Sounds easy, right? Just pay out employees for their unused PTO, and voila! Everyone’s happy. 

Except it’s not that easy at all. In fact, you can’t simply make up your own cashout policy—you must follow specific guidelines and regulations to ensure compliance and avoid potential financial pitfalls.

Let’s break down what a PTO cashout policy is, the IRS requirements you need to be aware of, and the potential cash flow implications for your business if you don’t handle these policies correctly.

What Is a PTO Cashout Policy?

A PTO cashout policy allows employees to exchange their unused paid time off for cash instead of taking the days off. Similar to PTO rollovers, cashouts may seem like an easy way to keep employees happy, especially when they can’t or don’t want to use their accrued PTO. However, it’s not as simple as offering cash in place of time off—you need to establish clear guidelines that are in compliance with both state and federal laws.

You Can’t Just Make Up a Cashout Policy

One common misconception among employers is thinking they can create a cashout policy on the fly. In reality, PTO cashout policies must comply with existing labor laws and IRS requirements. Failing to do so could lead to unintended tax consequences and legal issues for your business and employees.

Here are a few things you need to consider as you consider offering a cashouts to your paid leave policies:

• Consistency with State Laws: Some states require employers to pay out unused vacation time upon termination, while others don’t. Even if your business isn’t based in a state with strict requirements, it’s still a best practice to have a well-defined policy that clearly outlines when and how PTO can be cashed out.
• Non-Discrimination: If you decide to offer PTO cashouts, your policy must be applied consistently and fairly across all employees. You can’t selectively allow some employees to cash out while denying others the same opportunity, as this could lead to discrimination claims.
• Clear Communication: To avoid misunderstandings and potential disputes, you must clearly communicate your PTO cashout policy to all employees, ideally in your employee handbook. Include details on eligibility, the timing of cashouts, and any applicable limitations.

IRS Requirements & Tax Implications

When it comes to PTO cashouts, the IRS treats these payments as supplemental wages under the “constructive receipt” rule (similar to bonuses or commissions). This means you must follow specific withholding rules:

• Withholding Requirements: PTO cashouts are subject to federal income tax, Social Security, and Medicare taxes. The IRS requires you to withhold taxes at the appropriate rate, which is typically a flat 22% for supplemental wages. You could face penalties and interest if you fail to withhold the correct amount.
• Reporting on W-2s: Any cashouts should be accurately reported on the employee’s W-2 form at the end of the year to ensure you and your employees are meeting tax obligations.
• State and Local Taxes: Don’t forget that state and local tax rates might also apply to PTO cashouts. Check the tax laws in your state to avoid any surprises.

And yes, this means that if you establish a PTO payout policy allowing employees to cash out a certain amount each year, it counts as income—even for employees who don’t cash out any PTO! 

If your current policy permits this, chances are you’ve been underreporting workers’ income and withholding insufficient income and payroll taxes. In this case, it’s time for an immediate review with your HR and legal teams.

The Cash Flow Implications for Your Business

Allowing employees to cash out their unused PTO might seem like a good idea on the surface, but it can lead to significant cash flow issues for your business if not properly managed. Here are a few potential challenges:

• Unplanned Expenses: If multiple employees decide to cash out their PTO simultaneously, you could face a large, unplanned payout—which could strain your business’s cash flow.
• Payroll Budgeting: Since PTO cashouts are considered a payroll expense, they can quickly inflate your payroll costs if not planned for in advance. This might also impact your ability to invest in other business areas.
• Impact on Morale and Productivity: While offering a cashout option might seem like a perk, it could inadvertently encourage employees to forgo taking time off. Regular time away from work is crucial for employee well-being, and a lack of breaks could lead to burnout and decreased productivity.

Best Practices for Implementing a PTO Cashout Policy

To avoid these potential pitfalls, start by limiting the amount of PTO that employees can cash out in a given year to protect your cash flow. For example, you might allow cashouts only once per year or limit them to a specific number of days.

You should also consider implementing cashout windows, such as at the end of the fiscal year or during slower business periods, to better manage your cash flow. Before rolling out a PTO cashout policy, consult with a legal or HR professional to ensure you’re complying with all relevant laws and regulations. Running it by your accountant to understand the impact on your budget is also wise.

If you do want to offer PTO payouts to employees, use an option that complies with tax laws, such as:

• Offer Conditional Cashouts: You can require employees to maintain a minimum balance of PTO before they are eligible for a cashout. For instance, employees could only cash out PTO once they have accrued at least 80 hours, with the option to cash out anything above that amount. This ensures they still have enough time available for rest and prevents complete depletion of their PTO balance.
• Structured Cashout Percentage: Employers may offer a policy where only a percentage of the accrued PTO can be cashed out (e.g., 50% of the total hours). This reduces the immediate cash liability for the business while still giving employees the benefit of some extra income.
• Cashout Cap: You could also put a maximum limit on the number of hours that can be cashed out annually. For example, the policy might allow a maximum of 40 hours of PTO to be cashed out per year, regardless of the total amount accrued.
• Incentivize Time Off Usage: Encourage employees to use their PTO by offering a higher payout rate for time off taken rather than cashed out. For example, you could offer 100% of the PTO value when used for time off, but only 80% of its value if cashed out.

Rethink That PTO Cashout Policy

While a PTO cashout policy can be a valuable benefit for your employees, it’s crucial that you design and implement it carefully. Following IRS requirements and being mindful of your cash flow will help you avoid unexpected financial issues. Remember, you can’t just make up a cashout policy—take the time to ensure that it’s legally compliant and financially sound.

If you’re unsure about the best approach for your business, contact BlueLion to guide you through the process and help you create a policy that works for both your team and your bottom line.

The commission noted that noncompetes negatively impact the economy and workers by keeping wages low and stifling new ideas and businesses. They are common and often take advantage of workers by forcing them to either keep a job they wish to leave or take on “other significant harms and costs” (e.g., lower pay, relocation, being out of work, or costly legal battles).

Through the new rule, the FTC aims to provide Americans “the freedom to pursue a new job, start a new business, or bring a new idea to market.” The commission estimates that the noncompete ban will result in:

• 2.7% increase in new businesses formed annually—that’s more than 8,500 additional new businesses a year!
• $524 more per year in earnings for the average worker
• An average of 17,000 to 29,000 more patents each year

Get the details of the FTC’s new rule, who it affects, and your responsibilities and options as an employer below.

A Breakdown of the FTC Ban on Noncompetes

Most workers’ existing noncompetes will no longer be enforceable after the rule’s effective date, which is currently set for September 4, 2024. There is an exception for existing noncompete agreements with senior executives earning over $151,164 annually and in policy-making positions. Employers can keep these existing agreements but may not form or enforce new noncompetes with senior executives.

The rule will be retroactive, and employers will need to notify any applicable workers that their noncompetes will not be enforced against them in the future.

What is a Noncompete Agreement Defined As?

The FTC kept the language of the ruling broad, only specifically banning noncompetes. The ruling bans any noncompete clause or agreement that “prohibits a worker from, penalizes a worker for, or functions to prevent a worker” from finding work or starting a business in the United States.

