New York City has become the latest area to pass a law banning what has been called “unemployment discrimination.”

So just what is unemployment discrimination?  It refers to denying candidates employment based solely on the fact that they are not currently employed.

It’s no secret that companies have probably always preferred actively employed candidates, but some companies took it a step further in the wake of the recession by stating in job postings that unemployed candidates would NOT be considered.

The practice had people crying foul because many workers on the employment lines were victims of the recession’s mass layoffs and were not necessarily poor performers.

As a result, three states have passed laws against unemployment discrimination.  In general, these laws prohibit companies from posting ads stating that current employment is a job requirement or that unemployed candidates won’t be considered.

New York City has become the first city to pass such a law, which took effect on June 11.  The law makes it illegal to base employment decisions (hiring, compensation, terms, etc.) on a person’s employment status.  According to the Associated Press, NYC’s law is the most far-reaching of the unemployment discrimination laws, since it is the only one that allows applicants to sue for damages.

While it may not be spelled out in writing, many companies have a strong preference for currently employed candidates.  They might even go as far as to tell recruiters not to present any unemployed candidates.

Recruiters should make clients aware of the laws against unemployment discrimination and of the drawbacks of arbitrarily discounting the unemployed.

Even if it’s not illegal where your clients do business, overlooking candidates based solely on their employment status is not the best business strategy.  There are a number of reasons a candidate could be laid off that have nothing to do with their quality of work.

If you have a candidate you feel strongly about, but who is being overlooked due to their employment status, you may want to consider offering that candidate on a contract-to-direct basis.  This allows clients to “try-before-they-buy.”

If the candidate doesn’t work out, they can simply end the contract and try someone else.  But if they have found a great worker, they can extend the direct hire offer, and in most cases

As the number of wage-and-hour lawsuits under the Fair Labor Standards Act (FLSA) hits an all-time high, recruiters can help clients avoid what one attorney calls “one of the top threats to U.S. employers.”

Human Resource Executive Online recently reported that 7,764 FLSA lawsuits were filed between April 2012 and March 2013, which is the reporting year that is used by the Federal Judicial Center.

“With no clear catalyst during the past 12 months, this strong spike and new high for FLSA claims makes them one of the top threats to U.S. employers,” Richard Alfred, chair of Seyfarth Shaw’s wage-and-hour litigation practice, told Human Resource Executive Online.

While there is no obvious reason for the spike, Alfred largely blames the economy.  As the economy improves, he believes attorneys are targeting new companies with growing workforces.

On the flip side, the long, stretched out recovery has put increased pressure on existing employees who might be looking more closely at their employer’s pay practices as a result.  Social media has also made employees more aware of the FLSA and the rights that they have under it.

As a recruiter, clients often look to YOU as an employment expert, so it’s important that you are familiar with the FLSA and counsel your clients on the proper application of the law to help them avoid this fate.  Below are six key points to remember:

1. Overtime (1.5 times the regular pay rate) must be paid to most employees for any hours worked over 40 in a workweek.
2. Your clients also need to be aware of state laws that may be more generous to employees.  For example, in California, employees must be paid overtime (OT) for any hours worked over eight in a work day.
3. Your clients MUST prohibit off-the-clock work.  They should require that employees get pre-authorization before working overtime and that they keep accurate records, Alfred told HRE Online.
4. Some employees may be considered exempt from OT, but they must fall into the Executive, Administrative, Learned Professional, Computer-Related, or Outside Sales classifications.  They must meet speific requirements to fall under these categories. Please see the exempt requirements provided on the Department of Labor website.
5. Exempt individuals must also be paid on a basis of at least $455 a week on a salary, not hourly basis.  There are a couple of exceptions to this rule.  Computer-Related professionals may be paid at an hourly rate of at least $27.63 per hour ($39.90 per hour in California). Additionally, the salary requirements do not apply to those under the Outside Sales exemption.
6. DO NOT let your clients misclassify W-2 employees as Independent Contractors to avoid the overtime rules.  Doing so is just asking for Internal Revenue Service audits and FLSA lawsuits for back OT wages.

(Editor’s note: This article is intended for informational purposes ONLY and should not be considered legal advice.)

Many recruiters and employers are still trying to wrap their arms around Generation Y (or Millennials, if you prefer) and their unique look at the workplace.

