It’s that time of year when many organizations arrange to hire summer interns. Internships are mutually beneficial in that they provide organizations an opportunity to get extra help during the summer, and they provide individuals an excellent opportunity to gain experience or skills in a particular field or industry. In many cases, individuals are eager to accept an unpaid internship in exchange for the learning experience. However, an individual’s willingness to accept an unpaid internship does not make the arrangement legally compliant. The determination of whether an intern must be paid is a legal one and can be complicated.

The legal analysis differs between for profit and not-for-profit entities and public agencies (e.g., state, municipalities, etc.). In short, for-profit entities generally are required to pay interns at least minimum wage and overtime pay for hours worked over 40 whereas non-profit organizations and public agencies have greater latitude to structure an unpaid internship.

For Profit Organizations

Courts and the federal DOL use the “primary beneficiary test” to determine whether an intern is, in fact, an employee entitled to minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Courts and the DOL evaluate seven factors to determine which party is the “primary beneficiary” of the relationship. If the organization is the primary beneficiary, then an employment relationship exists and the intern is considered employee, entitled to all FLSA protections. The seven factors are:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Under this test, no single factor is determinative, and the unique circumstances must be considered. Given the subjectivity and uncertainty with how these factors could be applied in a particular circumstance, many for-profit employers opt to pay their interns to avoid legal risk.

Non-Profit Organizations and Public Employers

Federal and Connecticut law do not require non-profit organizations and public employers to pay individuals who are considered “volunteers”. Therefore, an intern who is considered a volunteer, is not entitled to minimum wage and overtime pay. The federal DOL has stated a volunteer generally will not be considered an employee if the individual:

  • volunteers freely for public service, religious or humanitarian objectives, and without contemplation or receipt of compensation (except volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers);
  • typically serves on a part-time basis; and
  • does not displace regular employed workers or perform work that would otherwise be performed by regular employees.

The DOL emphasizes that paid employees of a non-profit organization cannot volunteer to provide the same type of services to their non-profit organization that they are employed to provide.

If you have questions about this issue, please contact a member of Carmody’s Labor and Employment team.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

The IRS, in Revenue Procedure 2022-24, has announced increased minimums and limits related to Health Savings Account (HSAs) for the 2023 calendar year.  The increases are higher than those in recent years.  Here is what employers and employees need to know:

  • In 2023, the total limit on contributions to an HSA (both employer and employee) will be $3,850 for self-only coverage (up from $3,650 in 2022).
  • The same limit on HSA contributions for family coverage in 2023 will be $7,750 (up from $7,300 in 2022).
  • The additional catch-up contribution for individuals aged 55 and older will remain $1,000.
  • The minimum deductible of an employer-sponsored “high deductible health plan” (HDHP), with which an HSA must be paired, will be $1,500 for self-only coverage, and $3,000 for family coverage.
  • The annual out-of-pocket maximum for a high deductible health plan in 2023 will be $7,500 for self-only coverage, and $15,000 for family coverage.

Additional limits in other areas of employee benefits are expected to be announced by the IRS later in the year.

If you have questions, please contact a member of Carmody’s Labor & Employment group.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

Recent guidance from the U.S. Department of Labor and other developments in the public and private sectors signal that the use of cryptocurrency is starting to gain a substantial foothold in employment and compensation. For employers of all sizes and stripes, this trend should call for both excitement and caution.

First, last month the DOL’s Employee Benefits Security Administration published a compliance assistance document which acknowledged that in recent months firms have been marketing cryptocurrency investments to 401(k) plans as potential investment options.  In its compliance assistance, the DOL reminded employers of their core fiduciary duties under the Employee Retirement Income Security Act (ERISA) to offer only responsible investment options to plan participants.  As “highly speculative” investments with recordkeeping challenges, among other concerns, the DOL warned employers to exercise extreme caution in offering cryptocurrency investment options to their 401(k) plan participants.

Around the same time last month, the Biden Administration issued an executive order directing the federal government to take a variety of detailed steps to ensure the responsible development of digital assets in the United States, including research and development efforts into the potential deployment of a United States central bank digital currency (CBDC) similar to those being developed by other foreign governments. In issuing this order, the Administration recognized the increasing significance of cryptocurrency in  the U.S. and global economies, noting that in November 2021, non‑state issued digital assets had reached a combined market capitalization of $3 trillion.