However, it also notes that other restrictive covenants, such as non-disclosure and non-solicitation agreements, are also illegal when they are written broadly for the same purpose as noncompetes (i.e., preventing a worker from obtaining a job or starting a business in the same field).

What are the Exceptions?

The noncompete ban doesn’t apply to banks, savings and loan institutions, federal credit unions, common carriers, air carriers, foreign air carriers, and individuals and businesses subject to the Packers and Stockyards Act. Nonprofits are another exception, as the FTC only has authority over for-profit businesses.

Are Noncompetes Currently Banned?

Not yet, the rule will not go into effect until September 4, 2024—120 days after it was published in the Federal Register. However, there have already been several lawsuits challenging the ruling, which has raised a significant question: Does the FTC have the authority to regulate noncompetes, which have historically been regulated by state law? 

These challenges could extend the rule’s effective date or prevent it from ever going into effect at all. So, what should you do about noncompete agreements now?

Next Steps for Employers

If noncompetes are part of your new hire onboarding paperwork at all, you should stay tuned for updates regarding the rule. Employers have a few options for preparing for the potential noncompete ban.

• Operate as business per usual: Since the rule is not effective yet and the legal challenges are likely to draw it out, you can continue doing what you’re doing while keeping an eye on changes. Either way, all employers should use noncompetes, non-solicits, and non-disclosure agreements with caution, as many states are restricting their use.
• Implement changes today: Move forward as if the rule will go into effect on September 4, 2024, by updating employment agreement templates to remove noncompete clauses. Limit the use of nondisclosures and non-solicitations along with any other similar clauses or agreements that could inhibit workers from finding new jobs or starting a business. Prepare notices informing employees that their noncompetes will be unenforceable—you’ll want to send these before the effective date, but.
• Use an in-between solution: Continue using noncompetes with senior executives and other highly compensated employees. It’s possible the legal challenges will result in a modified version of the FTC ban on noncompetes that will treat workers of different levels accordingly.

Keep Up with the Latest on Noncompete Agreements

With the effective date approaching and several lawsuits pending, the final turnout is still unclear. We recommend that all employers monitor the progress of the noncompete ban and use these agreements sparingly. Since this is an evolving topic that will impact many of our clients, we will continue sharing updates here as well, so be sure to check back!

Do you have questions about noncompetes or other employment agreements? Contact BlueLion today at info@bluelionllc.com or 603-818-4131 for guidance!

Unfortunately, we’ve seen many employers and labor organizations make mistakes in this area, often because they are unaware of crucial employer obligations and union rights, like Beck rights. So, let’s take a straightforward, non-sugar-coated look at what you can, cannot, and must do regarding union agreements.

What is a Collective Bargaining Agreement?

When a workplace unionizes, the CBA is an essential early step. Typically, leadership, HR, and legal counsel negotiate with the union representatives to develop this contract, which outlines requirements and protections for both parties. It usually includes terms and conditions of employment, including:

• Wages
• Hours and breaks
• Benefits
• Dispute resolution and disciplinary action procedures
• Anti-discrimination laws

The CBA should be as clear and specific as possible and note the agreement’s validity period. Learn more about labor union agreements.

Types of Union Security Agreements

Whether your employees want to unionize or have already done so, you probably already know that unions are anything but black and white. For instance, there are several types of union security agreements. 

A union security agreement is typically part of a CBA. It is a contract between an employer and a labor union that outlines the extent to which the union can require employees to join the union and/or pay union dues as a condition of employment. These agreements aim to help ensure stable union membership and funding, supporting the union’s ability to represent and negotiate on behalf of the workforce. The specifics of these agreements vary and are subject to state laws, particularly in right-to-work states where such mandatory provisions are restricted.

The most common types of union security agreements are:

• Closed shop: Employers may only hire union members, which means new employees must already be union members before being hired. Closed shops have been illegal since the Taft-Hartley Act of 1947. 
• Union shop: Employees don’t need to be union members to be hired but must join the union within a specified period after starting their job. This is common in industries with a strong union presence but is subject to legal limitations, especially in right-to-work states.
• Agency shop: Employees aren’t required to join the union but must pay a fee (often called an agency fee) to cover the costs of collective bargaining and other representational activities. 
• Open shop: Employees are free to join or not join the union without any impact on their employment—meaning union dues and fees are entirely voluntary. This is predominant in right-to-work states.
• Maintenance of membership: This clause requires employees who join the union to remain members for the duration of the collective bargaining agreement, although new employees are not required to join.

Right-to-Work vs. Non-Right-to-Work States

Currently, 27 states have right-to-work laws, meaning employers cannot require employees to join a union or pay union dues as a condition of employment, even if their workplace is unionized. However, the CBA still protects all workers.

In a non-right-to-work state, on the other hand, employees may be required to join a union and pay union dues or fees as a condition of employment if their workplace has a union security agreement.

Note that exceptions may apply to public service employees. For example, although New Hampshire is a non-right-to-work state, public service employees can’t be required to join a union. So be sure to check your state’s union laws regarding public service workers and other specifics.

Today, it’s common to find companies where management employees are not union members but floor workers are. Whatever type of agreement you establish, you must understand what you can and can’t include in a CBA and require of employees. 

A good rule of thumb? You can add clauses to the CBA that provide additional benefits to union workers, but you may NOT attempt to supersede labor laws and take legal benefits away. For example, employers can’t state that certain employees are not eligible for overtime pay when they would be entitled to it according to wage and hour laws.

Beck Rights: How Do They Impact Union Rights & CBAs?

As explained earlier, unions entail regular dues, which go toward two broad expense categories: 1) collective bargaining and representational activities and 2) additional tasks and services (e.g., political activities). 

So, what are Beck rights, and how do they impact labor laws and CBAs? Thanks to the 1988 case Communications Workers of America v. Beck, the National Labor Relations Act (NLRA) prevents unions from requiring employees to become full union members. Employees can object and become “core” members, paying specifically for representation costs. The union contract still protects these workers.

Beck rights vary between states and unions, but generally, employers:

• Can require staff to pay partial dues (if located in a non-right-to-work state)
• Must notify employees of this choice and explain how union dues work if they opt out
• May NOT require workers to join the union fully
• May only use core members’ dues for representational costs, NOT political activities (if located in a non-right-to-work state)

Remember, if your business is located in a right-to-work state, employees can choose to either pay partial dues or not join the union at all. 

Understanding Union Rights & Employer Obligations

Navigating CBAs and union security arrangements can be tricky, but understanding the basics is vital for any employer with unionized staff. Different types of union security agreements affect how unions operate and what’s required from employees. 

In right-to-work states, employees can choose whether or not to join a union or pay dues, while union membership and dues might be required in non-right-to-work states. Plus, Beck rights also allow employees to opt for partial union membership, covering only representational costs.

Staying informed about these rules helps employers create fair and effective agreements that respect everyone’s rights. By doing so, you’ll foster a positive workplace and ensure compliance with labor laws.

If you need guidance from HR consultants with a significant understanding of union rights, contact BlueLion today at 603-818-4131 or info@bluelionllc.com. We’re happy to help you in this complex area!

