ADP ToTAlsourcesM

A Publication Dedicated to Employer’s Current HR Issues & Solutions Brought to You by ADP TotalSource

The Bottom LineVolume 9

Plan Ahead for the Reemployment

of Returning Veterans

Ask the Expert:

HR Business Partners

Employee Education –

Make the Most of Your

Employees

50 Is the New 40 –

Motivating your Employees

Give your Small Business

a Boost – Helpful Resources

and Programs

The Tax Man Speaks:

An Update on Recent

IRS Developments

State Employment

Law Roundup:

Summary of Key State Laws

Passed in 2011

What ADP TotalSourceSM

Clients Are Saying

ALSO IN THIS ISSUE

Give Your Small Business a Boost — Helpful Resources and Programs

New programs and resources are in the works to ensure that small businesses continue to serve as the engine of the American economy. Find out how to make the most of them.

19

State Employment Law Roundup: Summary of Key State Laws Passed in 2011

State legislatures were busy passing many new employment laws this year. We help you stay on top of some of the key changes.

27

The Tax Man Speaks: An Update on Recent IRS Developments

The tax man has spoken—were you listening? Understanding recent developments affecting cell phones and independent contractors.

23

What ADP TotalSource Clients Are Saying

How ADP TotalSource helped one client streamline its outsourced vendor relationships—and reduce the cost of managing HR.

34

The Bottom Line Volume 9

Employee Education — Make the Most of Your Employees

Businesses of all sizes strive to hire the “right” employee—someone with a specific skill set to get the job done. But do you need to hire the “right” employee, or can you develop one through mentoring and training?

09

50 Is the new 40 — Motivating Your Employees

Between budget cuts, reductions in force and organizational change, your employees have heavy burdens and big shoes to fill. Learn what to do to—and what not to do—to keep them motivated.

15

Ask the Experts: HR Business Partner

HR experts at ADP TotalSource weigh in on how to tackle some of the most sensitive employee-relations issues.

07

Plan Ahead for the Reemployment of Returning Veterans

With the wars in Iraq and Afghanistan winding down, many veterans are going back to their jobs. Make sure your company is ready for them.

03

BackgroundIn 1994, statutory reemployment rights for military members were revised with the signing of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), 38 U.S.C. §§ 4301-4333. USERRA was revised in response to issues from employees and employers regarding service during the Persian Gulf War. Like its predecessors, the basic concept of USERRA is to permit service members to leave their civilian jobs for uniformed service and return to their civilian jobs with accrued seniority.

EmployEEs’ oBligationsIn order to be entitled to these benefits, employees must:

1.Give timely notice of their need to perform military service except as required by military necessity

2.Apply for reemployment within a set time after release from military service that varies depending on the length of active duty. When service lasts less than 31 days, the individual must return to work on the first workday after release from military service. When service lasts from 31 to 180 days, the individual must reapply within 14 days after completing active service. When service lasts more than 180 days, the individual must reapply within 90 days after the completion of service.

3.Be released from military service under honorable conditions

3 The Bottom Line | Returning Veterans

Plan Ahead for the Reemployment of Returning Veterans

In October 2011, President Obama announced plans to have all U.S. troops out of Iraq by January 1, 2012, formally ending the war that began in the spring of 2003. The months following the announcement have been filled with joyous homecomings. Veterans have been reunited with their families—and their jobs. While some employers have been prepared, some have not. Fortunately, it is not too late for employers that are unaware of their obligations. This article will give employers vital information to plan ahead for the reemployment of returning veterans.

The Bottom Line | Returning Veterans 4

EmployEr oBligationsUSERRA (Uniformed Services Employment and Reemployment Rights Act) provides the following to employees:

1. Reinstatement, under the “escalator principle,” to the position the employee would have held if continuous employment had not been interrupted

2. The rights and benefits that are generally provided to individuals of similar status who are on a leave of absence

3. Continuation of medical benefits under the same terms and conditions as when actively employed if service is 31 days or less

4. Optional continuation of medical benefits under terms similar to those of COBRA

5. All seniority, rights and benefits upon return to work as if the employee had remained continuously employed. Typical benefits covered under USERRA include vacation allowances, pension credit and 401(k) contributions

6. Protection from discharge upon return to work except for cause for a period of time, depending on the length of service

What is the escalator principle? Employers must treat returning service members as though they have been continuously employed in the position they return to, maintaining the same terms of pay and benefits. For example, if employees in a particular position joining the company in 1996 earn $15 per hour, then a returning service member that joined the company in 1996 should be paid $15 per hour even if he or she had been on active duty for extended periods. As another example, if an employee left the company in 1999 as an apprentice electrician and returned in 2001, the employee might be entitled to return as a journeyman electrician.