With this quickly developing backdrop, several high-profile individuals, including the mayors of New York City and Miami, and a number of professional athletes, have announced in recent months that they had arranged to either accept or convert their salaries into Bitcoin and other cryptocurrencies. These developments have excited many entrepreneurs and entrepreneurial-minded employees.

In light of this trend, employers may be tempted to offer present or future wages to employees or consultants in digital assets. Some employers are already doing so with the assistance of like-minded service providers, like Bitwage. However, such businesses should be mindful of federal, state and local wage and hour laws that generally do not recognize cryptocurrency at this point for purposes of minimum wage and overtime pay. Employers that already meet legal pay requirements for their employees in U.S. dollars, but may be interested in integrating cryptocurrency into incentive or bonus plans (such as with stock option plans), may soon be inundated with a world of opportunities to evolve their compensation structures. But as laws and regulations begin to catch up with capital markets and the private sector, employers are well-advised to walk, before they run, in this complex and fast-developing area.

The U.S. Department of Labor (DOL), Employee Benefits Security Administration, (EBSA),  on March 10, 2022 released Compliance Assistance Release No. 2022-01, 401(k) Plan Investments in Cryptocurrencies.

The DOL indicates that it has become aware of firms marketing investments in cryptocurrencies as potential investment options for 401(k) plan participants. The DOL cautions plan fiduciaries to exercise extreme care before adding such an option to a 401(k) plan’s investment menu.

The DOL notes that the Securities and Exchange Commission (SEC) has cautioned that investment in a cryptocurrency is highly speculative. When included in an investment menu, the fiduciary is effectively telling the plan’s participants that knowledgeable investment experts have approved the cryptocurrency option as a prudent option for plan participants. There are also custodial, recordkeeping and valuation concerns.

Based on those concerns, EBSA will conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products and will take appropriate action to protect the interest of plan participants. Plan fiduciaries responsible for overseeing such investment options or allowing such investments through brokerage windows should expect to be questioned about how their actions meet their duties of prudence and loyalty in light of the risks identified in the Compliance Assistance Release.

Note that although the Release is not a regulation, it does provide insight into the position EBSA will take in any audit or investigation. The release also indicates that fiduciaries have a duty to monitor a fund offered through a brokerage window in the case of cryptocurrency investments.

For now, extreme caution is advised with respect to any cryptocurrency investment under a 401(k) plan or any plan where participants exercise control over their investments.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

The 2022 legislative session is in full swing with a slate of bills that have been advanced in the Labor Committee. Some of these bills are ones that have been proposed in the past, while others are new proposals. These bills have the potential to impact your workplace and, therefore, it is important to speak up and reach out to your state representatives if you have any concerns. Here is a rundown of some bills that are likely to be most impactful for all employers:

SB 312: AN ACT CONCERNING THE EXPANSION OF CONNECTICUT PAID SICK DAYS. Expands the paid sick leave law to require every employer (not just those with 50 or more employees) to provide every employee (not just service workers) with one hour of paid sick leave for each 30 hours worked (instead of 40 hours) up to a maximum of 40 hours per year. Would also require every employer to provide up to 80 hours of COVID-19 sick leave.

HB 5249: AN ACT CONCERNING NONCOMPETE AGREEMENTS: Significantly restricts an employer’s use of non-compete agreement. Would invalidate non-compete agreements for non-exempt (hourly) employees, employees earning not less than three times the minimum wage, and independent contractors earning less than five times the minimum wage. Would also render a non-compete unenforceable if the employer terminates the employment relationship without cause (which is not defined in the bill). There are numerous other restrictions, including a 12-month limit on the non-compete duration.

SB 317: AN ACT CONCERNING UNEMPLOYMENT FOR STRIKING EMPLOYEES. Permits employees who are on strike to collect unemployment benefits after two weeks. This would reverse current law, which generally renders a striking employee ineligible for benefits.

SB 318: AN ACT CONCERNING CAPTIVE AUDIENCE MEETINGS. Allows employees to bring a civil action against an employer if the employer requires employees to attend or participate in a meeting or listen to a speech, the primary purpose of which is to communicate the employer’s opinion concerning “religious matters” or “political matters”. The definitions of these terms are broad and could include a meeting to discuss legislation or regulations that impact business operations, employer involvement in civic or community events, and labor unions.

SB 321: AN ACT EXPANDING WORKERS’ COMPENSATION COVERAGE FOR POSTTRAUMATIC STRESS INJURIES FOR ALL EMPLOYEES. Extends workers’ compensation coverage for all employees (not just first responders) who have post-traumatic stress due to certain events such as viewing a deceased minor, witnessing the death of a person, and witnessing an injury to a person who subsequently dies before or after admission at a hospital.