What are the increases, and what do they mean for both employees and employers? The final rule will impact about a million salaried executive, administrative, professional, outside sales, and computer employees come July 1 and another three million as of next January. This gives employers a lot of planning and budgeting to do in the meantime. Plus, the change includes a bump in the total annual threshold for highly compensated employees. 

Find everything you need to know about the DOL’s new overtime rule and what you should consider in the coming months. 

What are the New Overtime Rule Salary Thresholds?

Currently, the minimum salary for executive, administrative, and professional (EAP) employees to be exempt from FLSA minimum wage and overtime pay protections is $684 per week or $35,568 per year. This will increase to: 

• $844 per week (equivalent to $43,888 per year) as of July 1
• $1,128 per week (equivalent to $58,656 per year) as of January 1, 2025

The new overtime rule will also increase the salary threshold for highly compensated employees (i.e., those not entitled to overtime pay under the FLSA if they meet certain requirements) from $107,432 per year to $132,964 per year on July 1 and then to $151,164 on January 1, 2025.

These changes will impact not only typical overtime but also weighted overtime calculations. If you have employees who fill multiple roles and have multiple pay rates, now is the time to start planning and adjusting.

When is an Employee Exempt vs. Nonexempt?

Need a refresher on exempt vs. nonexempt employees? Nonexempt employees are paid hourly or do not meet the minimum salary thresholds listed here. They must be paid for all hours worked and any overtime (i.e., hours worked beyond 40 hours each week). Overtime must be paid at 1.5x their hourly rate.

Exempt employees are not entitled to overtime and/or minimum wage provisions set by the FLSA. Exempt employees usually hold executive, administrative, or professional roles. These employees must qualify for the EAP exemption, which is met when:

• The employee is paid on a salaried basis
• The salary is not less than the minimum salary threshold amounts listed above
• The employee’s primary duties are executive, administrative, and/or professional 

While the DOL states that it’s on the employer to determine whether the EAP exemption applies, you can generally use these guidelines: 

• Executive exemption: Their primary duties involve managing two or more full-time employees or their equivalent. They have the authority to hire or fire employees, and their recommendations regarding hiring, firing, advancement, or promotion hold particular weight (e.g., managers and supervisors).
• Administrative exemption: They perform office or non-manual work directly related to the management or general business operations and must exercise discretion and independent judgment (e.g., HR personnel or financial analysts).
• Professional exemption: Their primary duties require advanced knowledge in a particular field, prolonged, specialized education and/or invention and originality, and the consistent exercise of discretion and judgment.

What Other Changes Come with the New Overtime Rule?

Between 1938 and 1975, the DOL increased minimum salary thresholds every five to nine years. These periods became longer after 1975, meaning the salary threshold became less effective at helping qualify exempt EAP employees. 

As part of the DOL’s new overtime rule, they state the eligibility thresholds will be updated every three years starting July 1, 2027. The department says this ensures the minimums will “keep pace with changes in worker salaries, ensuring that employers can adapt more easily because they’ll know when salary updates will happen and how they’ll be calculated.” 

How Should Employers Handle the New OT Rule?

You’ll need to remain compliant as the new overtime rule goes into effect. However, as a small business owner, it may not be wise or financially feasible to give all affected exempt employees a raise to ensure they still qualify as exempt under the FLSA. And remember, it’s not only about the earning level—the worker also has to be paid on a salaried basis and perform exempt job duties, as explained above.

So, as you prepare for these increases to take effect and before you jump into any decisions:

• Evaluate current employee classification. Determine if they meet the updated salary threshold for overtime pay exemption. Check each team member’s salary level and primary job duties to ensure compliance with the new regulations. 
• Identify impacted employees. This means those who currently fall below the new salary threshold and are classified as exempt but may now be eligible for overtime and need to be reclassified from exempt to nonexempt status. 
• Assess the potential cost implications on your organization. That means payroll expenses, budgetary considerations, and overall labor costs. Do you need to make adjustments to accommodate overtime pay? 
• Consider compensation adjustments. Does it make the most sense to increase salaries to maintain exempt status? Can you adjust work schedules to minimize overtime hours or implement alternative compensation structures? Note that having more nonexempt employees could complicate your administrative responsibilities and software needs regarding employee timekeeping.
• Communicate changes transparently. If employee classification or compensation changes will occur, communicate them clearly and as soon as possible. Explain the reasons for the changes, how they’ll be implemented, and how they may impact affected employees.
• Review overtime policies and procedures. Update them to reflect any changes in employee classification or compensation resulting from the new overtime rule, and ensure they are clearly defined and consistently applied. Remember to train employees (especially newly nonexempt people) in areas like time tracking, rest and meal breaks, and overtime approval.
• Train managers and supervisors. Ensure those in leadership roles understand the updated regulations, employee classification criteria, and overtime policies. This will help maintain compliance across the organization, maintain morale, and prevent dissatisfaction and turnover. 

Know Your Overtime Regulations

If you have two or more employees and your business makes yearly sales of at least $500,000, it is covered by the FLSA, meaning you must provide overtime pay to nonexempt employees. Your state may also have specific overtime laws, even if you’re exempt from FLSA requirements.

Simply put, you should understand overtime pay rules and how they’ll affect your business and workers!

But we get it—these approaching increases are significant, so you may be wondering what the best strategy is for adjusting employee compensation and classification and communicating these changes with your team. If you want a partner to help you navigate this challenging matter in the coming months, contact BlueLion today at 603-818-4131 or info@bluelionllc.com to learn how we can help.

Under the Fair Labor Standards Act (FLSA), employers must pay non-exempt employees who work over 40 hours in a week an overtime rate of 1.5 times their hourly rate. Suppose an employer has employees who hold multiple positions within the business and, therefore, receive multiple pay rates. In that case, the employer must calculate weighted overtime when these employees work over 40 hours in a week.

So, what is weighted overtime, and how does it work? This formula averages the employee’s different pay rates, which you must use to calculate their overtime wages.

Keep reading below for a breakdown of when and how to calculate weighted overtime.

When Do Employers Have to Calculate Weighted Overtime?

In addition to non-exempt employees with more than one job and pay rate, you have to perform weighted overtime calculations for non-exempt employees who have overtime and earn:

• A non-hours-based pay like commission, or
• Earn a fixed salary for an alternating workweek

Weighted overtime pay does not apply to employees with one role at one pay rate. For those workers, use the standard overtime calculation of 1.5x their regular pay rate.

Don’t Forget Non-discretionary Bonuses & Commission

A common oversight we see among employers is not including nondiscretionary bonuses and commissions in overtime calculations. Both are considered part of an employee’s regular pay rate, so they must be included in overtime. 

As the name suggests, discretionary bonuses are awarded at your discretion. They are issued near the end of the pay period and are not part of a contract, agreement, or promise that led employees to expect them. 

