REGULATIONS AFFECTING BUSINESSES WITH EMPLOYEES

[This discussion is offered for general informational and educational purposes. It is not offered as, and does not constitute, legal advice or a legal opinion. These materials should not be utilized as a substitute for direct professional services. If legal advice or other expert assistance is required, the services of an appropriate professional should be sought. All links set forth below were accurate when posted. Any information regarding a dead (or erroneous) link would be much appreciated.]

REGULATIONS AFFECTING BUSINESSES WITH EMPLOYEES

SUMMARY

LAW	POSTER	AGENCY
Fair Labor Standards Act	Your Rights under the Fair Labor Standards Act	U.S. Department of Labor
Polygraph Protection Act	Employee Polygraph Protection Act	U.S. Department of Labor
Family Medical Leave Act [50 or more employees]	Rights under Family and Medical Leave Act	U.S. Department of Labor
Worker Adjustment and Retraining Notification Act [100 or more employees]	N/A	U.S. Department of Labor
Occupational Safety and Health Act	Job Safety & Health Protection	Occupational Safety and Health Administration
Immigration Reform and Control Act	The Immigration Reform and Control Act (IRCA) Prohibits Employment Discrimination	Immigration and Naturalization Services and Department of Justice
Equal Opportunity Laws [15 or more employees]	Equal Employment Opportunity is the Law	Equal Employment Opportunity Commission and Department of Justice
Pennsylvania Minimum Wage Act	Minimum Wage Law Poster and Fact Sheet	Pa. Department of Labor and Industry, Bureau of Labor Standards
Equal Pay Law [where members of both sexes employed]	Abstract of the Equal Pay Law	Pa. Department of Labor and Industry, Bureau of Labor Standards
Employment of Minors [where minors employed]	Abstract of the Pennsylvania Child Labor Law and Hours of Work for Minors under Eighteen	Pa. Department of Labor and Industry, Bureau of Labor Standards
New Hire Reporting	N/A	Pa. Department of Labor and Industry, Bureau of Labor Standards
Unemployment Compensation	Description of Unemployment Compensation	Pa. Department of Labor and Industry, Bureau of Unemployment Compensation
Workers' Compensation	Name and address of Workers' Compensation Insurance Company	Pa. Department of Labor and Industry, Bureau of Workers' Compensation
Pennsylvania Human Relations Act [4 or more employees]	Employment Provisions - Pennsylvania Human Relations Act	Pennsylvania Human Relations Commission

DISCUSSION
For purposes of this discussion, consider the laws affecting business to fall into two broad categories: (1) laws and regulations (federal, state and local) governing the relationship between the business and its employees; and (2) laws and regulations (federal, state and local) governing the relationship between the business and non-employee third parties such as governmental agencies, customers, communities in which the business operates, etc.

Examples of laws and regulations falling into the second category include: tax laws; obligations to issue IRS forms 1099 to, among others, persons rendering services for more than $600; environmental regulations; the public accommodation requirements of Title III of the American with Disabilities Act and the Pennsylvania Human Relations Act; state licensing requirements; etc. Whether a business has employees or not, it must be concerned with, and comply with, laws falling within the second category. [For what appears to be a relatively good on-line source of information for matters falling into the second category under Pennsylvania law, see Pennsylvania on-line Entrepreneur's Guide. This site contains a discussion of considerations for starting up a business, a start-up checklist, and a list of required licences and permits in Pennsylvania. For another good checklist for going into business, see the Edward Lowe Foundation site. ]

Laws and regulations governing the relationship between the business and its employees can be further broken down into at least three areas: (1) employer taxes (like withholding, employer contributions to social security and medicare, and unemployment compensation); (2) employer related insurance like workmen's compensation; and (3) general non-tax laws and regulations governing the employer-employee relationship. The balance of this discussion will primarily focus on this last area.

There are both federal and state (non-tax) laws and regulations governing the employer-employee relationship. Not surprisingly, there is overlap.

FEDERAL LAW AND REGULATIONS

[For an overall view of Federal law pertaining to the employer-employee relationship, see the EEOC Small Business Information Site and The Deparment of Labor Small Business Handbook]

Fair Labor Standards Act ("FLSA") (29 U.S.C. §201 et. seq.)

