Author Archives: Stephanie

Employer’s Guide to Short-term and Long-term Disability Insurance

August 16, 2023
August 16, 2023
Title image with "Employer’s Guide to Short-term and Long-term Disability Insurance" and a leg in a cast with crutches

As an employer, you may have a general understanding of short-term and long-term disability insurance. But do you clearly understand these benefits and the difference between each? Disabilities can impact anyone, and having the right policies ensures your team members can receive the necessary assistance without unnecessary stress.

Everyone should have some type of disability insurance to protect their income if they cannot work due to an illness or injury. Many employers provide short-term disability, with a few states requiring it. And while long-term disability coverage is not mandatory, about half of large and mid-sized employers include it in their benefits.

Below, we share a simple breakdown of short-term and long-term disability to help you navigate this aspect of employee benefits.

Short-Term Disability

Short-term disability (STD) provides partial wage replacement for employees who are temporarily unable to work due to a non-work-related illness or injury. The disability can last for a few weeks to a whole year.

How can employees receive coverage?

An employee seeking short-term disability coverage typically needs to provide medical documentation from a healthcare professional stating the nature of their condition and expected recovery time. The most common reasons include surgery or illness recovery, an accident injury, or pregnancy/maternity leave.

Note that if the employee is injured on the job, their leave would be covered under your workers’ compensation insurance rather than your short-term disability policy.

How much coverage does short-term disability provide?

Short-term disability benefits usually cover a percentage of the employee’s base pay, typically around 60-80%. However, this can vary based on your plan. Employees receive weekly benefit payments.

Is there a waiting period?

There’s often a waiting period from when the employee becomes disabled to when benefits start to prevent abuse of disability benefits. This can range but is usually 14 days or fewer. Benefits typically begin on the eighth day after a claim is filed.

Because of the brief elimination period, short-term disability can ease financial stress as an employee waits for their long-term insurance to begin, which has a longer waiting period. Many choose to use both to supplement their income and lower costs.

How long does the benefit period last?

Standard short-term disability benefit periods are 13, 26, or 52 weeks. The U.S. Bureau of Labor Statistics (BLS) reports that the median coverage length is 26 weeks.

Are employers required to provide short-term disability?

No federal law mandates employers to provide short-term disability insurance, and most states have kept this optional. However, six jurisdictions require disability insurance, including:

  • California
  • Hawaii
  • New Jersey
  • New York
  • Rhode Island
  • Puerto Rico

Long-Term Disability

Long-term disability (LTD) insurance provides wage replacement for employees who are unable to work any job due to a serious, prolonged illness or injury. Cancer, mental illness, arthritis, chronic pain, heart disease, and other conditions that prevent employees from performing everyday tasks are common qualifying reasons.

How can employees receive coverage?

Employees must provide medical documentation from a healthcare provider stating that their condition prevents them from performing their job for an extended period.

How much coverage does long-term disability provide?

The coverage percentage for long-term disability benefits is usually less than short-term disability, covering around 40-70% of the employee’s income. LTD benefits are paid monthly.

Is there a waiting period?

Long-term disability elimination periods can run between 30 days and two years, though most take 90 days to begin receiving benefits.

How long does the benefit period last?

Long-term disability insurance can extend for months to years. Sometimes, LTD even lasts until retirement or until the individual is eligible for Social Security payments (age 65) for those who are permanently disabled.

Are employers required to provide long-term disability?

No, there are no laws requiring employers to offer long-term disability insurance. But that doesn’t mean you shouldn’t! Many employers include some kind of long-term disability in conjunction with their short-term disability group plan. This can enhance your employee benefits package and attract new talent while relieving your team during difficult situations.

What about employer contributions and costs?

While your provider and state may have specific requirements regarding short-term disability, employers can choose what type of plan they offer:

  • Traditional: Employer pays the total amount
  • Contributory: Employer and employees both contribute to the premium
  • Core buy-up: Employees can choose to buy more coverage
  • Voluntary: Employees alone cover the disability insurance

 

Note that short-term disability benefits are taxable if the employer pays for all or a portion of the insurance OR if the employee pays with pre-tax dollars (usually from their paycheck).

The BLS reports it costs employers approximately 1% of the total compensation cost, or $624 per full-time employee annually.

Final Thoughts on Disability Insurance

Considering the cost of disability insurance, this benefit is well worth it! You’ll show employees that you value their well-being, which will only pay off in the long run. When your team members know they have this additional safety net to fall back on, workplace morale will improve—and we know that higher morale equals higher retention and productivity. 

Specific policies and regulations may vary based on location and industry. Consulting with an HR professional can help you tailor your disability policies to your company and employees while adhering to relevant laws. Contact BlueLion today at 603-818-4131 or info@bluelionllc.com to ensure your benefits are where they should be and your team is supported!

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

Understanding New Hampshire Tip Laws: A Comprehensive Guide for Employers

August 11, 2023
August 11, 2023
Title image with "Understanding New Hampshire Tip Laws: A Comprehensive Guide for Employers" and photo of a waitress serving a customer a pastry

Do you operate a hospitality business in New Hampshire, or are you planning to launch one? Either way, it’s vital to ensure you understand New Hampshire tip laws.

New Hampshire has its own minimum wage and tip credit amount. Plus, hospitality industry employers in the Granite State must be careful to avoid coercion by requiring employees to participate in a tip pool. 

Keep reading for New Hampshire’s basic tip rules, tip credit explained, minimum wage requirements, tip pooling rules, and the treatment of mandatory service and credit card charges.

Basic New Hampshire Tip Laws

New Hampshire wage and hour laws consider tips the property of the employees who receive them. Employers are prohibited from keeping or distributing any portion of the tips received by their employees except:

  • In the case of a tip credit, when the employer counts all or part of the employee’s tips to meet minimum wage requirements.
  • As part of a valid tip pooling arrangement, when employees share and divide their tips. In New Hampshire, employees must opt into a tip pool—they cannot be required to participate.

More on both of these below!

Understanding Tip Credits & Minimum Wage Requirements

A “tip credit” is a provision that allows employers to pay employees in tipped positions less than the regular minimum wage as long as the employee’s tips bring their total compensation up to or above the minimum wage. Federal law and most state laws allow a tip credit—but only if you make more than $30 in tips each month.

New Hampshire’s minimum wage is $7.25 per hour for non-tipped employees, the same as the federal minimum wage. For tipped employees, the minimum wage (i.e., server’s wage) is $3.26 per hour, meaning the employer may take a tip credit of up to $3.99. The employer must make up the difference if an employee’s tips fall short of $7.25 an hour.