On the other hand, non-discretionary bonuses are those that are predetermined and that employees expect to receive based on factors like performance, productivity, or attendance. These bonuses are typically included as part of an employee’s compensation package and are not solely at your discretion. This means that during overtime pay calculation, you must: 

• Add the value of the bonus to the employee’s total regular earnings for the pay period
• Recalculate the regular rate of pay for the specific pay period in which the bonus was earned by dividing the total earnings for the pay period, including the bonus, by the total hours worked
• Calculate the overtime pay based on this new rate

The same goes for commission, which is based on an agreement. For example, suppose you have a contract with a salesperson stating that you’ll give them a 5% commission for every sale. In that case, that is a non-discretionary amount—you can’t suddenly decide to pay them an arbitrary amount one week. 

As you’d expect, this rule also applies to weighted overtime calculations. However, employers can avoid accounting for overtime bonuses by paying them “as a percentage of a nonexempt employee’s total straight-time and overtime earnings over the bonus period,” according to the Society for Human Resource Management (SHRM). 

How to Calculate Weighted Overtime

Calculating weighted overtime involves adjusting the overtime rate based on an employee’s different pay rates for various job duties or shifts. Let’s break down this process into a few steps, followed by an example: 

1. Calculate the total regular wages: Add the employee’s regular wages multiplied by the hours worked at each pay rate. 
2. Determine the weighted average pay rate: Divide the employee’s total compensation by the total hours worked to get the weighted average. 
3. Find the weighted overtime total: Multiply the weighted average from Step 2 by 0.5 to get the weighted overtime rate. Then, multiply this rate by the overtime hours to determine the additional overtime wages.
4. Add the total earnings: Combine the employee’s regular wages (Step 1) and their weighted overtime total (Step 3). 

Even with this step-by-step, calculating weighted overtime can get muddy. So, let’s say a coffee shop employee works front-of-house shifts for $12 per hour and kitchen duty at $15 per hour. She worked 30 hours in the front and 20 hours in the kitchen in one pay period. 

1. Start by finding her regular pay: (30 hours x $12) + (20 hours x $15) = $660
2. Next, divide the employee’s total wages by the total number of hours worked (50) to get her weighted average pay: $660 / 50 = $13.20
3. Multiply the weighted average pay rate by 0.5 to get her weighted overtime rate: $13.20 x 0.5 = $6.60
4. Calculate her total overtime wages by multiplying the overtime rate by the number of overtime hours worked (10): $6.60 x 10 = $66
5. Determine the employee’s total pay for the pay period by adding her regular earnings and weighted overtime wages: $660 + $66 = $726 (her total pay)

Calculate Weighted Overtime Properly & Comply with FLSA

Calculating weighted overtime is easier to understand with an example in front of you, but adding in nondiscretionary bonuses and commissions can complicate matters. The overall process can also be time-consuming.

Despite the apparent tedium, using the weighted overtime pay calculation is not optional when you have non-exempt employees working in different roles at different pay rates who work beyond 40 hours in a workweek. To remain compliant with FLSA rules, develop clear bonus and commission structures, track them carefully, and invest in an automated payroll system that can handle time-tracking and calculations. 

Do you have questions about how weighted overtime works or other FLSA regulations? Contact BlueLion today at 603-818-4131 or info@bluelionllc.com, and our HR consultants will happily answer them!

Most states have similar workers’ compensation laws, but in this article, we’ll look specifically at the Granite State’s laws. It’s vital that you know when you need it and the risk of not getting it when you are supposed to. 

Bottom line: The savings of not having a workers’ compensation policy are not worth the potential fines and legal action you’ll face for failing to comply! Let’s break it down below. 

Who needs workers’ compensation in New Hampshire? 

So, is workers’ compensation mandatory in New Hampshire? In most cases, yes. You must have insurance as soon as you have any employees, including full-time and part-time workers and family members. This law also applies to nonprofit organizations.

Who does NOT need workers’ comp insurance?

While all employers must have workers’ comp insurance, exempt individuals and entities include: 

• Sole proprietors
• Independent contractors
• Partners of partnerships
• Self-employed individuals
• Corporations or LLCs with three or fewer executive officers/LLC members and no other employees
• Direct salespeople
• Real estate salespeople

Corporations and LLCs must get workers’ compensation insurance once they have a fourth officer or LLC member. At this point, all officers, members, and employees are considered employees and would be automatically covered. You can then choose to exclude three executive officers or LLC members from coverage. 

Note that while you don’t have to have coverage as an independent contractor, you must meet the criteria and be able to prove that you qualify.

Do business owners need to be covered by workers’ comp?

Again, this depends on your business structure. As noted above, sole proprietors and business owners are not required to purchase workers’ compensation in New Hampshire. However, it doesn’t necessarily mean you shouldn’t! Workers’ compensation can offer significant financial protection if you undergo a serious injury or illness at work. It’s a wise investment, especially if you’re in a high-risk business.

Additionally, sole proprietors or partners operating as subcontractors under a general contractor may have to carry workers’ compensation if the general contractor requires it.

How can I get New Hampshire workers’ compensation insurance?

New Hampshire employers can purchase workers’ comp coverage through the private market by working with a licensed insurance broker or directly with an insurance company. 

If your business is in a high-risk industry, you may be unable to find coverage through the private market. Many high-risk companies must buy their policies through the New Hampshire assigned risk pool. You can also turn to the National Council on Compensation Insurance, which manages the pool and provides resources and coverage for employers who can’t get it elsewhere.

Finally, you may opt to self-insure your workers’ compensation policy. This typically works best for larger organizations since your company must pay for its workers’ comp claims. You’ll have to:

• Apply with the New Hampshire Department of Labor
• Guarantee that your company is financially equipped to handle workers’ comp claims (typically via a surety bond)
• Buy excess insurance coverage for claims that exceed your guaranteed coverage

How much does New Hampshire workers’ comp cost? 

Insureon reports that the average cost of workers’ compensation in New Hampshire is $44 per month. This rate depends on several factors, including:

• Industry and associated risks
• Claims history
• Payroll and number of employees
• Location
• Coverage limits and deductibles

Do you provide safety programs and practices? If so, you could qualify for discounts on your workers’ compensation premiums. These include safety training, providing appropriate safety equipment, and promoting a culture of safety, all of which can reduce the risk of workplace injuries and lower insurance costs. Learn more about New Hampshire’s safety labor laws.

Another resource that can save employers money and reduce risk to their company is the New Hampshire Second Injury Fund. The fund gives employers an option to limit their compensation costs if a partially disabled employee sustains a work-related injury that leaves them more injured than it would a non-impaired employee. A few quick facts: 

• This can be whole or partial compensation.
• The worker’s pre-existing condition should be a permanent impairment that poses an obstacle to obtaining employment. 
• It doesn’t matter where or how the employee sustained the original disability.
• The fund is intended to remove potential employment barriers for those with disabilities.

Proper employee classification is also essential to reducing workers’ compensation costs. Workers’ compensation class codes refer to the types of job duties employees perform. These codes indicate the risk level and type of hazard each role or work environment might involve.  Workers’ compensation costs are then calculated based on these factors.

For example, office employees who primarily work at their desks all day have a low risk of injury and, therefore, are less expensive to insure. On the other hand, warehouse workers operating heavy machinery likely cost more to insure. 

