Cell Phones: More phones, more problems

Last month we brought you guidance from Eric Schweffler of BLH&K on emerging issues with cell phones and the tax arena. Gauging from the response, it seems that cell phones are an area of increasing concern for employers.

Cell phones and PDA's, not to mention beepers and iPods, have brought a whole new bundle of issues to the doorsteps of employers. Some of these issues include overtime pay, horribly annoying rings, driving safety, employees taking personal calls at work, loss of confidential information (due to cell phone cameras,) and inappropriate material in the workplace (if you think there's any shortage of obscene or offensive cell phone screen backgrounds or ring tones, think again.)

Each of these issues is potentially a major problem, but my goal in this article is to hit a few high points for employers contending with a wireless workforce. Cell phones are actually at the intersection of a number of different policies, from harassment to confidentiality, so I'll highlight a few of those below.

We've all heard the ringtones in the office, from the country-western ballads to the heavy-metal version of Swan Lake (really.) Any good cell phone policy should include requirements of quiet, unobtrusive ringtones, if they are allowed at all. Because of the increasingly frequent disruptions, some companies require that all cell phones be turned to silent or vibrate during the workday, while others require that personal cell phones simply remain off except for breaks and meal periods.

One primary consideration in creating your cell phone policy is safety. Statistics have consistently shown that people using cell phones perform tasks less safely, whether it's driving or operating equipment. Many companies that require use of moving equipment, including construction, manufacturing, and others, have instituted policies requiring that personal cell phones remain in cars or lockers during work hours. Other companies limit use of cell phones while driving, and require people to pull over to make calls, or at least use hands-free devices.

As a reminder to everyone, hands-free devices are required by law for everyone using cell phones while driving as of 7/1/08, so all cell phone policies will need to include this at that time.

For companies with sensitive, confidential information, such as customer data, product designs, business plans, or anything else, it's wise to include cell phones and other electronic cameras or video or sound recorders in your confidentiality policy. This type of technology presents a serious potential for information loss by employers, so it's important to make sure that your policies are crafted to address this.

Aside from outgoing information, another primary concern with this technology is incoming material. Aside from ringtones, most cell phones now have customizable backgrounds and can store photos or videos. As one manager learned when opening an employee's cell phone to admire it, even cell phone screen savers have the potential to violate harassment policies. (This particular manager wasn't easily shocked, but said that in this case, she was shocked. The employee was told to ensure that anything she brings into the workplace is in alignment with the harassment policy, so the explicit video needed to be removed from her cell phone, since she had that out in her workspace.)

Harassment policies should make sure to address personal items in the workplace, such as cell phones, PDA's, iPods, screen savers, incoming emails, and personal laptops used in the workplace.

Another rapidly growing area of concern for employers is text messaging. How many times have you walked over to an employee's desk to find them silently texting away while you thought they were working? Some employers are more relaxed than others about this type of activity, but employers should recognize its potential (along with internet surfing) to be a time and productivity drain on employees. And because it's silent, you may not even know it's occurring. A well-drafted and even better-communicated policy is essential to make sure your employees aren't using your work time to text.

The last cell phone issue we'll look at in this article is the issue of overtime. For your exempt managers and executives, answering phone calls and emails from home is no issue, since they are expected to work the job, rather than the hours. For the non-exempt employee, though, who is checking their work email at home or answering or making cell phones calls outside of their normal work hours, overtime issues do arise. Since they are conducting business, you are required to pay those hours worked. However, if you have an employee working unauthorized overtime, you can approach that problem from a disciplinary standpoint.

Employers should make sure, though, that any hours worked (including on the phone from home or checking email remotely) are reflected on the timecards of non-exempt employees, even if the employee says they're happy to take a few calls at home. If it were ever to come in from of the Department of Labor Standards Enforcement, if the employer has no records, the employee's word on what they worked is often taken.

A well crafted, customized cell phone policy is now an essential in most businesses to address the growing issue of cell phones. Make sure it includes elements of when the phone can be on, can be answered, what the guidelines are for personal calls in general at work, appropriate material (including ringtones) on personal cell phones and PDA's, confidentiality of work material, safety, and any other areas that need to be addressed to protect your business.