Employers can only pay employees this server’s wage if the employees:

  • Work for a restaurant (including those who deliver prepared food), hotel, motel, inn, or cabin, and
  • Regularly receive $30 a month in tips directly from customers

New Hampshire’s Strict Tip Pooling Rules

Tip pooling or sharing is when a group of employees pool their tips and redistribute them according to a predetermined formula. Under New Hampshire tip laws, employers cannot require or coerce employees to share or pool their tips.

Let’s look at a few key terms as defined by the New Hampshire Department of Labor:

  • Coercion: The threat of or a direct action which results in an adverse effect on an employee’s economic or employment status
  • Tip pooling: Tips from employees within the same job category are intermingled in a common pool and then redistributed among participating employees.
  • Tip sharing: Tipped employees give a portion of their tips to other workers who participated in providing service to customers.

Simply put, your employees should not fear retaliation if they don’t agree to a tip pool.

Employers may set up a tip pooling or sharing system if employees request it. They can also guide staff on the tip pool arrangement and mediate employee disputes about the pool. Owners and managers are not allowed to participate in the tip pool.

What is Considered a Tip?

Tips are voluntary, gratuity-based payments given by customers to service industry workers in recognition of good service. They are considered the property of the employees who directly receive them. Whether in cash or included in credit card payments, tips are additional payments that customers choose to provide on top of the actual cost of goods or services rendered.

Employees must be allowed to retain the full amount of tips they receive, with no portion going to the employer, except when participating in a valid tip pooling arrangement (as mentioned earlier).

Now, let’s break down the exceptions of mandatory service charges and credit card fees.

Mandatory Service Charges

Mandatory service charges are different from tips. These charges are predetermined and automatically added to the bill for large parties or special events. Unlike tips, mandatory service charges are not discretionary or voluntary payments made by customers based on the quality of service received.

Under New Hampshire law, mandatory service charges are not considered tips. Instead, they are regarded as revenue for the employer. As such, these charges must be paid to employees within their hourly wages, subject to income tax withholding and other employment taxes.

Employers must communicate to employees and customers that mandatory service charges are not tips to ensure transparency and avoid confusion.

Credit Card Charges

When it comes to tips via credit card and whether employees are entitled to the full tip amount, the rules vary by state. Some states allow employers to pass on a portion of the credit card processing fee to employees. Others, like Massachusetts, prohibit this, stating that processing fees are a cost of doing business.

New Hampshire tip laws do not explicitly address the matter of credit card tips.

Tipping Legally in New Hampshire

Hospitality employers must understand and comply with New Hampshire tip laws to ensure employees receive proper compensation. Coercing tipped staff into sharing or pooling their tips can lead to significant fines and damage your reputation. 

When you understand the basic tip rules, tip credit, minimum wage requirements, tip pooling regulations, and the state’s definition of coercion, you’ll maintain a fair and compliant workplace.

Do you need guidance on your New Hampshire company’s tipping practices and policies? Our HR consultants are ready to lead the way! Contact BlueLion today at 603-818-4131 or info@bluelionllc.com to learn more about our outsourced HR services.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

Form I-9 Update: All About the New Alternative Verification Procedure

July 26, 2023
July 26, 2023
Form I-9 Update: All About the New Alternative Verification Procedure

The U.S. Citizenship and Immigration Services (USCIS) announced a new version of Form I-9 and a final ruling on a new alternative procedure allowing for remote Form I-9 inspection. The new optional procedure will be available beginning August 1, 2023. 

During COVID, flexibilities were implemented, allowing employers to conduct remote I-9 verification. With this exception expiring on July 31, 2023, the new rule comes just in time.

Here’s a quick breakdown of everything you need to know about the new Form I-9 alternative procedure.

Who is eligible to use the I-9 Alternative Procedure?

Only employers in good standing in E-Verify are qualified to use the new remote procedure. Once enrolled in E-Verify, you’ll have to create a case for all newly hired employees at each hiring site enrolled in E-Verify. This applies whether or not you use the alternative procedure.

How do employers conduct document verification?

  1. The employee must transmit a copy of the document(s) to the employer, ensuring it includes both front and back.
  2. You (or an authorized representative acting on your behalf, like a third-party vendor) must review the complete copy of the Form I-9.
  3. Conduct a live video meeting with the employee, during which they must present the same document(s) to ensure it appears genuine and accurately represents the individual.
  4. Complete the corresponding box on the Form I-9 indicating that an alternative procedure was used to examine it to complete Section 2 or for re-verification.
  5. Retain a clear, legible copy of all documents (both sides, if it’s two-sided) presented by the employee.
  6. If you are subject to a federal I-9 audit or investigation, you must make clear, legible copies of all identity and employment authorization documentation available for examination.

Once you complete this process, E-Verify will electronically compare the information you’ve entered from the employee’s I-9 to Department of Homeland Security (DHS) and Social Security Administration (SSA) records to validate their documents and identity.

What version of Form I-9 should I use?

The updated Form I-9 is available as of August 1, 2023, and includes a checkbox where employers can indicate they examined the document remotely under the authorized alternative procedure. 

You may continue to use the 10/21/2019 version of the I-9 through October 31, 2023. If you use this version during the grace period, you must indicate that you used the alternative procedure by writing “alternative procedure” in the Additional Information field in Section 2. 

Be sure to start using the new version of Form I-9 as of November 1, 2023!

What if I used the COVID Form I-9 flexibilities?

As long as you have met the conditions, you have nothing to worry about and won’t be required to physically inspect the documentation of those you hired under the flexibilities. That means as long as you:

  • Were enrolled in E-Verify at the time of hire
  • Created an E-Verify case for relevant employees
  • Performed the remote inspection between March 20, 2020, and July 31, 2023

Then you’re in the clear!

However, if you don’t meet all of these requirements, you’ll have to physically inspect the Forms I-9 of each hire before August 30.

Do I HAVE to offer the alternative procedure?

No, it’s completely optional. But whether you do or don’t offer it, you must do so consistently for all employees at each worksite to avoid discrimination.

For example, you can offer the alternative procedure exclusively for remote hires but still require the physical examination process for onsite or hybrid employees. However, you can’t do this for discriminatory purposes or treat employees differently based on their citizenship, immigration status, or national origin.

What if an employee requests physical document examination?

You must permit employees who cannot or refuse to submit documentation remotely to submit their I-9s for physical verification. You may not refuse to do so if the employee requests it.