Small business owners may also benefit from a pay-as-you-go workers’ compensation policy. These plans provide low premiums and allow you to pay based on your actual payroll instead of your estimated payroll. 

What does workers’ compensation cover?

New Hampshire workers’ compensation insurance typically covers: 

• Medical Expenses: Workers’ compensation insurance pays for medical treatment related to work-related injuries or illnesses. This includes doctor visits, hospital stays, surgery, medication, physical therapy, and other necessary medical services.
• Lost Wages: Workers’ comp can also provide wage replacement benefits for employees who cannot work due to an injury or illness on the job. This typically covers a portion of the employee’s lost wages, typically around two-thirds of their average weekly wage, up to a statutory maximum.
• Temporary Total Disability (TTD): If a work-related incident temporarily prevents an employee from working, they may be eligible for temporary total disability benefits. These benefits provide income replacement until the employee can return to work.
• Permanent Total Disability (PTD): An individual who is permanently unable to work due to a work-related injury or illness may be eligible for permanent total disability benefits. These benefits provide ongoing income replacement.
• Permanent Partial Disability (PPD): If an employee suffers a permanent impairment or disability due to a work-related injury but can still work in some capacity, they may be eligible for permanent partial disability benefits. These benefits compensate the employee for the permanent loss of function or impairment.
• Temporary Partial Disability (TPD): If a workplace incident temporarily impairs a worker’s ability to perform some, but not all, of their job duties, they may return to work on a limited basis or in a modified capacity while recovering. TPD compensates the worker for the difference between their pre-injury wages and their wages while working in a reduced capacity.
• Vocational Rehabilitation: In some cases, workers’ compensation may cover vocational rehabilitation services to help injured workers return to suitable employment. This can include job training, education, job placement assistance, and other support services.
• Death Benefits: No employer wants to consider losing an employee on the job—and that’s exactly why workers’ comp is a MUST. If a worker dies as a result of a work accident, your policy provides death benefits to the worker’s dependents, such as spouses and children. These benefits typically include compensation for funeral expenses and ongoing financial support.

Most policies also include employer liability insurance to assist with legal expenses if an employee blames you for an injury or illness. However, workers’ compensation plans typically include an exclusive remedy provision, which states that an employee cannot sue their employer after accepting benefits. 

What are the penalties for failing to get coverage?

The fines and penalties for non-compliance with the New Hampshire workers’ compensation mandate can quickly add up. It starts with a one-time fine of $2,500 plus a fine of $100 per employee per day of noncompliance. The penalties apply from the first day of the infraction up to a year. Additionally, any individuals involved in knowingly failing to obtain a workers’ compensation policy will be held personally responsible and subject to penalties.

Plus, if an employee is injured on the job and you don’t have coverage, you could be on the line for all related costs AND any civil penalties. The state could even prevent you from doing business in the state until you comply. And employers who intentionally neglect to get workers’ compensation insurance could face a class B felony. 

When do employers have to report a work-related injury?

New Hampshire employers must report work-related injuries within five days of receiving notification from an employee. If you fail to report the incident in time, you could face hefty fines of up to $2,500. 

Note that employees have up to two years to report workplace injuries and illnesses. However, you should advise them that it’s best to report an incident immediately. 

Get Workers’ Compensation Guidance

Do you have more questions about New Hampshire workers’ compensation requirements? Or are you searching for the best policy to protect your business and employees? BlueLion is happy to provide information and connect you to reputable insurance providers! Contact us today at info@bluelionllc.com or 603-818-4131 to learn more. 

This is a delicate area where HR and leadership must make an effort to build positive relations with unionized employees, negotiate a contract, and adhere to it. Read on for five steps to adhere to the union contract, plus best practices for a continued successful relationship.

1. Establish & Understand the Collective Bargaining Agreement

If employees have recently unionized, leadership, HR, and your legal counsel should ideally draw up a CBA. This contract outlines requirements and protections for both parties, mitigating uncertainty. The CBA typically includes terms and conditions of employment, such as: 

• Wages
• Hours and breaks
• Benefits
• Dispute resolution and disciplinary action procedures
• Anti-discrimination laws

…and many more. The more detailed these terms and conditions are, the more likely you’ll be to avoid future conflict.

The union agreement should note how long it will be valid. Once the contract expires, both parties must meet to negotiate a new contract in good faith. Revisit the CBA regularly and ensure both sides follow all stated policies and procedures. 

While the National Labor Relations Board (NLRB) mandates that the employer and union meet and neither can refuse to bargain collectively, parties do not HAVE to come to an agreement. Just remember that this can complicate and draw out the situation. 

For example, if you declare an impasse and move forward with the last offer you presented to the union, the union can refute this and file an unfair labor practice for failure to bargain in good faith. At this point, the issue is brought to the NLRB, which will decide whether an impasse was reached.

2. Address Conflict Resolution & Disciplinary Action

A union agreement usually outlines terms and procedures for handling grievances or corrective actions. For example, it might include a shop steward representation provision granting employees the right to have a union representative present during investigatory or disciplinary meetings with management. The rep acts as a witness and advocate for the employee and helps protect their rights during the process. 

CBAs often include guidelines for handling workplace conflicts and complaints, including a process, timelines for resolution at each step, and arbitration if the issue remains unresolved. 

Union workers may bring grievances to management through your organization’s internal policies and procedures or approach their union for support. If an employee turns to the union, the union must then inform your business and represent the employee. Typically, conflicts can be resolved quickly and internally when addressed proactively. While the union could opt for legal action in extreme cases, this is not the norm.

3. Manage Union Dues

Most unions require members to pay monthly fees to support activities and operations, which are often defined in the CBA. These union dues are typically handled through a payroll deduction and cover things like negotiating and enforcing contract terms, representing members in grievance procedures, and funding other union activities such as organizing campaigns and political advocacy.

The process usually includes: 

1. Authorization: When an employee becomes a union member, they typically sign an authorization form consenting to have union dues deducted from their wages.
2. Payroll Deduction: The employer deducts the agreed-upon amount of union dues from the employee’s paycheck regularly, usually each pay period.
3. Remittance to Union: The employer then submits the fees to the union on behalf of the employees.

4. Commit to Compliance

While compliance is critical for any employer, it is particularly sensitive for those with unionized workforces.  First, you should understand and adhere to labor laws, including: 

• Fair Labor Standards Act (FLSA): The FLSA dictates federal requirements for minimum wage, overtime, and child labor laws. 
• National Labor Relations Act (NLRA): Union employees’ rights to collective bargaining and concerted activity are protected by NLRA provisions.
• Occupational Safety and Health Act (OSHA): OSHA includes regulations around creating a safe and healthy workplace to ensure employee well-being.

Additionally, you should implement policies and practices to protect your workers and ensure a culture of equity and inclusion, such as: 

• An anti-harassment and discrimination policy addressing vital areas like fair hiring and promotion practices, compensation, and corrective actions.
• Following employee privacy laws—certain information, like age, marital status, religion, and sexual orientation, are off-limits.
• Knowing when to classify workers as W-2 employees vs. independent contractors—misclassification can subject you to legal action and significant penalties.