Now, according to Workforce, recruiters may want to start bracing for the next generation in the workplace.

The article “Another Generation Rises: Looking Beyond the Millennials” states that there are a number of monikers used to refer to these individuals born in 1995 or after: Pluralists, Re-Generation, Generation Z, and Homelanders.

The youngest of this generation are just turning 18, and some are already making their way into the workforce.

Of course, with any new generation, experts have predicted some characteristics they think will come to define this generation:

• Environmentally conscious
• Fiscally conservative and willing to delay gratification
• More likely to rent than own
• Indifferent to technology: they grew up with it, so they aren’t as obsessed with it as Millennials
• More likely to stay close to home due to the domestic and international turmoil they have witnessed (hence the name “Homelanders”)

There is some debate among experts whether these individuals really constitute a new generation or if they are just “late-wave Millennials.”

One thing is clear, though: the life experiences of people correlate strongly with how they work, so it is helpful to consider the events and environmental factors that have shaped their lives.

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Think you don’t have to worry about healthcare reform because you don’t have 50 or more employees? Think again!

Most of the hype about the Affordable Care Act (ACA), the healthcare reform law better known as Obamacare, has been surrounding the employer mandate.  Employers with 50 or more employees will have to provide affordable health coverage to those employees by 2014.

If you have contractors who are on your payroll, they count towards your total employee count.  Many recruiters, even those who employ some contractors, won’t get anywhere near this 50-employee threshold.  But that doesn’t mean they are out of the woods when it comes to Obamacare.

There are administrative tasks tied to the ACA, even for the smallest of employers.  For example, even if you only have a couple of employees (in-house, contractors, or a combination), you will have to provide those employees with a notice about the healthcare exchange, which has now been dubbed “The Marketplace.”

The Marketplace is supposed to provide individuals with a place where they can compare and select healthcare plans.  Depending upon their income, they may qualify for premium tax credits to reduce the cost of the coverage they select.

Any employer who is subject to the Fair Labor Standards Act (FLSA), which is almost EVERY employer, must provide a notice to employees letting them know that the Marketplace will be available starting January 1, 2014.

The notice must let them know what services the Marketplace provides and how to contact it.  It must also inform them that they may be eligible for a premium tax credit and that they may lose the employer contribution (if applicable) if they choose to purchase their insurance through the Marketplace.  You have to provide this notice even if you do not offer insurance.

On October 1, 2013, employers must begin providing this notice to new employees at the time they are hired.  All existing employees must receive the notice by October 1, 2013.  For details on how to implement this, the Department of Labor has provided a Technical Release.

Very small firms and companies may have other responsibilities under Obamacare, as well, especially if they offer health insurance.  For instance, the health reform law mandates some changes to the COBRA notices employers send to plan participants who lose their coverage.  The law also has certain reporting requirements for employers who offer health insurance, regardless of how many people they employ.

For these reasons alone, it’s important that recruiters don’t ignore Obamacare.  Be sure that you are aware of your responsibilities based on the number of employees you have, and make sure you educate your smaller clients about these provisions, as well.

Editor’s note: This article is for informational purposes only and should NOT be considered legal advice.

— — —

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There’s a new sheriff in town when it comes to worker misclassification.

Many employers use 1099 independent contractors (ICs) to reduce the costs associated with workers. By utilizing ICs, employers avoid paying the employer share of payroll taxes, the expenses associated with Workers’ Compensation and unemployment, employee benefits costs, and the time and money associated with administering various employment tasks.

However, employers can’t just call a worker an IC to avoid those costs. The worker must meet certain criteria to qualify as an IC.

The Obama administration has been particularly concerned about cracking down on the misclassification of ICs who really should be W-2 employees.

Worker misclassification robs both state and federal governments of taxes and unemployment funds.  Up until now, most of the news about worker misclassification enforcement has come out of the IRS.  But according to a Forbes column titled “Independent Contractor Enforcement: There’s More Than The IRS To Fear” by attorney John Thomas, the U.S. Department of Labor (DOL) has stepped up its own enforcement efforts against the misclassification of independent contractors.

This is all part of the Misclassification Initiative in which the DOL announced they would work with the IRS and share information to crackdown on worker misclassification.