The FLSA sets the minimum wage ($5.15/hr after 9/1/97), overtime requirement (arising after 40 hours in a given week), and in the case where both sexes are employed, equal pay requirements. Employers generating $500,000 or more in gross annual sales are subject to the FLSA. However, the Act is also applicable to employees involved in interestate commerce (e.g., putting product or services into interstate commerce), which would seem to cover most employees. Therefore, in most cases, employees are covered and employers must comply. For a general discussion of the FLSA, see the Department of Labor "Handy Reference Guide".

Exemptions. Although there are a number of special exemptions from the FLSA's minimum wage and overtime compensation provisions, the three main categories of exempt employees are those employed in a bona fide executive, administrative, or professional capacity. Regulations provide express conditions which must be satisfied in order for an employer to successfully claim that a particular employee is exempt as an executive, administrative, or professional employee. See 29 CFR §541.0 et. seq. Job title or classification is not dispositive. Likewise, the fact that an employee is "salaried" does not take him (or her) out of the reach of the FLSA.

If an employee is nonexempt, he or she is entitled to overtime at a rate equal to one and one-half times the regular rate. In the case of hourly employees, the regular rate is clear. In the case of piecework, the regular rate can be based on hours or on the piece rate, whichever is agreed to before the work is performed, provided, however, the amount paid must at least equal the minimum wage. In the case of nonexempt salaried employees, as a general rule, the regular rate is determined by dividing the salary by the specified number of hours per week for which the salary is intended to compensate.

There are two possible exceptions to the requirement that nonexempt salaried employees be paid overtime at the rate of one and one-half times the regular rate. The exceptions are: (1) "halftime" plans; and (2) Belo plans.

Halftime plans are authorized by regulation in the case of fluctuating workweeks (i.e., hours worked fluctuate week to week), where there is an agreement (preferably in writing) between the employer and employee that the salary will be paid regardless of the number of hours worked. See 29 CFR §778.114. The salary must be sufficiently large so that the employee receives at least the minimum wage for all hours worked in those workweeks in which the number of hours are the greatest. Overtime will still be due for all hours worked over 40 per week, but the rate will be one-half the regular hourly rate rather than one and one-half times. Thus, for example, if an employee is paid $400 per week (by agreement) whether he works 30 hours or 50 hours, and his workweek actually fluctuates between 30 and 50 hours, his overtime rate is one-half of the weekly regular rate (determined by dividing $400 by the number of hours worked that week) rather than the $15.00/hour ($400/40 hour workweek times 1.5) that would normally be the case. If the employee worked 50 hours, his overtime rate would be $4 ($400/50 hours times .5), for a total pay for the week of $440 ($400 salary plus 10 overtime hours at $4/hour). Compared to the $550 that would be due outside of the halftime plan ($400 salary plus 10 overtime hours at $15.00/hour), the savings are significant.

Not surprisingly, the salary must be large enough, and the workweek must fluctuate sufficiently, so that it does not turn out that the employee is essentially working overtime at a rate no greater than that which he recieves for his nonovertime hours. Where appropriate, however, halftime plans can be beneficial for both the employer and employee.

The other exception to overtime for nonexempt salaried employees is the so called Belo plan (named after a Supreme Court case in which A.H. Belo Corporation was one of the parties). Belo plans are statutorily authorized at 29 U.S.C. §207(f) where the nature of the job requires a fluctuating workweek above and below 40 hours per week, and the parties affirmatively agree to the number of hours per week the salary is to cover. See discussion at 29 CFR §§778.402 - 778.414. The regulations discuss, in detail, the condition that a fluctuating workweek be required by the job, but, generally, the cause of the fluctuation must be external. Accordingly, this condition creates a significant barrier to the availability of this exception. If all the required conditions are satisfied, an employer can completely avoid overtime up to the agreed upon number of hours per week covered by the salary. The number of hours covered by the salary must be occasionally exceeded so that overtime is occasionally paid, and the regulations also set forth rules for determining the maximum number of hours that may be covered by the salary. The actual workings of a Belo plan can get complicated, but as with the halftime plan, may be beneficial in appropriate circumstances.