Make sure you understand and adhere to federal labor laws AND your state’s regulations. Requirements vary when it comes to labor unions, minimum wage, salary history and background checks, anti-discrimination policies and training, and more. Your HR and legal teams should guide you on these topics so nothing is overlooked.

5. Foster Positive Union Relations

In addition to thoroughly defined and prompt conflict resolution processes, leadership and HR teams can maintain good relationships with union employees and representatives through open, honest communication. Consistent and transparent conversations strengthen trust and prevent minor concerns or misunderstandings from escalating.

CBAs and labor laws around unions can be complex and ever-changing. Train both managers and employees on their rights and duties and encourage them to view one another as team members rather than opponents. Doing so gives them the knowledge and skills to create a positive work environment and resolve issues peacefully. 

Bonus Tips: 4 Labor Union Compliance Mistakes to Avoid

Swaying Employee Union Decisions

If employees come to HR or management asking about the union and whether they should join, your company should always respond neutrally. Simply let them know that they have the right to become union members and refer them to a union representative for more information. 

Discarding Union-related Documentation

We’ve said it before about employee documentation, and the same goes for union-related documents—keep everything! That goes for complaints, disciplinary action, workplace investigations, and other issues regarding the union and its members. These files can protect your business if legal action arises down the road.

Failing to Adhere to the CBA

Your company’s safest bet is to stick to the union contract, which will prevent most issues. Even a minor violation could damage union relations and, worse, result in a lawsuit against your business. Potential shortcuts are simply not worth the risk!

Not Taking Unions Seriously

Many unions are well-organized and mean business, with dedicated attorneys, member benefits (e.g., health insurance and retirement plans), and strong relationships with the local government. Ignoring or dismissing the union’s concerns or demands could lead to:

• Decreased morale, escalating tensions, and labor disputes, in turn, disrupting productivity and operations
• Reputational damage because your company is viewed as anti-union and insensitive
• Legal action by the union, which could file unfair labor practices charges with labor relations boards or take your company to court
• Difficulty attracting and retaining skilled workers

Respecting the Labor Union Agreement

Once you establish a CBA with the union, protecting your company and employees is as simple as honoring that contract and following employment and labor laws. You’ll enjoy a much more fruitful, positive relationship with union workers when you maintain transparent communication and view one another as team members. 

Of course, labor unions and relevant laws are complex, so having experienced legal counsel and HR professionals by your side will help you navigate the process and negotiations much more smoothly. If you’re still searching for that HR partner, contact BlueLion at 603-818-4131 or info@bluelionllc.com to learn how we can help today!

In this article, we’ll answer some frequently asked questions to help you grasp the basics of the HIRD form. 

What is the HIRD form?

The Massachusetts Executive Office of Health and Human Services and the Department of Revenue (DOR) administer the HIRD form through the MassTaxConnect (MTC) web portal. It allows employers to report specific health insurance information about their employer-sponsored health insurance (ESI) and employees.

How will it be used?

MassHealth uses the information provided on the HIRD form to identify its members with access to qualifying ESI who may be eligible for subsidized health coverage through the MassHealth Premium Assistance Program.

This typically mitigates the need for you to fill out a separate Premium Assistance application for qualifying employees. However, MassHealth may request additional information from you to verify an individual’s eligibility.

Who has to complete the HIRD form?

All Massachusetts employers with six or more employees in any month during the preceding calendar year must complete the HIRD form. This also applies to:

• In-state or out-of-state employers who had Massachusetts-based employees in the past 12 months
• Employers who have six or more employees but do not offer health insurance

You must complete your HIRD filing annually. The form is available for electronic completion starting November 15 and must be completed by December 15 of the reporting year. Failure to file could lead to penalties, so don’t overlook this reporting requirement!

How do I file the HIRD form?

To complete your HIRD filing, visit the MTC web portal (the same used to file your state tax returns, submit forms, and make tax payments). Follow these simple steps: 

1. Log into your MTC account.
2. Select the “Withholding tax” account, then click the “File health insurance responsibility disclosure” link.
3. Complete the form electronically—paper forms will not be accepted!

What information will I need to provide?

You’ll be asked for details like the total number of employees, whether health insurance coverage was offered, and the number of employees who accepted or declined coverage. You may also have to provide information about your health insurance offerings and contributions. 

Work with your HR and/or benefits team to ensure you have the summary of benefits (which contains many of the essential details). You may also need information set by your company policies (e.g., minimum probationary period and hours worked per week to qualify for health insurance). Other information will be included in the agreement between your company and your insurance provider (e.g., Plan Year).

You won’t need to report information about flexible spending accounts (FSAs), health savings accounts (HSAs), or health retirement accounts (HRAs) on your HIRD filing.

What if I use a payroll company or PEO?

If you use a payroll company to file tax information on MTC, they can also file the HIRD form on MTC. Coordinate with your payroll provider to ensure accurate and timely filing.

If you use a professional employer organization (PEO), either you or the PEO may file the HIRD form on MTC. Again, coordinate with your PEO to ensure accurate and timely filing. 

The bottom line is that it is the employer’s responsibility to ensure the HIRD form is filed on time, regardless of whether you enlist your payroll company or PEO to submit it!

Could I be penalized based on details reported in the HIRD form?

No, the HIRD form will not be used to impose new fines or penalties related to your ESI offerings (or lack thereof). But if you have questions or concerns about your benefit offerings, we’re happy to help!

Final Thoughts on the HIRD Form

Ensuring accuracy is crucial when completing the HIRD form to avoid potential penalties or compliance issues. Keep track of changes in state regulations regarding health insurance reporting to stay updated on your responsibilities—and find a reliable HR partner who will help you navigate the many employment filings!

The HIRD Form is an important requirement for Massachusetts employers to fulfill their obligations regarding health insurance reporting. By understanding what the form entails and how to complete it accurately and on time, you can ensure compliance with state regulations and contribute to effectively administering healthcare coverage programs.

If you have further questions or need assistance completing the HIRD form, contact BlueLion for guidance today at 603-818-4131 or info@bluelionllc.com! We’ll walk you through this and any other Massachusetts labor law requirements.

Before you panic, respond negatively, and harm employee relations, take a moment to breathe! Consider what it means that your employees want to form a union.

Workers generally don’t organize unions with the goal of going to war against their employer. They’re trying to communicate with you about what they want, the things that your company could do to improve the working conditions and lives for themselves and their team members. Instead of viewing it as a threat, consider how you can work with employees to lift them up along with your organization.

With the right proactive measure, you can mitigate the chances of employees feeling the need for a union. If they do take this road, responding calmly and communicatively can lead to a positive outcome—but handling union efforts poorly (e.g., punishment, termination, or preventing unionization) can have a severe impact on your employee turnover, operations, reputation, and more.

Read on to understand why there is a “right” and “wrong” way to deal with employee unions and tips for responding wisely.

The Status of Unions

Why is it that unions seem to be on the rise again? Consider the current job market, where employees now have leverage as the unemployment rate remains below 4%. This means workers feel there is less risk in unionizing and are more confident about their ability to find another job with better conditions and pay.

