insurance plans and mandatory training? Will the relationship continue? Is the work performed a key aspect of the spa?
Every business owner needs to know that documentation of concerns and compliments will assist in defending against an audit, lawsuit or even an unemployment claim. Be aware of what employees are actually doing at the workplace; train managers to document violations of policies, as well as to document positive feedback. Consistently applying handbook policies will also avoid claims of favoritism or confusion as to what the rules really are. Consult with an employment attorney to better understand the rules applicable to your state, or even your county in the case of local ordinances.
Christine Sensenig, a founding partner of the Sensenig Law Firm, P.A. in Sarasota, FL, has been in practice for more than 14 years. She can be reached at firstname.lastname@example.org.