Posting requirement. An employer subject to the FLSA must post a notice advising employees of their rights under the Act. The Poster may be obtained by calling the Department of Labor or downloaded from the DOL Web site. Failure to post imposes upon an employer an obligation to prove that the employees otherwise knew their rights under the FLSA in order to cause the statute of limitations period to begin to run. See, e.g., Friedrich v. U.S. Computer Services, Inc., 833 F.Supp. 470 (E.D. Pa. 1993). Accordingly, there is some benefit to employers in posting.

Recordkeeping. The FLSA requires employers to keep records on wages, hours, and other items specified in the regulations. The records become critical in the event an employee claims that the FLSA has been violated. Absent records, an employee's claim of a violation of the FLSA may go unrebutted.

State counterpart. Even if the employer is not subject to the FLSA, it is in all probability subject to the Pennsylvania counterpart, the Pennsylvania Minimum Wage Act.

Polygraph Protection Act ("PPA") (29 U.S.C. §2001 et. seq.)

The PPA prohibits employers from giving employees polygraph tests except in certain limited circumstances.

Posting requirement. From the perspective of the small business, the only likely significant aspect of this Act is its posting requirement (see 29 CFR §801.6). The Poster may be obtained by calling the Department of Labor or downloaded from the DOL Web site.

Occupational Safety and Health Act ("OSHA") (29 U.S.C. §651 et. seq.)

Under OSHA, a State may enact/promulgate laws/regulations that override federal law. Pennsylvania has generally not done so and, therefore, OSHA rules and regulations apply in most cases. OSHA requires, in part, that every employer covered under the Act furnish to its employees employment and a place of employment which is free from recognized hazards that are causing or are likely to cause death or serious physical harm. OSHA has the power, under the Act to promulgate rules and regulations. See 29 CFR Parts 1900 to end.

Posting requirement. OSHA requires employers to post a Job Safety & Health Protection notice. See 29 CFR §1903.2. The Poster may be obtained by calling the Department of Labor or downloaded from the DOL Web site.

Recordkeeping. OSHA regulations also require employers to keep records of employee injuries and illnesses. In the case of small employers (employers with 10 employees or less), the employer need only maintain a log of injuries and illnesses (on OSHA form 200, or something comparable). In the case of employers with 10 or more employees, the employer is required to post an annual summary. See 29 CFR §1904.1 to §1904.17.

Immigration Reform and Control Act ("IRCA") (8 U.S.C. §1324(a))

IRCA prohibits discrimination, when hiring, discharging, or recruiting, on the basis of national origin (like Title VII of the Civil Rights Act of 1964), and/or aliens with work authorization. The prohibition against discrimination in IRCA applies to employers with four or more employees (whereas Title VII only kicks in when the employer has 15 or more employees).

IRCA further requires that all employers verify that all hired employees are eligible to work (i.e., that they are either citizens or nationals of the United States, or are aliens with work authorization). In order to ensure verification, IRCA require that every person hired after November 6, 1986, complete a form ("I-9 Form"), and that the employer verify eligibility by examining one of the documents identified on the I-9 Form as being acceptable. The employer is required to verify on the I-9 Form that an acceptable identifying document has been presented. The I-9 Forms are to be retained for three (3) years after the date of hire, or one (1) year after the date employment ends, whichever is later.

For more information see the Immigration and Naturalization Service web site.

Equal Opportunity Laws

Under Federal Law, equal employment opportunity is the law. Title VII of the Civil Rights Act of 1964 (42 U.S.C. §2000e et. seq.), applicable to employers with 15 or more employees 20 or more weeks per year, prohibits discrimination on the basis of race, color, religion, sex, or national origin. Titlle VII also prohibits, among other things, sexual harassment, racial and ethnic harassment, pregnancy discrimination, and requires religious accommodation where the cost is "de minimis."

The Americans with Disabilities Act ("ADA," 42 U.S.C. §12101 et. seq.), applicable to employers with 15 or more employees 20 or more weeks per year, prohibits discrimination against qualified individuals with disabilities (i.e., individuals who meet legitimate skill, experience, education, or other requirements of an employment position and who can perform the essential functions of the position with or without reasonable accommodation).

The Age Discrimination in Employment Act ("ADEA," 29 U.S.C. §621 et. seq.), applicable to employers with 20 or more employees 20 or more weeks per year) prohibits discrimination against older workers (persons 40 or older) in all aspects of employment, including hiring and benefits.