FMLA: New Categories; More Time Off Work; More to Comply With

On 1/28/08, the President signed a new law that expands the Family and Medical Leave Act (FMLA), providing leave rights for military families that is causing a new look at companies' FMLA policies. The law went into effect as of that date, so it's a mad scramble now as employers struggle to understand the policies they must now comply with.

As these new laws are not backed up by detailed regulation yet, the advice of a qualified HR or legal professional is essential ensuring compliance with the complex requirements of leave administration.

First, some employers are confused about the intersection of USERRA with these new FMLA leaves. USERRA is for actual deployed military members. The new FMLA leaves are for the people who stay back home, such as family members.

There are two new types of leave under the FMLA: "Qualifying Exigencies" and "Service member Family Leave." An employer is still required to cover health insurance, follow the notification requirements, and all the other current FMLA rules. The best way for an employer to think about this is that these are two new categories of leave under the current FMLA; in other words, these are amendments, not entirely new types of leave.

"Qualifying Exigency Leave" is for an employee whose spouse, son, daughter, or parent is on active duty or is called for active duty in support of a contingency operation. The Department of Labor has not issued regulations on the exact definition of "qualified exigency" leave yet, so until then the DOL is encouraging employers to provide this type of leave to employees even though they won’t be enforcing it until the regulations are promulgated. Probable examples of this type of leave would be a spouse taking leave to arrange for child care, to see a child off or welcome a child home, to attend pre-deployment briefings, to attend family support meetings, or to attend reintegration briefings. This is clearly intended to be a broad category of leave, so it's essential employers act in good faith and stay on top of the regulations as they are issued. In the meantime, make every attempt to accommodate this type of leave if it does arise before official guidance from the DOL is issued.

It's important to note that the definition of "son" or "daughter" in Qualifying Exigency leave conflicts with the existing definition of those terms in the current FMLA regulations. It's anticipated that the DOL regulations will address this discrepancy and provide guidance. The definition of parent is a biological parent or one who stood in-loco-parentis for the employee.

Active duty covers a broad array of potential military assignments during a war or national emergency, and this definition is governed by US code 101(a)(13)(B) of Title X. It covers assignments besides those which involve direct combat.

Qualifying Exigency leave is 12 weeks during a 12-month period, and is calculated the same way that any other FMLA leave is calculated by the employer: using the calendar year, roll-forward, or roll-back methods. Qualifying Exigency leave is integrated with all other FMLA reasons, so if an employee has taken 8 weeks of leave for a personal medical issue, and then requests Qualifying Exigency leave under the FMLA, they would have 4 weeks available.

Next of kin means the nearest blood relative of the Servicemember. This is likely to affect employees who are outside the traditional FMLA categories, such as brothers, sisters, aunts, uncles, and grandparents. Keep in mind that someone who qualifies under "in-loco-parentis" might qualify that employee under the "parent" category rather than "next-of-kin." The DOL may issue some further guidance on next-of-kin, as there is nothing in the regulations making a determination of that term. For instance, what if there are two brothers of a servicemember?

One way for employers to prevent potential abuse of the next-of-kin provision is to ask what brothers, sisters, aunts, uncles, grandparents are service personnel in advance of any requested leave, or to list servicemembers they are potentially next-of-kin of.

The definition of "serious injury or illness" is different under Servicemember leave than under the other types of FMLA, as it requires that the injury or illness must have occurred in the line of active duty.

Employers should remember that providing "psychological comfort" also qualifies as a reason for leave under FMLA, including Servicemember leave. For this type of leave, an employer can ask the employee to specify the type of care they will be providing for the injured Servicemember.

For intermittent leave, it's very important to get certification of the nature and schedule of the care to be provided, as the regulations seem to indicate that employees can take Servicemember leave on an intermittent basis as well.

Employers should immediately amend or supplement their FMLA policies. An employer is still required to give employees general notice of their rights under FMLA, so employers can post an updated policy on the employee bulletin board while we're waiting for official postings from the DOL. Handbooks should also reflect the revised policy.