Stay Up on the Latest Documentation Features & Compliance

Want to use the alternative procedure from now on? We don’t blame you! Just be sure to enroll in E-Verify and have managers complete the required free training on fraud awareness and anti-discrimination. 

We also recommend you have a notary attend the virtual verification and sign off saying they witnessed the documentation signing. Ensure the employees make copies of the documents and send them to you. 

Stay tuned for more guidance from the USCIS as details develop. And if you have more questions about identity and employment authorization or any other documentation requirements and processes, contact BlueLion today at 603-818-4131 or info@bluelionllc.com!

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

Maternity and Paternity Leave vs. Parental Leave: What’s Right for Your Team?

July 18, 2023
July 18, 2023
Maternity and Paternity Leave vs. Parental Leave: What’s Right for Your Team?

As employers contemplate ways to stay ahead of the competition, boost employee morale, and enhance their diversity, equity, and inclusion (DEI) initiatives, many are debating between maternity and paternity leave or parental leave policies. 

America is one of the only developed countries that doesn’t offer nationwide paid parental or family leave. The Family and Medical Leave Act (FMLA) covers up to 12 weeks of unpaid leave, which can apply to eligible new parents. And an increasing number of states are implementing paid family leave programs.

While many companies have historically provided longer maternity leave and shorter paternity leave, this could put employers at risk of a discrimination lawsuit.

With all this in mind, developing an inclusive policy can be challenging. So, should you use separate maternity and paternity leave or a parental leave policy?

Let’s take a closer look at the differences, how they work, and what is best for your organization and employees.

What are maternity leave and paternity leave?

Maternity leave is when a woman takes time off from work because she is about to give birth, has just had a baby, or has adopted a child. Paternity leave applies to men who adopt or have partners who have just had a child. Both aim to provide parents with bonding time with their new child. 

Traditionally, employers have offered individual maternity and paternity leave policies to employees. However, more and more organizations are choosing a general parental leave policy.

What is parental leave?

Parental leave is a gender-neutral policy that provides employees of all genders time off to care for their children. A growing number of employers are choosing to implement general parental leave policies available to all caregivers within the first year of a child’s birth or adoption.

Some employers have even started offering both maternity or paternity leave plus parental leave. For example, a mother could take maternity leave and extend her time off with parental leave. 

Countries around the world are leading the way in this employee-first trend. Find more parental leave inspiration.

What are the perks of parental leave?

Creating a thoughtful parental leave policy instead of individual maternity and paternity leave policies can help your company: 

  • Avoid discrimination claims and legal issues by offering the same amount of leave to all new caregivers
  • Ensure inclusivity for all parents, regardless of their gender or if they’re birth or adoptive parents
  • Maintain a straightforward, easy-to-administer benefit
  • Strengthen employee morale 
  • Eliminate caregiver stereotypes/stigmas and reduce employees’ fear of taking family leave
  • Attract and retain talent

At the end of the day, an inclusive parental leave benefit shows employees you value and care about them and their families. 

What is pregnancy disability leave?

In addition to maternity leave, several states now have laws allowing employees to take leave for pregnancy disability, also known as pregnancy-related medical leave. This is included in the employer’s short-term disability insurance and typically gives mothers an additional six weeks (or eight weeks for a Caesarian delivery) for:

  • Pregnancy complications
  • Childbirth recovery and complications
  • Related medical conditions

These laws vary from one state to the next.

Is parental leave paid or unpaid?

Many companies that offer maternity and paternity or parental leave often provide it unpaid. Employers that offer paid leave often provide a percentage of wages and/or allow employees to combine sick leave, vacation time, and short-term disability.

As mentioned earlier, more states are mandating paid family and medical leave (PFML) laws. These are typically either funded by employee-paid payroll taxes or a combination of employee and employer deductions.

So whether or not you provide paid or unpaid parental leave depends on your state’s requirements and what type of policy you choose.

How long should parental leave last?

Since there is no federal requirement regarding parental leave, this is usually up to the employer. Policies range from four to 12 weeks or more. Again, some states, like California and New York, now have paid family leave laws mandating employers to provide a minimum number of weeks of paid parental leave.

In addition to applicable state laws, you must ensure your parental leave policy is equal for male and female employees. If you offer longer maternity leave than paternity leave, you’ll be in violation of Title VII of the Civil Rights Act, which prohibits gender discrimination.

For example, a company may offer employees up to 10 weeks of pregnancy-related medical leave for pregnancy and childbirth. They may also offer new parents, regardless of gender, six weeks of parental leave. This is legal as both men and women receive six weeks of parental (i.e., bonding) leave, and women who give birth get an extra 10 weeks of leave for pregnancy and childbirth recovery.

What about adoptive parents?

Whether you opt for individual maternity and paternity leave policies or a gender-neutral parental leave policy, it must apply equally to both birth parents and adoptive parents. 

To ensure your policy is legal, make it available to all parents, regardless of gender and whether or not they give birth. 

How do multiple leave provisions work together?

So, what are your rights and responsibilities as an employer when it comes to employees combining different types of leave? Let’s look at a couple of scenarios.

Parental Leave + PTO

You can require employees to use vacation, sick time, or other PTO before taking paid parental leave or maternity leave (just be sure to apply this requirement for all types of medical leave). Be careful here—a too-strict policy could affect employee morale, so build in some flexibility if you go this route.

Parental Leave + FMLA

Most employers allow eligible employees to take parental leave concurrently with FMLA leave concurrently. This allows employees to extend their paid parental leave (whether under your policy or a state paid family leave program) with unpaid leave while typically keeping the 12-week total. 

For example, if you (or your state) offer eight weeks of paid leave, employees could take four weeks of unpaid FMLA leave. You may also allow or require employees to use any available paid leave to cover their FMLA time. 

FMLA protects employees by guaranteeing their job when their leave is over and ensuring their continued benefits coverage. Additionally, employers with 15 or more employees are subject to the Pregnancy Discrimination Act, meaning they can’t discriminate against employees based on pregnancy, childbirth, or related medical conditions.

Do What’s Best for Your Company & New Parents

Today’s top talent EXPECT family-friendly workplaces, and offering a generous, gender-neutral parental leave policy is a great place to start. Not to mention, it will help mitigate your risk of legal issues, improve employee engagement, and strengthen your brand image!

For more guidance on developing a thorough and competitive parental leave program, contact BlueLion today at 603-818-4131 or info@bluelionllc.com.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

New Hampshire Paid Family and Medical Leave: 2023 Update & Guidance

July 12, 2023
July 12, 2023
New Hampshire Paid Family and Medical Leave: 2023 Update & Guidance

In exciting news for both employers and employees, New Hampshire joined a growing list of states and Washington, D.C., when Governor Chris Sununu signed the Granite State Paid Family Leave Plan into law on June 25, 2021. The law went into effect on January 1, 2023.