HB 5245: AN ACT CONCERNING FORCED ARBITRATION AGREEMENTS AND ALLOWING CERTAIN COURT ACTIONS TO BE BROUGHT ON BEHALF OF THE STATE: Allows employees to sue their employers for discrimination on behalf of the state after having waived their personal rights to sue by signing forced arbitration agreements. This would be similar the federal False Claims Act that allow private citizens to help recover compensation on behalf of the government for violations of the law.

HB 5356: AN ACT CONCERNING PANDEMIC PAY FOR ESSENTIAL WORKERS. Provides “essential workers” with $2,000 pandemic pay for their service during the COVID19 pandemic to be paid from Connecticut’s general fund.

HB 5353: AN ACT CONCERNING A FAIR WORKWEEK SCHEDULE. Requiring certain retail, restaurant, and hospitality employers to provide 14 days’ notice to employees of their work schedules.

We will continue to monitor these bills and provide updates. In the meantime, if you have questions about what you can do to improve your employee retention, please contact a member of Carmody’s Labor & Employment team.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

Many employers require their employees to sign an arbitration agreement whereby the employee agrees to arbitrate any employment claim instead of pursuing litigation. Employers may want to reconsider their approach after a new federal law was recently passed limiting the enforceability of such agreements for certain claims.

The federal “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” (the “Act”) was signed into law on March 3, 2022. The Act allows employees who have signed arbitration agreements the option to pursue claims of sexual assault or sexual harassment either in court or in arbitration. The Act is considered a product of the #MeToo movement and applies to claims that arise after March 3, 2022, even if the arbitration agreement was entered into before this date. It does not, however, affect otherwise valid arbitration agreements that are not related to sexual assault or sexual harassment.

So, what does this mean for employers with arbitration agreements? Employers should re-evaluate the pros and cons of mandatory arbitration agreements. Many employers favor arbitration over litigation because it is generally perceived as being less expensive and speedier than litigation, although this is not always the case. Employers also favor arbitration because it is a private process and eliminates the risk of a runaway jury. On the other hand, an arbitration process that is less expensive and speedier may result in more claims being filed. Also, employers may not have the same ability to file dispositive motions in arbitration as they would in litigation. These factors, among others, will continue to be relevant for claims that do not involve sexual assault or sexual harassment.

But, what happens if an employee files claims that involve sexual assault or sexual harassment and other claims that are not covered under the Act?  Will the employee be able to simultaneously pursue their claims in arbitration and court?  Is this a desirable outcome for an employer? Probably not. However, some employers may conclude that the benefits of arbitration for all other claims outweighs the downside of having to defend multiple claims in different venues. Other employers may reach a different conclusion and will reassess whether to continue entering into arbitration agreements.

Whatever approach an employer believes is best for its business, the best defense to any harassment claim starts with making sure that the employer is taking appropriate steps to prevent such claims. This includes:

  • Having a well written, comprehensive anti-harassment and discrimination policy
  • Ensuring that all employees, particularly managers and supervisors, receive appropriate training
  • Promptly and thoroughly investigating all claims of employee misconduct, especially harassment and discrimination claims
  • Taking appropriate corrective or disciplinary action when an employee engages in misconduct
  • Creating a workplace environment and culture where all employees are treated with dignity and respect
  • Establishing credibility with employees so they are comfortable raising their concerns internally instead of filing formal agency complaints, lawsuits or a demand for arbitration

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

There is no doubt that the ongoing pandemic has significantly changed the workplace. An increasing number of employees are working remotely, and there has been a high level of turnover in connection with the “Great Resignation”. We also have seen the federal government, many states—including Connecticut—and cities pass employment laws that provide greater employee rights that are reshaping the workplace.

In the dawn of this new era, employers would be well-advised to conduct a comprehensive review of their policies and employment practices. An HR audit can help an employer determine whether it: (a) is complying with the ever-changing laws; (b) is following best practices; (c) has the policies, practices and forms that it needs to run the business; and (d) has the benefits, compensation structure, and policies to competitively recruit and retain talented employees.

By examining these questions, employers will have a better understanding of what is working well, what needs improvement and where changes need to be made. Start with these major areas:

Hiring – Employers should review recruiting practices and postings to ensure compliance with discrimination laws and that they further the principles of DEI. Job descriptions should be updated and list truly essential job functions. Employment applications should be vetted for inappropriate questions and include all appropriate disclosures and notices. Employers should provide written offers of employment that include basic information about the job, an at-will statement, and indicate whether employment is subject to any contingencies such as a drug testing and/or background check. 1-9 forms must be completed, and employees should be given confidentiality and/or non-compete agreements when the offer is extended.