Employers also need to determine if they will comply with the general provisions of the Qualified Exigency leave while the specific regulations are pending. Supervisors and managers will need to be trained on these new requirements, and employers will need to update their forms to reflect the new leaves, such as revising the questionnaire regarding covered family relations.

Until the regulations are finalized for the Qualifying Exigency leave, some very broad situations may fall under that type of leave, such as staying home to care for children after a spouse has been deployed.

Because of the new length of these leaves, it's possible that employers will face long-term employee absences, so cross-training employees in anticipation of such circumstances may benefit employers. There is no hardship or unreasonable provision of the FMLA that would allow a covered employee to deny the leave to a covered employee.

People on Servicemember leave in California may qualify for the Paid Family Leave program, which provides up to 6 weeks of salary replacement. But because few people can afford to take 20 weeks of unpaid leave, employers may want to consider adding a leave donation program as a way to support the family members of injured Servicemembers. Such programs can demonstrate the company’s solid support of our Servicemembers, and build morale and team identify by setting up a structure for employees to help each other.

Another wrinkle for California employers is the recent passage of a bill establishing leave rights for Military Spouses. This new leave will need to be integrated with CFRA and FMLA as well as PFL. So far 2008 has dramatically increased the complexity of leaves that California employers must contend with, and the advice of a qualified HR or legal professional is highly recommended in dealing with these complex situations.

Workforce Dynamics Part 2

Last month we began the Workforce Dynamics series with two major workforce trends, workforce fluidity and Generation Y. This month we will take a look at two additional trends. Employee perks and the significant role they play in capturing and retaining talent in a competitive job market and a Workforce Dynamic that has grabbed media headlines, older workers and the vital resource they represent in our economy.

In the Spring of 2008 YPP will bring business owners, CEO's and top level managers together to further analyze and explore Workforce Dynamics and provide participants with practical tools to better understand and capitalize on these challenges and opportunities.

Employee Perks

There was a time when we thought of employee perks in the context of the rarified atmosphere of the Fortune 500 executive suite. To borrow a line from an old Dylan tune, times they are a-changing. In today's competition to hire and keep top talent virtually every employer regardless of size is expected to offer some level of perks.

Of course the spectrum is broad. At the top of the "Perks Peak" you have companies like Google where the sheer number and variety of perks are legendary. In an attempt to get an idea of how high Google has set the bar I googled "Google employee perks" and got 29,300 hits. No question there is a hyper-media buzz here but if you look deeper you will find some important lessons and employment trend information.

Our goal is to help employers better understand and effectively utilize employee perks as a recruiting and retention tool in the real world. The traditional purpose of perks is to make employees feel appreciated and increase their motivation to perform for the company. This remains the fundamental purpose although some companies, like Google, have made perks integral to the corporate culture as a means of building a work environment that blurs the lines between personal time and work time.

As an employer you need to look beyond the old standards of health benefits and pension plans. While these remain critical to most employees the increased competition for talent, especially for small businesses, means finding creative ways to reward your valuable workforce without breaking the bank.

The good news is most employees, when asked about the perks that matter most, are realistic in their expectations. One of the most significant trends is an increasing desire to achieve work/life balance. For instance some bonus time off after a big push to complete a demanding project would be a valued perk for many employees.

It is important that at least some of the perks you offer be rewards to recognize individuals rather that just the group. For instance buying lunch for everyone is appreciated but isn't necessarily a personal enough reward. Look at more creative options, such as letting employees work from home and skip the commute on certain days, a couple of family days to use when kids or aging parents have demands without eating into regular vacation time, flexible hours (within applicable wage & hour guidelines) if the standard 8 to 5 is more habit than necessity in your industry are just a few work/life balance perks that can pay off big in employee job satisfaction. On a lighter note some companies have instituted bring your dog to work days, employee car washes, health club memberships, group or individual outings to the movies or other entertainment venues.

The culture of your business, the make-up of your workforce and your specific industry will all be factors to consider in establishing employee perks. As an employer a fresh look at employee perks may give you a big payoff in loyalty and job performance and help cut down on the high cost of recruiting and training in a competitive market.