This effort has resulted in several recent high dollar judgments against employers.  Most recently, the DOL announced it had recovered more than $1 million in back wages for workers at a Kentucky-based cable installation company. The Forbes column warns that many more DOL investigations are being conducted now.

It is important that you educate your clients of the ever-increasing focus on worker misclassification. Encourage them to look at their IC workforce and determine if those workers truly qualify as ICs.  In general, government agencies will be looking at the degree of control a company has over a worker and how financially dependent the worker is on the company when determining a worker’s correct classification. The best place to learn about correct IC classification is the IRS website.

Recruiters can help their client companies by offering to convert current 1099 ICs to W-2 employees.  You can offer to put those workers on contract assignments and outsource their employment to a contracting back-office that serves as the W-2 Employer of Record.

That way, your clients can still escape the administrative and financial burdens of employing their workers without the risk involved with making them ICs.

According to a recent Society for Human Resource Management (SHRM) article, I-9 audits are on the rise (SHRM membership may be required to access this article).  In 2004, only three audits were conducted compared with 3,004 in 2012.  Simple paperwork errors can cost employers up to $1,100 per violation.

If you serve as the W-2 employer for your contractors, YOU are responsible for I-9 compliance . . . and any fines assessed in an I-9 audit.  Here are some tips for making sure your I-9s pass muster.

1. The newest version of Form I-9 must be used exclusively starting May 7, 2013.
2. Make sure the employee completes Section 1 on their first day of work.  Inspect it to be sure that all the required information is provided and that Section 1 is signed and dated.  If anything is incomplete, don’t fill in the missing information.  Only the employee can complete or correct Section 1.
3. Be sure that you complete Section 2 within three days of the employee’s start date.  So if a contractor starts an assignment on a Monday, Section 2 must be complete by Thursday.
4. Remember that you must physically view each original document the employee presents in order to complete Section 2.  So what if you are too far from the employee to meet them?  The I-9 does allow for an “authorized representative” to complete Section 2 instead of the employer.  You could ask the client or a Notary Public to serve as the authorized representative.  If you encounter a lot of reluctance, you may want to work with an attorney to draw up a disclaimer that assures them they will not be held liable for I-9 penalties.
5. Conduct annual I-9 audits and make corrections where needed.  But remember, don’t white out mistakes.  Cross them off, initial, and date any changes.  Don’t make changes to Section 1—again only employees can make changes there, so if you find a mistake, ask the employee to make the correction.  And be sure not to back date anything.  While correcting I-9s may not eliminate penalties, they could reduce them.
6. U.S. Immigration and Customs Enforcement (ICE) normally audits companies that are connected to the nation’s “critical infrastructure,” such as power plants, food-service businesses, airports, etc., according to SHRM.  But complaints to ICE from disgruntled employees can also now initiate an audit, so don’t assume that your firm is flying under the radar.

Disclaimer: This article is for informational purposes only and should NOT be construed as legal advice.