Wage & Hour – Employers must ensure that there is an accurate process for recording work hours. Employers should review wage payment policies, how PTO is accrued, carryover time, and whether PTO is paid out on separation of employment. Employees must be paid on at least a bi-weekly schedule and within eight days after the end of the payroll period. Exempt/non-exempt and independent contractor classifications should be closely scrutinized. Bonus plans should be written, clear, and scrupulously followed. Employees must be paid for all compensable time worked including on-call, training, and traveling time.

Review of Personnel Policies – With recent new laws, updating the handbook is crucial. This review should include, among others: that EEO policies include new protected classes; anti-harassment policies are legally compliant; there is a proper FMLA policy; drug testing policies account for legalized marijuana; PTO policies comply with the sick leave law; and employees have signed an acknowledgement of receipt.

Posting, Record-Keeping, and Required Documentation – Ensure records are maintained for the required period. Personnel, medical, immigration and investigation files should be maintained separately. Electronic files also should have limited access and be controlled. Confidential records must be secured, marked as confidential, and disclosed on a need-to-know basis. Postings are required for FMLA, non-discrimination/harassment, electronic monitoring, OSHA, workers’ compensation, sick leave, pregnancy accommodation, and wage and hour. Employers should have toolkits for administering the FMLA and other medical leaves, and for addressing employee performance.

Analysis of the Termination Process – Having a thoughtful protocol for the termination process is critical. It is helpful to review a liability checklist, consider severance pay, address benefit information, and return of all company property.

Believe it or not, these are just some key areas to audit. A comprehensive HR audit is a smart and cost-effective way for companies to minimize their legal exposure by pro-actively managing their workforce.

 

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

A unanimous U.S. Supreme Court (8-0, Justice Barrett recused) overturned a decision by the U.S. Court of Appeals for the Seventh Circuit which had dismissed a case brought by plan participants involving the fiduciary obligations of an ERISA plan sponsor in the selection of funds in its 403(b) plans. The case is remanded and will now proceed under the standards outlined by the Court. Hughes v. Northwestern University.

Hughes was one of several cases targeting large universities over their fiduciary roles in selecting the menu of investments available to participants under their 403(b) plans. These cases followed years of similar suits involving private sector 401(k) plans. The claims in this case were that the plans had so many investment choices that they were likely to confuse and overwhelm participants, some of the funds had excessive management fees, and the plans had high recordkeeping fees. The participants alleged that Northwestern, its investment committee and individual plan officials violated ERISA’s duty of prudence by failing to monitor and control recordkeeping fees; offering mutual funds and annuities in the form of ‘retail’ share classes that carried higher fees than identical share classes of the same investments; and offering options that were likely to confuse participants, with over 400 investment choices between the two plans.

The Supreme Court cited its 2015 decision in Tibble v. Edison Int’l which had stated that “a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones.” The Supreme Court stated that the Seventh Circuit did not apply Tibble’s guidance and instead focused primarily on a fiduciary’s separate obligation to assemble a diverse menu of investment options. The Seventh Circuit noted that the types of funds participants wanted, low-cost index funds, were included in the array of choices. In other words, because the array of funds included some low-cost options, it did not matter that some of the funds were high-cost options, and therefore the plans’ participants could not have a valid ERISA claim against the plans’ fiduciaries.

The Supreme Court unanimously disagreed, stating that fiduciaries must conduct their own independent evaluation to determine which investments may be prudently included. For 403(b) and 401(k) sponsors, this means they must continually monitor all plan investment options, including both their performance and associated fees, and remove any investments that may become imprudent to offer within a reasonable period of time.

As for this case, whether the participant claims can survive a motion to dismiss will now be evaluated by the Seventh Circuit in light of the standards set forth in Tibble. Stay tuned.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

In 2022, sponsors and administrators of 401(k) plans should be aware of a newly effective lifetime income disclosure statement, as well as written plan amendments that must be adopted by calendar year plans by the end of 2022.