This unique voluntary program is the first in the nation and provides New Hampshire employees with family medical leave insurance (FMLI). New Hampshire employers may choose to opt into this program, which offers workers a 60% wage replacement for up to six or 12 weeks of work per year if they take time off for qualifying personal health or family reasons.

Now that the New Hampshire Paid Family and Medical Leave (NH PFML) program has officially launched, we’re sharing the latest updates and guidance for employers and employees below.

What are the eligible reasons? 

Granite State workers can use the voluntary paid leave program for:

  • The birth of a child or care of a newborn child for the first year.
  • Care of newly adopted or fostered children within the first year.
  • Care of an employee’s family member with a serious health condition.
  • Care of a spouse, child, parent, or next of kin who is in the military and has a serious injury or illness.
  • A serious personal health condition independent of employment (if disability insurance doesn’t apply, including childbirth).

What does the NH PFML insurance plan include?

When employers enroll in NH PFML, their employees have access to:

  • Paid Family and Paid Medical Leave under one insurance policy
  • 60% wage replacement benefits up to the Social Security wage cap for eligible reasons (see above)
  • The option to take leave all at once (consecutively) or in partial days (intermittently) with a minimum of 4-hour increments

Employers can choose to offer either six or 12 weeks of paid leave.

What Employers Need to Know About the NH Paid Family and Medical Leave Plan 

Who can participate?

NH PFML benefits are available to all NH employers and employees through MetLife, the state’s PFML insurance partner.

Employers must be located in New Hampshire to be eligible for this voluntary paid leave program. The plan does not cover workers in other states—employees must be designated as working for an NH employer and report wages to NH for unemployment purposes to qualify.

How much does NH PFML insurance cost employers?

NH employers can get a quote by using the MetLife quote calculator. This tool allows you to customize your NH PFML plan based on your business needs while accounting for state regulations.

How do I enroll in a group plan?

Employers can enroll in an NH PFML insurance plan at any time. You can begin the process by requesting a quote from MetLife:

  1. Contact a licensed agent, broker, or consultant who is appointed with MetLife to sell NH Paid Family and Medical Leave insurance. 
  2. Use MetLife’s Quote Calculator for employers to explore your PFML plan options and connect with MetLife. You’ll need to complete their workforce census form to get your quote.
  3. Contact the MetLife Customer Solution Center at 1-866-595-7365 for your next steps.

While you have the option to purchase NH PFML through your current insurance company, you will NOT be eligible for the Business Enterprise Tax (BET) Credit if you do so. Only employers who buy from MetLife will qualify for the BET Credit.

What are my obligations as an employer if I opt into an NH PFML plan?

Employers have specific requirements and options when it comes to administering NH PFML benefits to employees.

  • Employers with more than 50 employees who elect to participate must make premium contributions available to employees through payroll deduction. This requirement applies whether the employer sets up an NH PFML group plan or if workers purchase individual coverage.
  • Employers of 50 or fewer employees have the option to offer payroll deductions.
  • All employers may entirely or partially cover the employees’ costs. If you cover 100% of your employees’ premiums, you do not have to take payroll deductions.

Employers who opt into the program must also provide heightened employment protections, namely:

  • Continuation of health insurance coverage during leave
  • Protection from discrimination and retaliation for using the leave
  • Restoring workers to their position prior to leave or an equivalent role (only applicable to employers with 50 or more employees)

What is the Business Enterprise Tax (BET) Credit?

As mentioned above, when you purchase NH PFML insurance through MetLife, you qualify for a BET Credit equal to 50% of the six-week premium you pay. You’ll need to submit the most recent Schedule of Business Profits Tax (BPT) Credit (form DP-160) to the NH Department of Revenue Administration to claim your credit.

The 50% credit applies only to the portion employers pay to MetLife. It does not apply to worker-paid premiums. If you pass on the full cost to your employees, you will not qualify for the BET Credit as you’re not contributing to the premium.

Find more NH PFML guidance for employers.

Individual Worker Enrollment

What if my employer does not participate?

If your New Hampshire employer does not opt into the program, you may choose to participate independently during a 60-day annual open-enrollment window. Open enrollment for the 2024 NH PFML individual plan runs from December 1, 2023, through January 29, 2024.

Is there a waiting period?

Yes, the individual PFML plan requires a seven-month waiting period before employees can use the benefits. There is also a one-week unpaid elimination period before receiving benefit payments.

What does the individual plan include?

The individual NH PFML plan includes all the same benefits of the employer group plan. Weekly premiums will be capped at $5 per employee.

Learn more about individual worker enrollment.

What is the benefit to employers?

The NH PFML program’s affordable premiums make it feasible for many small and mid-sized employers who don’t offer paid family leave benefits due to cost. By offering this benefit, employers will:

Between its cost-effectiveness and the tax incentive, the Granite State Paid Family Leave Plan aims to help employers and workers. It’s a small investment that can have powerful results!

If you’re a New Hampshire employer with questions about enrolling in NH PFML insurance, contact BlueLion at info@bluelionllc.com or 603-818-4131 for the next steps and guidance today!

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

This article was originally published in December 2021 and has been updated for comprehensiveness and accuracy.

The Art of Working Interviews: Unlocking Talent While Staying Legally Compliant

July 6, 2023
July 6, 2023

Finding the perfect candidate to join your team can be challenging, like searching for a needle in a haystack. Resumes and interviews only scratch the surface when assessing a candidate’s fit for a position. 

Enter the working interview, a unique approach that allows employers to evaluate a candidate’s skills and cultural fit through hands-on experience.

This test-run scenario sounds awesome, right? But before you require a candidate to “try out” the job, you must know the working interview laws. Yep, that includes proper compensation!

In this blog post, we’ll explore the ins and outs of working interviews, including their legality, proper implementation, potential risks, and alternative assessment methods.

What is a Working Interview?

A working interview is an assessment technique where an employer has a job candidate perform tasks or projects relevant to the position they are applying for. This typically comes after the initial job interview and provides a glimpse into how candidates perform in a real work environment and allows employers to assess their skills, work ethic, and compatibility with the team.

Are Working Interviews Legal?

Yes, when you conduct them and classify the worker properly.

While working interviews can be a valuable tool, ensuring compliance with employment laws is crucial. In most jurisdictions, anyone working for a company, even in an interview setting, must be compensated for their time and effort. It means that if a candidate performs work that benefits the company, they must be treated as an employee and receive appropriate compensation.

