Key Employment Issues for the C-Suite, What Really Affects Your Bottom Line?
On July 19th govmates and ATI co-hosted a webinar presented by PilieroMazza PLLC on the topic of Key Employment Issues for the C-Suite and taking a good hard look at the things that really affect your budget as business owners. Here are a few of the golden nuggets we mined from the discussion. (You can find the full webinar replay here.)
Classifications
One of the biggest and most costly mistakes that companies make is classifying employees incorrectly. An important thing to note is that classifications are no easy feat and there’s a bit of risk involved. There are well defined boundaries, sure, but the gray area is vast. When we mean “classify” we’re talking about exempt and non-exempt employees. To break it down in the most simple terms, salaried employees are typically exempt, and hourly employees are typically non-exempt (but of course this isn’t always the case, and that’s why we have good employment lawyer friends). The zinger here is that if you get it wrong, you may have to pay overtime, benefits, other H&W costs, as well as the pieces that go into the correct wage determinations. Oof, sounds like a lot. Luckily, this is where your team comes into play. If you include your HR team, your managers on the ground (their assignment of duties can change exempt/non-exempt status) as well as your pricing team, you’ll have a better chance of getting it right AND having the documentation to back up your determination should you be subjected to an audit. The DOL has well-defined determinations when it comes to W2s vs 1099s as well, and to make your life easier – know that your employees don’t get to decide their status. Just because they “want” to be non-exempt doesn’t mean that they “are” non-exempt. If you follow the letter of the regulations, that should help you avoid the “but my employee asked to be…” conversations. That’s a risk you do NOT need to take.
While we were talking about 1099s a bit, our first theme of the discussion emerged; differences by state. While GovCons need to follow Federal Regulations when it comes to employment, they also need to comply with specific and often differing state regulations. To spin your head just a little more, cities within some states (say NYC and NY State) there are even MORE differences. So, you’ll need to know exactly where your employees work and the regulations to which you’ll be subjected. As an example, in Maryland to be considered a 1099 the individual must have incorporated business of some sort, a working website, be actively advertising, have a business card, the ability to engage other clients, and more, just to name a few things. If those stipulations are not met, you may well have a full-blown employee on your hands… surprise!
Also, do you have Unionized Workforce Questions? Great! That’s a definite “phone a friend” situation and if you need that type of friend – given the experience from this webinar, we’d definitely recommend the team at PilieroMazza.
Employee Agreements
Employee agreements are not a “one size fits all” type of document. They will change based upon the type of employee, their duties, as well as where the work is being done (oh hey, theme, welcome back!). Currently, all states apart from Montana, are at-will states. (This differs from “right to work” regulations and should be noted that way.) You CAN have an employment agreement for an executive and probably should. These can include incentive/bonus plans, IP protections, and any post-employment restrictions (such as non-competes or non-solicits). A big nugget here was on the topic of offer letters versus employment agreements. Do not, and we repeat, do not make your cover letter read like a contract. That can come back to bite you in the rear, in a big way. While the employment agreement should be tailored to your employee, the cover letter should be more standard. This is one place you can and probably should have more of a plug and play situation. It should also include contingencies, just in case they end up being a train wreck on day two. If you need something that reads like a contract, create one, don’t try to knock out two birds with an ill placed stone.
Handbooks
Let’s get a little into the weeds on handbooks. HRs love them and our presenters were big fans of the 30-50 page handbook instead of a handbook with hundreds of pages that people definitely won’t read. Talk about overkill. Handbooks get a bad rap but they’re actually a great tool when used correctly. If you haven’t revisited yours in the last 15 years, it may be time. Again, our theme emerges here: you may need to include different statues and requirements based on the states in which your employees reside. Things to include are your sick leave and vacation requirements, EEO policies and procedures, required trainings and certifications, drug testing requirements, etc. To get around having a different handbook for each state, our presenters recommended adding addendums to the end of the handbook for the states necessary.
The Incumbent Rinse and Repeat Risk
Let’s say you’ve recently won new work that had a previous prime/incumbent. Congratulations! It should be a breeze just to continue what they were doing to remain in compliance, right? W-R-O-N-G. You can’t assume that the incumbent was following everything appropriately nor that their requirements match your new contract. You’ll need to identify working conditions, contract terms, classifications, responsibilities, even going so far as to E-Verify citizenship. It may be a bit of a lift, but it is one that can save you time and penalty money later. Own your contract and your employee management to help ensure compliance and that you followed policy should you be subjected to an audit in later months/years.
We’re lucky to know some really smart people in the GovCon space. Thank you again to Sarah and Nichole for sharing their time and expertise with us. If you have additional questions for the govmates team or our presenters, please email matchmaker@govmates.com.