Enacted in 2019, the SECURE Act made a number of important changes to 401(k) plans. A few of those changes are noted below:

  • The required beginning date for distributions is now age 72. Keep in mind that most plans do not require a distribution until the later of age 72 or retirement. Five percent (5%) owners must continue to commence distributions at the required beginning date, even if still employed. This change is already in effect for any participant turning 70 ½ after December 31, 2019. Plans that have not already been amended or restated to provide for this later required beginning date will need to be amended or restated by the end of their 2022 plan year.
  • Long-term, part-time employees must be allowed to participate in salary deferrals if they work 500 hours or more in three consecutive years. This new rule is in addition to the eligibility requirement of 1,000 hours of service in a year. The need to track part-time employee hours for this purpose began with the 2021 plan year, so entry into the plan for salary deferrals could begin in 2024 if an employee has attained age 21. Note that your plan may still require 1,000 hours of service in a single year to qualify for employer matching or profit sharing contributions. Plans that have not already been amended or restated to provide for this change will need to be amended or restated by the end of their 2022 plan year.
  • Qualified birth or adoption distributions is an optional feature which may be added to your plan at any time. Distributions of $5,000 made within a year of a qualified birth or adoption are exempt from the 10% penalty normally imposed on distributions made to employees under age 59 ½. Such distributions may also be recontributed to the Plan.
  • Lifetime income disclosure information will need to be added to your 401(k) participant statements at least once per year with one of the statements issued (typically quarterly) after September 18, 2021. The DOL has issued FAQs clarifying the effective date. Since the effective date was September 18, 2021, and the disclosure statement must be provided within one year of the effective date, the first lifetime income illustration can be provided as late as with the second quarter statement for the quarter ending June 30, 2022. The statements will have to show the lifetime annuity which the account balance could provide at age 67. The DOL has issued a model statement that may be used as a template for this purpose.

If you have questions about any of these changes to 401(k) plans, please contact us for more information.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

The “Great Resignation” reached a peak in November 2021 as the United States Bureau of Labor Statistics (BLS) reported that a record-breaking 4.5 million workers voluntarily resigned from their employment. This represented an increase of almost 9% from October 2021 and was the largest number of resignations in more than 20 years.

In what Industries are people resigning? According to the BLS, the top fields most affected by the resignations are: leisure and hospitality; trade, transportation and utilities; professional and business services; and education and health services. The resignation rate is highest among lower paid employees.

Why are employees resigning? The resignations are attributed to a variety of factors, including ongoing health concerns. That is, some workers are worried about the pandemic and are hesitant to return to a workplace that is not 100% vaccinated. Parents also are still struggling with childcare needs. In addition, employees generally want to reduce stress and expenses where possible and seek flexible work arrangements that allow them to work from home partially or completely. Some workers have resigned to seek better compensation and benefits from employers who are desperate to fill positions. And some workers are simply looking for better work-life balance, recognition for their work, better company culture and values that align with theirs.

What can employers do to improve retention? While the benefits employers offer depends on the demographics of their workplace, there are several non-economic and, of course, economic benefits to consider. The two most popular ones are:

Flexible work options: The most demanded work benefit today is the ability to work from home. Research shows that employees desire flexibility in where and when they work. Many individuals are looking for entirely remote jobs that allow them to work from any location. Hybrid arrangements that allow workers to work from home a couple of days each week are popular in businesses where entirely remote choices are not viable. Flexible work hours, such as allowing employees to work during non-traditional hours or compressed workweeks, may be an option for positions that cannot be done remotely.

Career development: Employees are more engaged when they believe their employer is invested in their professional development. To foster this, employers can: (1) emphasize several career paths within their organization, allowing employees to see what possibilities are available; and (2) employers can provide development tools like mentoring and coaching to help employees achieve their objectives.

In addition to flexibility and career development, attractive compensation and health-care benefits are amongst the most common motivations of retention. However, in today’s job market, that may not be sufficient. The following are some other benefits that may entice employees to stay or get onboard:

  • Generous paid time off (beyond the traditional vacation and sick time);
  • Home office support if remote work is available;
  • Onsite offerings like childcare centers, and free and/or healthy food options;
  • Wellness support that include sabbatical leave, coaching, workstation accommodations;
  • Inclusive workplaces;
  • Educational assistance (i.e., tuition reimbursement or student loan repayment assistance); and
  • Other non-traditional benefits, such as pet-friendly perks.
  • Other recommendations for establishing or strengthening employee retention efforts include addressing employee concerns, communicating effectively and frequently, offering accommodations, being accessible to employees, educating managers on employee relations and providing support when feasible.

If you have questions about what you can do to improve your employee retention, contact a member of Carmody’s Labor & Employment team.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.