Conducting Compliant Working Interviews

Employers should follow these key guidelines to conduct a working interview while adhering to legal obligations.

Clearly Define the Purpose

Clearly communicate to the candidate that the working interview is part of the assessment process and not a trial period of employment. Make it explicit that they will receive compensation for their time.

Determine Fair Compensation

This must be at least the applicable minimum wage. Discuss a fair and reasonable compensation rate for the working interview before it begins.

Make It Official

The applicant should sign Form I-9 and W-4 (for employees) or W-9 (for independent contractors). If you classify them as an independent contractor, ensure they meet the definition as such. Otherwise, classify them as an employee and withhold payroll taxes. 

You should also verify their eligibility, perform a background check (if legal and applicable), and ensure they have any required licenses or certifications before the working interview.

Set a Time Limit

Limit the duration of the working interview to a reasonable timeframe. It should be sufficient time to evaluate the candidate’s skills without exceeding what could be considered exploitative or unfair.

Document the Agreement

Create a written agreement outlining the terms of the working interview, including compensation, duration, and the candidate’s understanding that it does not guarantee employment.

Ensure Compliant Working Conditions

Even for a short-term working interview, you must ensure safe working conditions that comply with OSHA and other federal, state, and local regulations. You may also need to provide reasonable accommodations under the ADA. Finally, notify your workers’ compensation carrier to cover the employee.

Provide Required Training

Assess whether the candidate will need HIPAA training or any other relevant safety or privacy protection training for the work they’ll be doing.

Risks of Non-Compliance

While working interviews can be an effective evaluation method, employers should be aware of several potential pitfalls and mistakes to ensure compliance with employment laws.

Unpaid Working Interviews

The most significant mistake employers can make is conducting working interviews without compensating the candidates. Candidates who perform tasks that benefit the company must be treated as employees and paid accordingly. Failing to do so can lead to accusations of wage theft, which may result in legal consequences and damage to the employer’s reputation.

Misclassifying Candidates

It’s essential to communicate to candidates that the working interview is part of the assessment process, not an employment offer or trial period. Misclassifying candidates as unpaid interns or independent contractors during working interviews can lead to misinterpretation of their legal rights. Improper classification can result in accusations of misclassification, leading to potential legal and financial liabilities.

Exceeding Reasonable Duration

Working interviews should be of reasonable duration to assess a candidate’s skills and suitability for the role. Exceeding a reasonable timeframe could be viewed as taking advantage of the candidate’s labor without providing proper compensation. It’s crucial to define the duration of the working interview in advance and ensure it aligns with industry norms and applicable labor laws.

Inconsistent Selection Criteria

Another risk employers face during working interviews is applying inconsistent selection criteria or treating candidates unfairly. Establishing objective evaluation criteria and using them consistently for all candidates is essential. Biases or discriminatory practices during the working interview process can lead to allegations of unfair treatment and potential legal repercussions.

Confidentiality and Intellectual Property

Employers must ensure that candidates participating in working interviews respect the organization’s confidentiality and intellectual property rights. Establishing clear guidelines and agreements regarding protecting sensitive information and proprietary materials is crucial. Failing to address these concerns can result in the unauthorized disclosure of company information or potential intellectual property disputes.

Conducting working interviews without following legal obligations can damage an employer’s reputation and lead to costly legal battles, so it’s crucial to consult your HR and legal team before conducting one!

Alternatives to Working Interviews

While working interviews offer unique insights into a candidate’s abilities, there are alternative methods to assess their skills and fit for the role:

Skills Tests

Administering skills-based tests can effectively evaluate a candidate’s capabilities without requiring them to perform work for the company. These tests can include written assessments, practical exercises, or online simulations.

90-Day Probationary Period

Implementing a probationary period after hiring allows employers to evaluate a candidate’s performance on the job. During this time, employers can assess skills, cultural fit, and overall suitability for the role before making a final decision. Inform these new employees that they will be eligible for benefits after successfully completing this “acquaintance” period.

Observation/Shadow Sessions

Inviting candidates to observe or shadow existing employees in similar roles provides valuable insights into their potential fit within the company. This approach allows candidates to experience the work environment and interact with other team members without actively performing tasks.

Make Working Interviews Work for You

Working interviews can be a powerful tool for assessing job candidates’ skills and cultural fit, but conducting them legally and ethically is vital. Employers can utilize working interviews effectively without violating regulations by providing proper compensation, setting clear expectations, and adhering to employment laws. 

Additionally, considering alternative assessment methods like skills tests, probationary periods, or observation sessions can provide valuable insights into how a candidate will fit in with your company culture.

Do you need help developing effective and compliant job candidate assessment and hiring practices? Our HR consultants will be happy to guide you! Contact us at 603-818-4131 or info@bluelionllc.com to learn more today.

The information on this website, including its newsletters, is not, nor is it intended to be, legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

Our Top 5 Leadership Tips for a Genuine Connection with Employees

June 29, 2023
June 29, 2023

In a recent conversation with a client and company owner, he posed an interesting question: 

How can he maintain a genuine connection with employees and ensure they are comfortable coming to him with concerns?

He explained that he believes he has a strong connection and relationship with his staff. But he’s noticed they still hesitate to approach him with complaints, although he welcomes all forms of concerns and feedback. 

While this is generally the nature of being a “top dog,” there are steps and leadership skills that small business owners can take to establish a rapport with employees and mitigate the fear of speaking up. We asked a few of our own team members—both leaders and staff—for their best leadership tips from both perspectives, so check them out below!

Consider yourself part of the team, not the boss.

“I NEVER refer to myself as anyone’s ‘boss,’” says BlueLion co-founder, Toni Runci. “I understand the point of the term, but in my opinion, it creates a lack of connection between my team members and myself.”

Her leadership tip: Get to know your employees on a personal level to build a deeper connection and empathy!

“I try to work with my team more as a peer, who at times has to make more elevated or escalated business decisions,” Toni continues. “I want to know what is happening in their lives, with their significant others, their children, their parents. I like knowing what they did over the weekend.”

BlueLion team member, Amanda Shae, gives her take on leadership from an employee perspective. “Lead from a leadership perspective, not from a boss mentality,” she explains. “Leaders build people up, lead with emotional intelligence, and genuinely care for employees.”

Bottom line: Being a boss and being a leader are two different things! Effective leadership skills revolve around your actions more than your words. How can you show your staff that you care about them both professionally and personally?