But what do the laws say? The National Labor Relations Board (NLRB) allows workers to form a union in one of two ways. Organizers can pursue an NLRB election if they get at least 30% of workers to sign cards or a petition saying they want a union; if the majority vote for a union, the NLRB will certify it. Or, the employer can voluntarily recognize a union based on proof (i.e., signed union-authorization cards) that a majority of employees want union representation.

Concerted activity is also protected, meaning employers can’t stop employees from discussing work conditions, how to improve them, and unionization. Follow the NLRB’s “TIPS” rule, outlining which actions are illegal: 

• Threats: Employers cannot threaten employees for supporting a union.
• Interrogation: Employers cannot question employees about their union sympathies, activities, or those of their peers.
• Promises: Employers cannot promise or provide benefits to employees to gain their support and deter them from supporting the union. 
• Surveillance: Employers cannot spy or pretend to spy on union activity.

However, managers and supervisors can communicate specific information during a unionization campaign under the “FOE” rules: 

• Facts: You may share publicly available facts from reputable sources like the NLRB and unionfacts.com.
• Opinions: You may share why your company believes a union is unnecessary.
• Examples: You may provide real stories of others to highlight why a union might not be the right choice.

Create an Employee-Centric Corporate Culture

Let’s face it: Your employees are your most important business asset. Not your facility, equipment, inventory, or cash flow. It’s your people—without them, your operations and productivity, even your customer experience, would suffer.

It goes without saying, then, that the first step in avoiding unionization is creating a workplace culture where employees don’t feel it’s necessary to form a union. So, how do you do this? Maintain employee satisfaction by: 

• Fair, competitive pay and benefits
• Ongoing performance management 
• New opportunities and room for growth
• Safe, healthy, and enjoyable working conditions
• Flexible work schedules and paid leave policies
• Providing a system for employee feedback and ideas—and showing you listen to them!

With a positive company culture that puts your people first, employees will know that leadership cares about their well-being at work and beyond. In turn, they likely won’t feel a need to unionize. 

Typically, union talks begin when teams believe management does not care about and value them. So remember, even when workers have concerns and conflict arises, listening can go a long way. People often just want to be heard!

Address Concerns Early

Sure, you can look for warning signs of employees wanting to form a union, but by this point, it’s likely too late. 

Instead, you should have a pulse on your workplace culture and employee satisfaction long before problems are significant enough that people start talking about unionizing. Hence the importance of building a positive workplace culture and putting employees first from the beginning!

Once you start hearing rumblings of unionization talk, you first need to assess what issues could be driving them to unionize. Consider the common issues mentioned above. What changes can you make? If you can’t afford the pay and benefits workers are requesting, what else can you offer? Look at work-life balance perks like those flexible work schedules and leave policies.

Despite discussions about forming a union, it may not be what your employees truly want—often, they feel it’s the best option to garner attention and change. Again, showing them an effort to listen and create a fair work environment can often deter union efforts.

Shift Your Perspective

Historically, many companies believe that unions would not be good for either party and attempt to convince employees of this, too. From the last couple of years, we can look to the recent Starbucks, Amazon, and Target stories as glaring examples of what companies should NOT do. 

Starbucks fired workers known to be involved in union organizations and closed stores with strong union activity. Amazon has been found in violation of labor laws by retaliating against employees for union activities and threatening employees. The company also required workers to attend a series of anti-union meetings in the weeks leading up to the Staten Island union elections. And leaked Target training documents showed that the company instructs store management to prevent workers from forming unions.

Employers walk a fine line regarding workers’ rights to unionize. At the least, they risk reputational damage; at worst, they risk violating labor laws. 

Recognize that when employees form a union, it means they are dedicated to improving the company. Yes, they could simply quit and find work elsewhere—but they are invested in their coworkers and some part of the organization.

When you go the collaborative route in your relationship with a worker union, it can actually have positive effects, such as:

• Improved employee retention and relations
• Fostering trust and more efficient problem-solving—without the power struggle that often comes along with union negotiations
• A more equitable and sustainable workplace

Respond to Unionization Efforts

Take the time to find out what employees want and why they’re forming a union, then evaluate how you can address their concerns. Consult a labor law attorney before reacting to unionization efforts or making any rash decisions. Then, determine how you will respond—remember, it isn’t black and white or one extreme or the other.

Establish open communication channels between management and employees, and encourage continued dialogue. This is one way to immediately address concerns and issues and demonstrate that the company values employee feedback, helping to build trust and reduce the appeal of unionization. 

Below are a couple of approaches employers could take. 

Pursue an Active Partnership

Working together can strengthen employee relations and result in a positive outcome, preventing the situation from going sour. You could start by implementing: 

• Employee engagement programs focused on improving job satisfaction, work-life balance, and overall employee welfare
• Labor management committees where management and employees collaborate on workplace issues 

Both can help build trust and address concerns before things escalate to unionization.

Proactively working with employees could also mean voluntarily recognizing the union (i.e., recognizing the union without requiring a formal NLRB-run election). At this point, you should begin good-faith negotiations. This involves sincere efforts to reach an agreement on terms that both parties find acceptable.

Maintain a Neutral & Respectful Stance

If you choose not to voluntarily recognize a union, you can still respond legally and in a way that won’t further damage your relationship with workers. Avoid making negative comments about the union or its organizers, and refrain from any actions that could be perceived as attempting to influence employees’ decisions. 

You might also establish key agreements with union organizers, such as: 

• A neutrality agreement stating you agree not to oppose unionization efforts actively. This can include not holding anti-union meetings, distributing anti-union materials, or taking actions that could be perceived as attempting to influence the outcome. 
• An agreement allowing union organizers reasonable access to non-working areas of the workplace for organizing purposes. This agreement should outline a reasonable time, place, and manner to ensure minimal disruption to business operations.

Remember, you have the right to communicate with employees, so you may share information about the potential consequences and benefits of unionization to help them make educated decisions. 

After an NLRB Election

In the case an NLRB election takes place and employees vote in favor of unionization, accept the results and begin bargaining in good faith with the union. One essential piece to negotiate is a collective bargaining agreement (CBA), which outlines the terms and conditions of employment. 

Additionally, ensure your company follows any NLRB orders related to the election process and subsequent bargaining by providing necessary information to the union and engaging in good-faith negotiations.

When it comes to communication with employees, keep it positive and respectful. Reassure them of the company’s commitment to maintaining a positive workplace despite the changes and encourage collaboration between membership and the union. Conduct orientations for employees and management to familiarize them with the rights and responsibilities established by the National Labor Relations Act (NLRA).

Maintain this open dialogue with the union to address concerns and ensure a collaborative relationship. This can help prevent misunderstandings and foster a positive working relationship. Explore opportunities for joint initiatives that benefit both the company and the unionized workforce. This could include joint committees to address workplace issues and improve communication.

Final Thoughts on Worker Unions

It’s essential for employers to strike a balance between addressing the root causes of employee dissatisfaction and respecting their rights to organize. Be cautious about engaging in activities that may be perceived as unfair labor practices, as these can lead to legal challenges.