Posting requirement. Covered employers must post a comprehensive Equal Employment Opportunity is The Law notice. The poster may be obtained from the Equal Employment Opportunity Commission or downloaded from the DOL Web site.

Recordkeeping. Employers with more than 100 employees must prepare and file, annually, a Form EEO-1. While there are no formal record keeping requirements for smaller employers, records setting forth nondiscriminatory reasons for any employement decision would be important if the action is challenged.

Family and Medical Leave Act ("FMLA") (29 U.S.C. §2601 et. seq.)
[Applicable to Employers with 50 or more employees 20 or more weeks per year]

The FMLA provides certain employees with up to 12 workweeks of unpaid, job-protected leave a year to give birth or to care for a family member, and requires group health benefits to be maintained during the leave as if the the employee continued to work instead of taking leave.

Posting requirement. The Poster may be obtained by calling the Department of Labor or downloaded from the DOL Web site.

Worker Adjustment and Retraining Notification Act ("WARN") (29 U.S.C. §2101 et. seq.)
[Applicable to Employers with 100 or more employees exclusive of employees who have worked less than 6 months in the last 12 months, and not counting those who work an average of less than 20 hours per week]

Generally, a covered employer must give notice if an employment site (or one or more facilities or operating units within an employment site) will be shut down, and the shutdown will result in an employment loss for 50 or more employees during any 30-day period. A covered employer must also give notice if there is to be a mass layoff which does not result from a plant closing, but which will result in an employment loss at the employment site during any 30-day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer's active workforce. For more information see the Department of Labor web site.

PENNSYLVANIA LAWS AND REGULATIONS

Pennsylvania Minimum Wage Act ("PMWA") (43 P.S. §333.101 et. seq.)

The PMWA applies to most Pennsylvania employers. Under the statutory language, it applies unless the employer or employee falls within a specific statutory exceptions.

The PMWA is not preempted by the FLSA to the extent it provides a higher minimum wage or greater employee protections. In most respects, however, it appears that the regulations and administration of the PMWA cause it to mirror the FLSA. For example, even though there is no statutory or regulatory provision authorizing "halftime" plans under the PMWA, the Bureau of Labor Standards has represented that such plans, to the extent in compliance with the FLSA, are accepted under the PMWA. In addition, the minimum wage and overtime requirements of the PMWA and FLSA are identical.

In addition to the PMWA, Pennsylvania has a prevailing wage law and a wage collection law. Under the prevailing wage law, the Prevailing Wage Division of the Department of Labor and Industry determines prevailing wage rates for the construction industry and enforces the rates and classifications under heavy, highway and building construction projects of $25,000 or more when public funds are involved. See the Prevailing Wage Division web site for additional information. The Pennsylvania Wage Payment and Collection Law requires that all wages due employees be paid on regular paydays designated in advance by the employer. Each employee must be notified at the time of hiring of the time and place of payment of wages, the rate of pay, and any fringe benefits. Statutory liquidated damages and penalties may be assessed against employers for failure to pay wages.

Posting requirement. Like the FLSA, there is a posting requirement under the PMWA. The poster includes, among other things, a summary of the PMWA. Accordingly, it probably represents a separate posting requirement even if the employer already maintains a FLSA poster. The poster may be obtained from the Department of Labor and Industry Bureau of Labor Law Compliance, (717) 787-4670. See Mandatory Postings for Pennsylvania Employers.

Equal Pay Law (43 P.S. §336.1 et. seq.)

The Fair Labor Standards Act prohibits discrimination in rates of pay between employees on the basis of sex for work under equal conditions on jobs which require equal skills. 29 U.S.C. §206(d). The Pennsylvania law covers all employees not covered by the FLSA.

Posting requirement. Businesses are required to post an Abstract of Equal Pay Law if members of both sexes are employed. See 43 P.S. §336.7 and 34 Pa. Code §§9.61 - 9.63. The poster may be obtained from the Department of Labor and Industry Bureau of Labor Law Compliance, (717) 787-4670.

Unemployment Compensation

Pennsylvania employers pay a tax to the state to fund unemployement compensation. Under the law, employers file quarterly Unemployment Compensation ("UC") tax reports and remit payments.