Anyone can talk the talk—but can you walk the walk? When you tell employees you’ll do something, follow through! If you tell them they can come to you with complaints listen with an open mind and find out how you can support them or improve the situation. Then act on it.

Look for ways to have their back.

On a related note, the most effective leaders have a sharp eye for where and how their team needs support. Toni says if she encounters a staff member who is struggling with something, whether personal or work-related, she always asks how she can help or offer resources.

On the topic of work-related support, she emphasizes, “I am never above doing the same work they do. It keeps me connected to their ‘life’ day-to-day within the organization, so I can feel what they feel. I always have their back.” 

So, what does that look like? For one thing, Toni explains she never pushes back when her team members come to her with an issue. “I collaborate and ask, ‘What do you need/want from me here? Do you need advice, or do you need me to step in and handle it at an escalated level?’ I want them to know I am here to support them in as many ways as possible.”

Communicate your schedule and set expectations.

While it’s important to be there for your team to answer questions and handle situations, YOU are human, too! Knowing your limits and when to delegate is a vital leadership skill.

BlueLion co-founder Alison Milioto reminds small business leaders that there will be times you can’t respond right away, and it’s ok to take time for yourself. She recommends setting clear expectations of your availability well in advance (when possible), so your team is prepared for a delayed response.

Additionally, you should:

  • Outline a clear chain of command so they know who to go to for issues when you’re unavailable
  • Communicate your team’s priorities, due dates, and workflows while you’re OOO
  • Define each task with clear instructions, as applicable, so employees feel prepared
  • Trust your team! This means allowing them to work without fear of micromanagement because you know they’ll get the job done, even when you’re not around.

Help them learn, improve, and grow.

Another BlueLion team member shared a quote by renowned entrepreneur, author, and speaker, Jim Rohn: “A good objective of leadership is to help those who are doing poorly to do well and to help those who are doing well to do even better.”

As you interact with and evaluate your employees’ performance, take a deeper look. 

WHY is someone struggling? What is the root cause? How can you show them you care, help build their confidence, and improve their skills and performance? 

If a team member is already showing potential, how can you nurture their growth and help them take their abilities to the next level? Can you fuel their passion for certain types of projects or work?

The simple solution: ASK THEM! You can easily stay on top of this when you have regular meetings, a performance review process, and stay interviews in place. This way, you can find out precisely what they need to do better and find higher job satisfaction. 

And as a savvy leader, you know that showing your team that you care about their professional growth and passions boosts employee engagement and retention!

Remember your employees are humans!

For Toni, this is the number one rule that ties back to her entire leadership approach. “[My team members] are humans first and foremost, and I never forget that.”

Echoing her business partner’s sentiment, Alison advises quarterly check-ins to discuss not only work. “We are all fully remote, and I want to know how they’re doing as a human, not just an employee.” 

It is especially important for small business leaders with remote workforces, like ours, to remind people that you care about them and maintain that connection. Alison says this also means taking extra time to check in when you know an employee is facing challenges.

One way you can create a culture of transparency and trust is by establishing an open-door policy. Consider ways to make this an approachable, encouraging, and compassionate process. It may take time for employees to warm up to it, but when you show them you’re truly open to ideas and critiques and that it’s ok to make mistakes, their trust will grow.

Be a Leader Who Fosters Trust & Transparency in the Workplace

There are many essential leadership skills small business owners must possess. But in today’s ever-changing workplace, the most important are our soft skills, intuition, and team-oriented mentality. When we show our employees that we genuinely care, they’ll grow more comfortable approaching us even in difficult situations.

So instead of carrying yourself as the “boss,” view yourself as one of the team. And remember that you are all humans deserving of compassion and empathy!

Do you need more leadership tips or assistance with building a culture of trust? We’d love to share more about our own experience at BlueLion, where we’re proud to say we’ve built a team of talented individuals who aren’t afraid to come to us for support or speak their minds! Contact us at 603-818-4131 or info@bluelionllc.com to learn more today.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

Handling an Employee Death: 7 Ways to Show Empathy in the Workplace

June 23, 2023
June 23, 2023

Handling an employee death is a delicate and sensitive situation that requires empathy, compassion, and clear communication. Although your business must continue operating and serving customers, you must also prioritize employee mental health during this difficult time.

The #1 rule to keep in mind: Don’t try to power through the grieving process. Let’s explore more in this step-by-step guide on how company leaders can offer support and handle the necessary notifications following a death of a colleague.

1. Notify the immediate team.

Notification of an employee death is the first step and sets the tone for the rest of the staff and the grieving process. 

Once you confirm the family has been informed, gather HR, the deceased employee’s immediate team members, and other coworkers who were close to the employee to inform them of the sad news personally. Ensure you have a quiet and private space for this discussion. 

Offer support and provide an opportunity for team members to share their feelings and express their grief. Tell everyone that you will share more information once available, such as funeral or memorial details.

2. Communicate with the rest of the organization.

Depending on the size of your company, consider the most appropriate communication method for the employee’s death announcement. This could include an email from senior leadership, a company-wide meeting, or both. Be mindful of the sensitivity of the situation and express condolences, emphasizing the availability of support resources.

You may also handle this by informing other executives and managers first. Each department can then have a more intimate meeting to discuss the beloved employee’s passing.

Tactfully coordinate with the deceased employee’s team to determine what work must be immediately covered and delegate as necessary.

3. Give your team time.

Everyone grieves in different ways and timeframes. Grief expert David Kessler, who co-developed the five stages of grief™ with Elisabeth Kübler-Ross, says of the stages, “They are responses to loss that many people have, but there is not a typical response to loss as there is no typical loss.”

Avoid rushing the grieving process by minimizing the event and trying to move on too quickly. This can actually cause grief to linger after an employee death if people aren’t able to work through it. And trying to force your staff to forge ahead without sufficient time to reflect, share, and pay their respects can lead to bigger issues later.

Lead with empathy and don’t be afraid to show emotions. Let your employees know that it’s ok not to be ok—we’re all only human. This comes from the top down, so you’ll set the example for the rest of your leadership team. Managers can hold team meetings to give people an outlet to talk things through.

If possible, lighten everyone’s workload that week and provide bereavement time so people can attend the funeral or memorial service.

4. Provide grief counseling and support.

In addition to allowing your team to share and work through grief together, you should also provide access to grief counseling services immediately after an employee death by:

  • Referring them to your employee assistance programs (EAPs), if you have one. The EAP professionals can direct employees to the right services.
  • Bringing a grief counselor onsite for a set time for employees who want to talk to someone in person.
  • Providing virtual or phone grief counseling service or directing them to the Grief Recovery Hotline (800-445-4808) or recovery organizations like GriefShare.org.