By proactively addressing underlying issues, maintaining open communication, and respecting employees’ rights, you can create a positive workplace environment that mitigates the appeal of unionization. It’s crucial to approach the situation with empathy, transparency, and a commitment to addressing employees’ concerns.

Remember, each workplace is unique, and the appropriate response may vary based on the specific circumstances. Seeking legal advice and consulting with HR professionals can help tailor your approach to your organization’s needs and challenges. Contact BlueLion to learn how at info@bluelionllc.com or 603-818-4131 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.

We get it—another hefty responsibility for the small business owner to manage! What records do you need to retain? And for how long? 

Federal laws and agencies like the Federal Labor Standards Act (FLSA), Equal Employment Opportunity Commission (EEOC), and Department of Labor (DOL) have established employee recordkeeping requirements. Plus, you might have state and local laws to adhere to. 

Keep reading for a checklist of employment records you’ll need to keep, along with guidelines for how and when.

How long do employers have to keep employee records?

This depends on the type of records and any applicable federal, state, and local laws that apply. The Society of Human Resource Management (SHRM) notes that many employers keep it safe and straightforward by retaining employee records for seven years, which meets most regulations. 

Employee Personnel Files

Most personnel files should be retained for at least one year after employment ends. This includes everything from personal details to hiring documentation. Under the FLSA, employers should keep personal and hiring records, such as: 

• Full name and Social Security number
• Complete address
• Birth date (if under age 19)
• Demographic information
• Job description
• Job application and cover letter
• Pre-employment evaluations
• References
• Background checks and drug test results
• Offer letter
• Employment, noncompete, nonsolicitation, and any other contracts
• Start and end dates

When it comes to performance and disciplinary records, keep the following for at least two years after the employee leaves:

• Performance reviews
• Wages and changes 
• Trainings, classes, and certifications completed
• Job titles, promotions, or transitions
• Leaves of absence
• Corrective actions or complaints
• Exit interviews, layoff, or termination information

Form I-9, Employment Eligibility Verification

Form I-9 is one of the most important documents for every employee you hire in the United States, including citizens and noncitizens. You and the employee must complete your respective portions of the form by their first day of work. 

You must retain all I-9s for three years after the employee’s hire date or one year after their termination, whichever is later. Be sure to file them securely and separately from other employee records. The new I-9 alternative procedure offers a remote method, making completing and retaining each form much more efficient.

Payroll Records

This is another crucial area of employee records, which can become overwhelming and confusing due to the numerous documents and regulations around payroll. Many requirements range from three to seven years—and employers often err on the side of caution by sticking to the higher end. If you’re not sure if you should keep certain documents, hold onto them and consult with an HR professional. Below are some guidelines.

First, the Department of Labor (DOL) requires businesses to retain any wage-related records for at least two years, including:

• Employee schedules, whether fluctuating or fixed
• Regular pay rate
• Wage tables
• Time cards and piecework tickets
• Total daily or weekly straight-time earnings
• Total wages paid each pay period
• Overtime earnings
• Additions to or deductions from wages

If you’re ever selected for a DOL audit, you’ll need to provide these employee records, which should be stored at the workplace or in a central records office.

Regarding the method and format you use for timekeeping, you may use a time clock, have a designated timekeeper track employees’ work hours, or have workers write their own times. The DOL allows any of these as long as the records are complete and accurate.

For workers on fixed schedules, you can simply document their daily and weekly hours, indicating that they followed the assigned schedule. If an employee works more or fewer hours than their set schedule, record those hours on an exception basis.

Tax Records

The IRS also requires employers to keep employee records related to federal and state taxes for at least four years, including: 

• Your EIN
• Amounts and dates of all wages, annuities, pension payments, and tips
• The fair market value of in-kind wages paid
• Employee names, addresses, SSNs, and occupations
• Dates of employment
• Payment details for employees who were absent due to sickness or injury
• Copies of employees’ income tax withholding certificates (Forms W-4, W-4P, W-4R, W-4S, and W-4V)
• Dates and amounts of tax deposits you made
• Copies of returns filed and confirmation numbers
• Dates and amounts of fringe benefits and expense reimbursements
• Documentation to substantiate any credits claimed

Employee Benefits

According to the Employee Retirement Income Security Act of 1974 (ERISA), employers must retain employee records of 401(k) plans for at least six years after filing Form 5500. These include but are not limited to fiduciary plan documents, participant disclosures, payroll records, selections, and beneficiary designation forms. 

The EEOC also mandates that employers keep documentation of all employee benefits (e.g., pension and insurance plans) “and any written seniority or merit system for the full period the plan or system is in effect and for at least one year after its termination.” Records of benefit plans, enrollment forms, and plan descriptions should all be kept.

These requirements are part of anti-discrimination laws. If an EEOC charge is filed against your business, you must show these records and hold onto them until the charge or a related lawsuit is resolved. Retaining accurate, clear paperwork can protect your company in these situations.

Health & Safety Records

The Occupational Safety and Health Administration (OSHA) mandates retaining records of workplace injuries, illnesses, and exposure to hazardous substances for five years after termination. Additionally, HIPAA regulations require storing medical files separately from personnel files for confidentiality, while EEO laws protect sensitive personal information.

To be safe, keep documentation of:

• Employee medical records related to their ability to perform their jobs safely (e.g., fitness-for-duty exams, medical evaluations for specific tasks, and records of workplace accommodations)
• Leaves of absence and details
• FMLA leave documentation (see next section)

If an employee is exposed to a toxic substance, employers must keep documents related to all medical exams and safety data for 30 years after the worker’s termination.

Family and Medical Leave Act Documentation

The FMLA also has employer recordkeeping requirements, stating that businesses must maintain specific documentation related to employees’ leave for family or medical leave for at least three years. These include:

• Notices given to employees regarding their FMLA rights (e.g., general notice postings, individual eligibility notices, and rights and responsibilities notices)
• Records of the designation of FMLA leave, including any forms or communications specifying the leave as FMLA
• Medical certifications provided by employees to support their need for FMLA (which should detail the serious health condition of the employee or family member and the leave duration)
• Records of any paid and unpaid leave taken under FMLA, how it was designated (i.e., FMLA or otherwise), and benefits maintained during leave
• Employer policies and practices on benefits and compensation during paid and unpaid leave

Maintain the confidentiality of FMLA-related records by storing them separately and ensuring only authorized personnel can access this sensitive information. 

Conclusion

Investing the time and energy into proper employee recordkeeping is worth it to protect your company and employees and mitigate risk! This is a major area that will help you remain compliant and streamline HR processes. Inaccurate or missing paperwork can lead to one or a chain reaction of costly events, including:

• IRS or DOL audits
• Labor law noncompliance
• Disputes about compensation, hours worked, overtime, and more
• Discrimination and harassment allegations
• Privacy and data protection violations and breaches

And all of the above opens up your company to potentially significant penalties. For a small business, every dollar counts—and thousands of dollars in fines can take a severe hit on your bottom line!

Staying up on these many items and requirements takes time and effort. So, if you have questions about employee records and how long to keep them, contact BlueLion today for guidance at info@bluelionllc.com or 603-818-4131!