Older Workers

The Baby Boomers have made history from the beginning, first flooding schools, next making the 1960's a legendary decade of social and political change and later becoming the majority of the American workforce. The Boomer generation broadly encompasses people born between 1946 and 1964, roughly 76 million people. As this generation reaches retirement age it will mean a drastic shift in workforce demographics. In 1950 there were approximately 7 workers for every elderly person in the United States but by 2030 it is estimated there will be only 3.

Like many significant trends this one will present challenges and opportunities. The biggest challenge will be redefining the workplace and developing strategies to integrate older workers into the workforce as a means of expanding the pool of available workers and limiting the impact of what has been described as the single biggest brain drain to ever to hit the American economy.

Jeri Sedlar, the Senior Advisor to The Conference Board on mature workforce issues make it clear that this is a serious issue in a report on America's aging workforce. "...organizations that fail to understand the complexities or recognize the opportunities associated with an aging workforce may risk their ability to stay competitive. As more companies feel the pain of knowledge losses caused by retirements in key businesses or functions, those not planning ahead or leveraging their mature workforce will be scrambling."

The good news is that many baby boomers are willing and able to continue working and do not see age 65 as an automatic signal to stop working completely. Their reasons for wanting to continue participating workforce are often financial but many also just are too healthy and active to see themselves as retired in the traditional sense. What this means for employers is finding creative ways to utilize older workers as a valuable resource and develop jobs that will afford older workers scheduling flexibility, new learning challenges and the opportunity to continue making meaningful contributions. Companies that plan for this drastic shift in the workforce demographics will have a strategic advantage over competitors caught unaware and unprepared.

New business opportunities will also emerge as the aging population continues to need goods and services that address their specific needs. Once again the Boomers will be trend setters and challenge the status quo as they redefine retirement.

YPP looks forward to our Workforce Dynamics Seminar scheduled for Spring 2008 where we will work with business owners, CEOs and top level managers to map workforce trends and explore the important questions and strategies needed to stay competitive. As these trends ripple through the labor force it is critical that employers be prepared not just to cope with new challenges but seize the opportunity to capitalize on emerging opportunities.

Business and Personal Use of Cellular Telephones

The Internal Revenue Service has recently been focusing their attentions on the taxation of business and personal use of cellular telephones to employees, resulting in additional taxable compensation to employees for income and payroll tax purposes. A summarized review of the substantiation requirements follows.

Cell phones are identified by the IRS as "listed property," which is property that by its nature lends itself easily to personal use. Listed property is subject to strict requirements substantiating business use, including the following:

1. Amount of expense;
2. Time and place of use;
3. Business purpose; and
4. Business relationship of the taxpayer to the person using the property.

If these substantiation requirements are met, then all business use of the cell phone is excludable from the employee's wages and income and payroll taxes as a working condition fringe benefit. Any amount of personal use (including the cost of each personal call along with a pro rata share of the monthly service charges) is required to be included in the employee's wages. When the substantiation requirements are not met, the value of the phone, along with charges for individual calls and the monthly service charges, are taxable to the employee as compensation. There are no de mimimis exceptions to the substantiation requirements.

To meet these strict requirements, it is advisable for employers to have a written policy requiring employees with company-owned cell phones to maintain the required records as listed above and submit copies of this documentation to the employer on a regular basis. If a monthly statement lists out the date, time, and phone number for individual calls, employees should document the business purpose of each call, along with any available supporting documentation, and the business relationship to the taxpayer. If an employee reimburses an employer for any personal charges within a reasonable time, then the value of the business use portion would not be taxable to the employee.

When the employee owns the cell phone, reimbursement of business-related calls should be made under an accountable plan in order to meet the substantiation requirements and be excludable from the employee's compensation and income and payroll taxes. An accountable plan requires that employees submit documentation substantiating business expenses and return any excess reimbursement to the employer within a reasonable time.

Pursuant to IRS Circular 230, the Internal Revenue Service requires us to inform you that any advice included herein is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Additional issues may exist that could affect the federal tax treatment of the transaction on the matter that is the subject of this advice, and this advice does not provide a conclusion with respect to such issues. That said, please do not hesitate to contact us if you have any further questions regarding this matter.

Guest Blogger: Eric Schwefler, CPA, Partner, Barbich Longcrier Hooper & King Accountancy