These resources can help staff members cope with their emotions and provide professional guidance during this difficult time. Communicate the availability of these services clearly and encourage employees to utilize them if needed.

5. Reach out to the deceased employee’s family.

Designate a senior leader or HR representative to personally reach out to the family of the deceased employee. This person should express condolences, offer support, and inquire about the family’s wishes regarding communication with other employees or clients.

You may also need to maintain communication with the family while tying up the paperwork and loose ends, such as final paychecks, taxes, and benefits.

6. Communicate with clients.

Contact any clients or customers who had direct interactions with the deceased employee. Express condolences on behalf of the company, acknowledge the impact of the loss, and assure them that alternative arrangements will be made to meet their needs. Introduce a new point of contact and provide any necessary information or updates to ensure a smooth transition.

7. Memorialize and honor the employee.

Consider holding a memorial or tribute event to honor the memory of the employee. This can provide an opportunity for colleagues to come together, share stories, and grieve collectively. 

Additionally, consider other ways to remember to create a memorial for the employee within the workplace, such as:

  • Establishing a memorial fund or scholarship: Consider making a financial contribution to a cause or organization that held significance for them or a scholarship for aspiring professionals in their field. This gesture can serve as a lasting tribute and support a cause that was important to the employee.
  • Creating a memorial award or recognition: Institute an annual or periodic memorial award or recognition based on qualities or values that the employee exemplified, such as teamwork, leadership, or innovation. Recognizing others who embody these characteristics can help keep the employee’s memory alive and inspire their colleagues.
  • Dedicating a physical space or artifact: If possible, create a memorial wall or garden. Or try a simpler option like a dedicated seating area with a plaque or a photo. You could even get creative and display an item that held significance to the employee, like a piece of their work or personal memento.
  • Incorporating the employee’s contributions into company culture: Highlight their achievements and positive impact in company newsletters, internal communications, or during team meetings.
  • Supporting a charitable cause in their name: Did the employee support a particular nonprofit or cause? Consider making a one-time gesture or an ongoing commitment, such as an annual donation. Share this information with employees so they can get involved, too.

Approach these ideas with sensitivity and involve the family of the deceased employee in decision-making whenever possible. Their input and preferences should be respected throughout the memorialization process.

Every situation is unique, so you should adapt your approach based on the company culture, employee preferences, and local customs. Be flexible and responsive to the needs of your employees during this challenging time, and continue to provide support and resources as long as necessary. 

An employee death is not something business leaders want to think about—but having an overall plan and resources ready will help ease the process and pain when the unfortunate happens.

Do you need help navigating an employee death or putting a plan in place? Contact our experienced, empathetic HR consultants today at 603-818-4131 or info@bluelionllc.com to learn more.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

7 FAQs About New Hampshire Wage & Hour Laws

June 8, 2023
June 8, 2023

Are you an employer in the Granite State and if so, are you up on all of the New Hampshire wage and hour laws? There are many requirements to keep up with regarding time worked and pay!

Whether you’re hiring your first employee, have a specific question, or simply want to ensure you’re compliant, it’s always a good time to review. While these laws primarily affect non-exempt (i.e., hourly) employees, some also apply to exempt staff. 

And if you’re hiring minors and new to the process, remember that separate New Hampshire child labor laws have time and hour restrictions for workers under age 18. These even include specific requirements for different age groups (i.e., under 16 and 16 to 17).

Read on for answers to seven key New Hampshire labor law questions.

How is a workweek defined in New Hampshire?

A workweek is defined as a fixed period of 168 consecutive hours equaling 7 consecutive 24-hour periods. Employers must specify when their workweek starts and ends, including the day of the week and hour of the day, and the workweek must align with the calendar week.

What do I have to pay employees for?

New Hampshire wage and hour laws follow the Fair Labor Standards Act (FLSA) for hours worked, stating that employers must pay employees for all hours worked. 

However, this isn’t always black and white. There are specific requirements and exemptions for waiting time, travel time, and meeting, lecture, and training time. Let’s break them down.

Waiting Time

The FLSA recognizes three types of waiting time, which is defined as an employee’s time spent not performing the job duties for which they were hired. During these periods, employees may still be subject to their employer’s direction and their job duties.

  • On-duty waiting time: This usually takes place during regular work hours and is when an employee awaits direction from their supervisor or manager. On-duty waiting time should be counted as hours worked. One example is a warehouse worker waiting for equipment to arrive.
  • On-call time: Similar to on-duty waiting time, this involves an employee who must remain available after their shift ends. The on-call conditions vary by employer. For example, an on-call employee may be allowed to use that time for personal reasons, in which case they’re considered off-duty. But an on-call worker who is restricted from using that time for personal matters due to constant calls or other conditions from the employer could be considered on-duty.
  • Off-duty waiting time: Since this occurs when an employee is free of their job duties, can leave their workplace, and can use the time as they wish, off-duty waiting time should not be counted as hours worked. For example, if a sales representative travels to a prospect’s facility for a meeting that ends at 12 p.m., doesn’t have another meeting until 3 p.m., and is free to do as they please during the time in between, they are considered off-duty.

Travel Time

Employers do not need to pay employees for their regular commutes between home and work. However, employees who travel as part of their work duties and between multiple worksites must be paid for that time.

There are several unique situations that may require you to pay for employees’ travel time. Learn more about travel pay and compliance.

Meeting, Lecture & Training Time

The FLSA states that employers must pay employees for attending meetings, trainings, and lectures. However, you do not have to pay staff for this time if it is: 

  • Outside the employee’s regular working hours
  • Voluntary
  • Not directly related to their job, and
  • Does not entail the employee doing productive work

If all four of these requirements are met, you do not have to pay the worker for their time attending the event.

What is the minimum time an employer must pay an employee who reports to work?

New Hampshire labor laws require employers to pay employees for a minimum of two hours of work at their regular pay if the employee shows up to work at your request—even if they work less than two hours. This is also known as “show up” pay.

Three main exceptions include:

  • An employee showing up to work after you have made good faith yet unsuccessful attempts to notify them not to report for a scheduled shift. If this occurs, you may require the employee to perform assigned duties when they report to work.
  • An employee who is scheduled to work under two hours in a shift, as long as the employee was informed in advance and in writing of the shift duration.
  • Employees of counties or municipalities or si and snowboard instructional employees at ski resorts, as long as you provide them with other compensation that is at least equal to their rate of pay.