One of the trickiest things about running your own back-office is navigating the complex web of state and local laws.  Paid sick leave (PSL) is an area where recruiters need to be especially careful.  With no paid leave laws on the federal level, some states and cities are taking matters into their own hands.  Most recently, the city of Portland, Ore., passed a sick leave ordinance that will go into effect on Jan 1, 2014, according to HR Hero. If you’re running your own back-office, you are responsible, as the employer of your contractors, for providing PSL when required.  Here is a quick breakdown of the PSL laws currently on the books in specific areas: Portland, Ore.—Employers with six or more employees will be required starting 1/1/2014 to provide PSL to those working 240 or more hours per year within the city limits.  This will apply to employers even if they are not based in Portland and even if the employee only works in the city occasionally, as long as they meet the 240 hours per year requirement.  Employees will earn one hour of paid leave for every 30 hours worked up to a maximum of 40 hours per year.  They can also carry up to 40 unused hours over.  This law will also require employers with less than six employees to provide them with one hour of UNPAID sick leave for every 30 hours worked up to 40 hours per year. San Francisco—All San Francisco employers are required to provide one hour of PSL to employees for every 30 hours worked.  The maximum is 40 hours per year for small businesses (10 or fewer employees) and 72 for larger employers (more than 10).  Unused leave carries over every year, not to exceed the maximum limit.  Visit the City & County of San Francisco Labor Standard Enforcement site for more details. Seattle—Seattle’s PSL law applies to employers with a total of five or more full-time employees.  If any of those employees work at least 240 hours per year within Seattle’s city limits, the employer is required to provide one hour of leave for every 40 hours they work.  The maximum hours range from 40 to 72, depending upon the size of the company.  This law is unique in that it not only allows employees to use the time to care for themselves or a family member in the case of injury or illness, but it also can be used as “safe leave” if their place of business has been closed by a public official for health or safety reasons. Washington, D.C.—Under the Washington D.C. Paid Sick Leave Act, employees must be employed for a year without a break in service and work at least 1,000 hours prior to their request to take time off.  The law excludes the following types of workers: independent contractors, students, health care workers who have opted into a premium pay program, and restaurant servers and bartenders who receive both wages and tips.  The number of hours accrued depends upon the employer’s size, but cannot exceed seven days a year. Connecticut—With the only state-wide PSL law so far, Connecticut requires employers with 50 or more employees in the state to provide up to 40 hours of PSL.  The tricky part about this law is that it only applies to “service workers,” those who are not exempt from the Fair Labor Standards Act (FLSA) requirements and who fall into one of the positions listed in the legislation.  You can view a list and other details about the law by clicking here. Just because you don’t have contractors working in these areas doesn’t mean you don’t need to be concerned.  New York City is also close to passing legislation, and Philadelphia is considering its own PSL law.  Chances are that more will follow suit.  As a contract staffing recruiter running your own back-office, it’s important that you stay on top of these developments and make sure you’re following any applicable PSL laws. This article is for informational purposes only and should NOT be construed as legal advice.

A lack of qualified health IT professionals could prevent some healthcare providers from receiving government funding to implement Electronic Health Records (EHRs) at their facilities, according to Staffing Industry Analysts, citing data from a PricewaterhouseCooper (PwC) Health Institute Report.

The Health Information Technology for Economic and Clinical Health Act (HITECH Act) has been providing funding to healthcare providers for the adoption and “meaningful use” of EHRs.  That funding is contingent upon healthcare providers meeting specific deadlines.

But according to the PwC report, 67% of healthcare CEOs said they are experiencing IT staff shortages, and 59% said those shortages will negatively impact their ability meet those deadlines to receive the meaningful use incentives.

The need for Health IT professionals is so severe that many healthcare providers are seeking IT professionals from other industries.  But that is not the ideal solution.

Recruiter Raymond Gooch, who works the health IT niche, told Top Echelon Contracting that healthcare providers need IT professionals who have the ability to communicate with medical professionals, which is a hard combination to come by.  That is why many healthcare providers are turning to recruiters to help them fill these positions, making health IT a hot niche for recruiters.

“I’ve had hospitals tell me, word for word, ‘I have no problem finding quality IT professionals on my own, but I can’t find quality IT professionals who understand healthcare,’” said Gooch.  “Hospitals would strongly prefer individuals who have a healthcare background and have crossed over into IT.  That’s a slim pool of people.”

So it’s clear that recruiters are needed in this niche, but they need to be able to provide contractors to be successful.  Healthcare providers often need a lot of people to implement an EHR system, but only need one or two health IT professionals to maintain the system on an ongoing basis, Gooch said.

Contracting allows them to quickly ramp up to implement the project and then ramp down when it’s complete.  The PwC report found that 75% of healthcare providers are looking to hire health IT talent, so the potential is there for recruiters interested in this area.

(Editor’s Note: This is the next in a series of guest blog posts about contract staffing, courtesy of Top Echelon Contracting, the recruiter’s back-office solution.  Similar posts will appear in future issues of The Pinnacle Newsletter Blog.)

For at least the past decade, Americans have been lamenting the loss of jobs to countries overseas.  Everything from call centers to manufacturing operations has been shipped to countries with lower wages and fewer government regulations.

Now it appears that some of those jobs may be coming back home.  A new trend is emerging known as “re-shoring,” which refers to companies that previously off-shored functions bringing those functions back to the United States.  A recent Workforce article points to Apple as an example.

