California Employers Beware

Recent news on the central coast involved a well known business owner who is facing over $100,000 in wage violations and penalties. Over the past year, there have been other publicized cases against businesses for substantial claims. Do you think this would never be you? Thing again!

With more than 20 years doing HR management for businesses, I know there are many more that are exposed to these kinds of claims. We routinely find businesses who did not understand or, worse, ignored overtime, meal period, travel time, prevailing wage requirements, and other wage & hour or employment regulations. Those liabilities can mount very rapidly, and with penalties of up to 30 days wages for each employee (that's days, not just a months' salary), you can be upside down very quickly.

It would be a mistake to think that California's budget crisis means it's easier to evade this liability. The economic recession leads laid off employees to look for income sources and you could be who they pursue.

In addition, we can expect heightened enforcement by OSHA and the EEOC. OSHA's 2010 budget funded 100 new OSHA inspectors, with the 2011 budget anticipated to hire another 25 and move 35 from compliance assistance to enforcement. The DOL's wage & hour division is seeking funding for 90 new investigators, and the EEOC also seeking increases to fund enforcement. While these are federal agencies, they influence enforcement at the state level.

Like most things in business an ounce of prevention is worth a pound of cure and that is certainly true here. Audit your processes and make sure that you resolve any violations before the examiner knocks on your door, not after. Wage and hour rules in California are complex and nuanced with many conflicting rules so make sure that you use a highly skilled person for this review. It is much cheaper to find and fix than it is to learn the rules from an employment agency examiner. Saving a few pennies here can be like borrowing money from the IRS, nice concept but a bad business practice - think interest and penalties.

Healthcare Passed - Now What?

For the last year the healthcare bill has been working its way through the law making process. Regardless of your political position on this law, it is a law and as businesses we now need to figure out what to do with this reality. So what's next?

Gather the Troops
The first step that should be going on right now is the assembly of your team to guide your business through the changes that will need to be designed and implemented as the law takes effect. Within this team as a minimum you want representation from Executive Management, Finance, Human Resources, and your Insurance/Benefits Broker or Agent. You probably also want representation of every substantial employee group within the business. It is going to be important that this core group can communicate across the entire company. People are going to be nervous that the changes are going to hurt them or that their issues will not be considered, so open communication is going to be key during this time.

Assess when and how the changes will impact the business
The law passed is nothing if not complex and nuanced, so one of the first tasks is going to be to map out when the changes will impact your business. Working back from those dates you should be able to identify the tasks that need to be completed and key deadlines. Like any time period with lots of change, there are many tradeoffs that will have to be made to rebuild the employee benefit package. Early evaluation of the bill shows that how it impacts business will depend on the size of the business, wage levels of the employee groups, ages of the workforce, and many other variables. This bill has both carrots and sticks so careful review is critical.


Start the Communication Process and do not stop!
If the last year has taught us nothing else, it has taught us that the media is biased with both the right and left putting very different spins on what the provisions actually mean. There is very little doubt that this process will continue and employees will be coming to work with many inaccurate factoids that will strain the communications. A well thought out system will allow you to navigate this sea of questions without impacting your productivity.

Not All Change Is Bad
Change always seems to get people excited and it is often negative in nature even if the change is positive. Again, it all comes back to communications and here is where you need to lean on your HR professionals to keep the channels to all areas to the company open and flowing with how change really impacts your business. This bill is not going to impact everyone the same, and a well developed plan can make sure that your business is one of the winners in this process.

What do we know now that may impact you first? Here's a summary of business-related changes that will become effective for plan years renewing 6 months after enactment:

• Small Business Subsidy Phase I: Tax credit of up to 35% of employer's contribution toward the employee's premium if employer contributes at least 50% of the total premium or 50% of a benchmark premium. Full credit to employers with 10 or fewer employees and annual wages of less than $25,000.
• Pre-existing Condition Exclusions: On dependent children under age 19 will be prohibited.
• Policy Rescissions: Rescissions or cancellations will be prohibited unless fraud or misrepresentation by the insured.
• Dependent Coverage: Up to age 26, coverage is mandated (note that there are varying opinions so far on who will qualify as a dependent.)
• Lifetime/Annual Maximums: Health plans will not be able to impose lifetime caps on the value of benefits; restricted annual caps will be permitted until 2014.
• Appeals: Plans must develop effective appeal processes and continue coverage during appeals
• Temporary National Health Risk Pool: Effective 90 days after enactment, guarantee issue for individuals who have been uninsured for 6 months due to health status or a pre-existing condition.
• This summary is based on today's knowledge, and subject to change as more information and assessment of the massive bill is available.

In conclusion, the healthcare bill will be rolling out in phases from now until 2018 resulting in a need to constantly tweak your benefit investment decisions. We are going through this with a number of clients and we expect that will continue to increase. If you are a California Employer that needs more discussion in this area give us a call and let's talk.