When do New Hampshire employers have to pay overtime?

New Hampshire also follows federal law here, requiring employers to pay overtime to employees who work more than 40 hours in a week. Overtime pay must equal 1.5 times the employee’s regular rate of pay for ALL hours worked past 40 unless exempt by the FLSA.

Typically, overtime pay only applies to hourly, or non-exempt, employees. However, some salaried employees are entitled to overtime pay. This can depend on their wages, job duties, and whether they are classified as employees or independent contractors. 

It’s always best to consult with your HR, attorney, or the New Hampshire Department of Labor (DOL) if you’re unsure about a worker’s overtime eligibility.

Are New Hampshire employees entitled to a lunch period?

Any employee working more than five consecutive hours is entitled to a 30-minute lunch or eating period. If you can’t afford to give an employee 30 minutes but they can eat while working, you must pay them for their time.

Note that any additional breaks lasting less than 20 minutes you choose to give employees must be paid.

How frequently must employers pay employees?

As a New Hampshire employer, you have the option to pay employees:

  • Weekly, meaning you must issue paychecks within 8 days of the end of each pay period
  • Biweekly, meaning you must pay them within 15 days of the end of a pay period

If you wish to pay employees less frequently, you must request permission from the DOL outlining:

  • Payment method
  • Either a semi-monthly (twice a month) or monthly pay schedule
  • The beginning and end of each pay period
  • Designated payday(s)
  • Employee classification
  • The salary range of relevant employees
  • Your employer identification number (EIN)

The DOL grants these requests on a case-by-case basis but will not allow you to pay employees less than monthly.

Who is responsible for keeping records of hours and wages?

The employer must maintain accurate records of hours worked and wages paid for all employees for a minimum of at least three years. These documents will be subject to inspection if your company is ever selected for a DOL audit.

Adhere to New Hampshire Wage & Hour Laws

There are many gray areas and exceptions when it comes to New Hampshire labor laws. Every business and role is different, sparking unique scenarios and questions. The key to remaining compliant is not to guess or wait to find out the hard way! If you’re unsure about something, consult your HR or legal team. Illegal hour and wage practices, even if accidental, can open your company up to significant fines and lawsuits. 

If you have additional questions or need guidance on a specific situation, contact BlueLion today at 603-818-4131 or info@bluelionllc.com! Our HR consultants have extensive knowledge of New Hampshire wage and hour laws and will help you ensure your team is paid and treated properly.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.

Understanding Massachusetts Tip Laws: A Comprehensive Guide for Employers

May 31, 2023
May 31, 2023

Massachusetts tip laws are designed to ensure fair compensation for service industry workers and protect their rights. If you’re an employer in the state’s hospitality industry, you must have a solid understanding of these laws to avoid potential violations. 

In this blog post, we’ll dive into the basic tip rules, the concept of tip credit, minimum wage requirements, tip pooling rules, and the treatment of mandatory service and credit card charges.

Basic Massachusetts Tip Laws

Massachusetts wage and hour laws consider tips the property of the employees who receive them. Employers are prohibited from keeping or distributing any portion of the tips received by their employees except:

  • In the case of a tip credit, when the employer counts all or part of the employee’s tips to meet minimum wage requirements.
  • As part of a valid tip pooling arrangement, when employees share and divide their tips.

More on both of these below!

Understanding Tip Credits & Minimum Wage Requirements

A “tip credit” is a provision that allows employers to pay employees in tipped positions less than the regular minimum wage as long as the employee’s tips bring their total compensation up to or above the minimum wage. Federal law and most state laws allow a tip credit—but only if you make more than $30 in tips each month.

As of January 1, 2023, the minimum wage in Massachusetts is $15 per hour for non-tipped employees. For tipped employees, the minimum wage (i.e., server’s wage) is $6.75 per hour, meaning the employer may take a tip credit of up to $8.25. The employer must make up the difference if an employee’s tips fall short of $15 an hour.

Massachusetts Tip Pooling Rules: Legal or Not?

Tip pooling or sharing is when a group of employees pool their tips and redistribute them according to a predetermined formula. Under Massachusetts tip laws, employers can legally require employees to share their tips. However, certain rules must be followed:

  • Only wait staff, service employees, and service bartenders can participate in a tip pool. 
  • Employers must inform all qualified staff of the tip sharing arrangement.
  • Each employee must be able to keep at least the full minimum wage.

Additionally, owners and managers are not allowed to participate in the tip pool.

What is Considered a Tip?

Tips are voluntary, gratuity-based payments given by customers to service industry workers in recognition of good service. They are considered the property of the employees who directly receive them. Whether in cash or included in credit card payments, tips are additional payments that customers choose to provide on top of the actual cost of goods or services rendered.

Employees must be allowed to retain the full amount of tips they receive, with no portion going to the employer, except when participating in a valid tip pooling arrangement (as mentioned earlier).

Now, let’s break down the exceptions of mandatory service charges and credit card fees.

Mandatory Service Charges

Mandatory service charges are different from tips. These charges are predetermined and automatically added to the bill for large parties or special events. Unlike tips, mandatory service charges are not discretionary or voluntary payments made by customers based on the quality of service received.

Under Massachusetts law, mandatory service charges are not considered tips. Instead, they are regarded as revenue for the employer. As such, these charges must be treated as wages and paid to the employees, subject to income tax withholding and other employment taxes.

Employers must communicate to employees and customers that mandatory service charges are not tips, ensuring transparency and avoiding confusion.

Credit Card Charges

The employer may incur credit card processing fees when customers pay with a credit card. The employer is responsible for paying these fees as a cost of doing business rather than passing the charges onto the employees. Massachusetts tip laws prohibit employers from deducting these fees from the tips given by customers.

Employees must receive the total amount of tips given by customers, regardless of any credit card fees incurred by the employer. Employers should know this distinction and ensure employees receive the entire tip amount.

Ensure Legal Tipping in Massachusetts

Compliance with Massachusetts tip laws is vital for employers in the service industry. Understanding the basic tip rules, tip credit, minimum wage requirements, tip pooling regulations, and the treatment of mandatory service charges and credit card fees is essential for maintaining fairness and legality in the workplace.

By adhering to these laws, employers can protect their employees’ rights and maintain a positive work environment, while employees can receive the compensation they deserve for their hard work and dedication.

Do you need guidance on your Massachusetts company’s tipping practices and policies? Our HR consultants are ready to lead the way! Contact BlueLion today at 603-818-4131 or info@bluelionllc.com to learn more about our outsourced HR services.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.