The technology leader, known for making products in China, recently announced that it would be manufacturing some computers in the United States.  While experts don’t expect offshoring to disappear, the Workforce article notes a gradual movement toward bringing work back to the United States, driven by the following factors:

1. Eroding Cost Savings.  As wages and benefits costs increase in China, the amount companies can save by offshoring is decreasing and could go down to single digit percentages for many products.
2. Social Responsibility.  The slow economic recovery has made some successful companies feel responsible for creating jobs at home.
3. Value of Proximity.  Companies are starting to realize the advantages of having team members close together.  For instance, one hotel group interviewed for the article said that having developers located near the company’s business partners is essential for strategic tasks, such as rebuilding the website.
4. U.S.-specific skills.  Some skills are difficult to find overseas.  One example is app development for mobile devices.  U.S. coders are more familiar with writing those apps, so most app development is done with American talent.

Obviously, re-shoring is good for the American workforce . . . and recruiters.  But there’s a catch.  Many of these jobs are going to be filled by contractors.  Companies are still looking to keep their labor costs down.  Contractors help them do that because they are employed by a third party (“back-office”) that pays the employer portion of benefits premiums.  The back-office also takes on the administrative costs and burdens associated with payroll, Workers’ Compensation, Unemployment, employee paperwork and issues, and more.

North Canton, Ohio-based recruiter Mike Aquino told Top Echelon Contracting that a number of companies he’s worked with at his firm, MPA Companies, are bringing work back from overseas due to quality.

“They sent the work overseas because it was cheaper, but quality was horrible and they lost money because it held up production,” Aquino said.  “They’ve decided to bite the bullet and pay more to get it done right in the United States.”

But companies are having trouble finding the skilled workers they need nearby.  That’s where contracting comes in.  Workers from other areas who may be reluctant to relocate may consider moving on a temporary basis to take a contract assignment.  For example, Aquino recently received a call from a client in Texas looking for contractors from Ohio.

Only time will tell how big re-shoring will really be, but it’s obvious that it has already had some impact and that recruiters who can place contractors could especially benefit from this trend.

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(Editor’s Note: This is the next in a series of guest blog posts about contract staffing, courtesy of Top Echelon Contracting, the recruiter’s back-office solution.  Similar posts will appear in future issues of The Pinnacle Newsletter Blog.)

It appears the Department of Labor (DOL) will once again be focusing on worker misclassification in 2013.

Staffing Industry Analysts recently reported that the DOL plans to commission a $1.9 million study to determine if workers have knowledge of their employment classification and the implications of that classification.

When a worker is classified as a 1099 Independent Contractor (IC) rather than a W-2 employee, they are not covered by Unemployment or Workers’ Compensation insurance. They are also deprived of minimum wage and overtime pay and do not have taxes automatically withheld from their pay like they would if they were employees.

Because federal law doesn’t currently require employers to inform workers of how they are classified or why, the DOL suspects that workers “may not be prepared for the consequences of misclassification,” according to the Federal Register.  The DOL intends to interview 10,060 workers and 100 executives to gauge workers’ awareness of basic employment laws and the consequences of their classification.

The DOL is soliciting comments on the potential study until March 12.  Additional details, including how to submit comments, are available in the Federal Register.

According to the Federal Register, the practice of misclassifying employees as ICs takes $2.7 billion per year of Social Security, Unemployment, and income taxes out of the federal coffers because companies don’t pay the employer portion of taxes on their ICs. This loss of tax revenue is why the DOL has been cracking down on misclassification over the past few years. Since 2009, the DOL has collected $29 million in back wages for more than 29,000 workers who were determined to be misclassified as 1099 ICs rather than W-2 employees.

As always, we urge you to warn your clients about the dangers of worker misclassification. The DOL is not going away, and the Obama administration’s war against misclassification is only going to intensify, especially since more employers may be tempted to classify workers as 1099 ICs to avoid complying with the Patient Protection and Affordable Care Act (PPACA) better known as Obamacare.

If you have clients who are utilizing ICs, you can help by offering to convert their ICs to contractors who are W-2 employees of a contract staffing back-office, such as Top Echelon Contracting. The back-office assumes all the employment responsibilities, including providing Unemployment and Workers Compensation insurance, paying the employer portion of taxes, and withholding the appropriate taxes from contractor pay checks. That way, your clients can still enjoy the cost savings of having contractors without the legal risks.

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