Posting requirement. Employers are required to post a summary of the employees' rights under the law, as drafted by the Department of Labor and Industry. 43 P.S. §805 and 34 Pa. Code §61.4. The poster may be obtained from the Department of Labor and Industry Bureau of Unemployment Compensation Benefits and Allowances, (717) 787-3547.

Recordkeeping. Unemployement Compensation Regulations, 34 Pa. Code §63.64, sets forth certain employment records which must be maintained by an employer.

Worker's Compensation

Pennsylvania employers are required to have worker's compensation insurance unless specifically exempted as a self-insurer. 77 P.S. §501(a). Failure to maintain the insurance is a criminal offense. §501(b).

Posting requirement. Employers are required to conspicuously post a notice containing the name of the carrier and the address and telephone number of the carrier or insurer, or if the employer is self-insured, the name, address and telephone number of the person to whom claims or requests for information are to be addressed. In addition, the notice is to contain the statement: "Remember, it is important to tell your employer about your injury." See 77 P.S. §501(e). The poster may be obtained from the Department of Labor and Industry Bureau of Workers' Compensation, (717) 783-5421.

Pennsylvania Human Relations Act ("PHRA") (43 P.S. §951 et. seq.)
[Applicable to Employers with 4 or more employees]

The PHRA, like Title VII of the Civil Rights Act of 1964, prohibits discriminatory practices.

Posting requirement. Employers are required to post a notice setting forth the employment provisions of PHRA. 16 Pa. Code §43.1. The poster may be obtained from the Pennsylvania Human Relations Commission, (717) 787-4410.

Employment of Minors (Child Labor Law) (43 P.S. §46 et. seq.)
[Applicable to Employers of Children under 18]

Both Pennsylvania and Federal (FLSA) law regulate the employment of minors under the age of 18. In addition to regulating the hours of employement, the laws also prohibit employement in certain occupations.

State law regulates number of hours per day, number of hours per week, and number of days per week. 43 P.S. §46. In addition, the limits are reduced during a school week. There are different limits for children under 16 and those between 16 and 18.

43 P.S. §49 requires an employer to either obtain, and keep on file, an "employment certificate", or ensure that the minor has a "transferable work permit." The child's parent, guardian, or legal custodian applies for the certificate or permit, and it is issued by school officials. It is the employers responsibility to assure that the minor has the certificate or work permit. If the minor delivers a certificate, the employer is obligated to acknowledge, in writing, to the school official issuing the certificate, within 5 days of the commencement of employment, receipt of the certificate. On termination of employment, the certificate is returned to the issuing official. If the minor uses a work permit, the employer must notify the school district issuing the permit of certain matters listed at 43 P.S. §58.1(a), and maintained a record of the information set forth in §58.1(b). In addition, pursuant to §58.1(c), the employer must notify the school district within 5 days of the termination of employment.

Posting requirement. Pennsylvania law requires employers who employ minors under the age of eighteen to conspicuously post a printed abstract of the child labor law, together with a list of all minors employed and a schedule of the hours of each minor. 43 P.S. §63. The poster may be obtained from the Department of Labor and Industry Bureau of Labor Law Compliance, (717) 787-4670. In addition, the FLSA minimum wage poster references limitations on the employment of minors.

New Hire Reporting

New Hire Reporting is a process by which the employer reports information on all employees hired on or after January 1, 1998. Pennsylvania will match New Hire Reports against its child support records to locate non-custodial parents, establish child support orders, or enforce existing orders. Pennsylvania will also transmit the data to the National Directory of New Hires to match against child support orders from other states. The information will also be used to detect and prevent erroneous benefit payments in the Unemployment Compensation and Public Assistance programs.

Each New Hire Report should contain the following data elements: Employer's Name, Address, Federal Employer Identification Number (FEIN), and a Contact Name and Phone Number; and Employee's Name, Address, Social Security Number (SSN), Date of Birth (optional) and Date of Hire. This is, essentially, the information set forth on the W-4. The information may be mailed, faxed, or sent via the internet, within 20 days of the new hire.

For additional information concerning employer's reporting obligations, information where to send the required information, and to download a copy of the report form, see the Department of Labor and Industry New Hire Reporting web site.

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