What if the employee was serving in the National Guard? National Guard members sometimes perform federal service (e.g., during annual training) and sometimes perform state service (e.g., during some disasters). USERRA applies only to National Guard members performing federal service, but many state laws afford similar protection to those performing state service. We recommend that you obtain a copy of the employee’s orders and consult with an attorney under these circumstances.

Is there a five-year limit on military service under USERRA? USERRA provides that employees are only entitled to cumulative military leave of up to five years, but there are many exceptions. Periods of time in which reservists were ordered to active duty by presidential declaration for critical missions, contingencies or military requirements would not normally count as part of the five-year period. The wars in Iraq and Afghanistan would generally fall within that exception.

What effect does USERRA have on FMLA eligibility requirements? USERRA requires that service members who conclude their tours of duty and are reemployed by their civilian employers receive all benefits of employment that they would have obtained if they had been continuously employed, except those that are considered a form of short-term compensation, such as accrued paid vacation. If a service member had been continuously employed, one such benefit to which he or she might have been entitled is leave under the FMLA. The service member’s eligibility will depend upon whether the service member would have met FMLA eligibility requirements (e.g., the person would have been employed by the employer for at least 12 months and worked at least 1,250 hours during the 12-month period preceding the start of the leave) had he or she not performed military service. n

othEr issuEsUSERRA also prohibits discrimination against service members who are employed and provides training obligations for employers under certain circumstances. Employers do not have to reemploy a returning service member if “the employer’s circumstances have so changed as to make such reemployment impossible or unreasonable.” Employees who are hired for a brief, nonrecurring period without reasonable expectation that employment will continue indefinitely or for a significant time are not entitled to reinstatement rights. Some states provide additional rights to returning employees that may be more extensive than USERRA.

common QuEstionsWhat if an employee volunteers for military service? USERRA does not distinguish between volunteers and those ordered to perform military service. They are protected regardless.

Do I have to pay an employee while he or she is on active duty? USERRA does not require pay for individuals who are absent due to military service. Some employers have policies that compensate employees for the difference between regular pay and military pay and allowances. (They should review their policy to ensure that such an obligation is limited.)

Can I require an employee to use earned vacation time while performing military service? No, employees are entitled to use earned vacation time while on leave but generally may not be required to.

5 The Bottom Line | Returning Veterans The Bottom Line | Returning Veterans 6

employee has not been separated from service with a disqualifying discharge or under other-than-honorable conditions. There are some qualifications and exceptions to these eligibility requirements.

does an employee have rights under usErra even though he or she holds a temporary, part-time, probationary or seasonal employment position? USERRA rights are not diminished because an employee holds one of the aforementioned types of positions. However, an employer is not required to rehire an employee if the position she left in order to serve in the uniformed services was for a brief, nonrecurrent period and there is no reasonable expectation that the employment would have continued indefinitely or for a significant period. The employer bears the burden of proving this affirmative defense.

does usErra cover independent contractors?No, USERRA does not provide protections for independent contractors.

What position is the employee entitled to upon reemployment? As a general rule, the employee is entitled to reemployment in the position she would have attained with reasonable certainty if not for the absence due to uniformed service. This is known as the escalator position. The principle is that, if not for the period of uniformed service, the employee could have been promoted (or, alternatively, demoted, transferred or laid off) due to intervening events. It requires that the employee be rehired in a position that reflects, with reasonable certainty, the pay, benefits, seniority and other job perquisites that would have been attained if not for the period of service. Depending upon the specific circumstances, the employer may have the option or be required to rehire the employee in a position other than the escalator position.

does the reemployment position include elements such as seniority, status and rate of pay? Yes, assuming these elements are what the employee would ordinarily have attained in that position given his or her job history. This also includes prospects for future earnings and advancement. The employer must determine the seniority rights, status and rate of pay as though the employee had been continuously employed during the period of service, and they include those established (or changed) by a collective bargaining agreement, employer policy or employment practice. Any agreements, policies and practices in effect at the beginning of the employee’s service and any changes that may have occurred during service must be considered as well. In particular, the employee’s status in the reemployment position could include opportunities for advancement, general working conditions, job location, shift assignment, rank, responsibility and geographical location.

is the employee required to accommodate the employer’s needs as to the timing, frequency or duration of service? No. The employer cannot refuse to rehire the employee because it believes that the timing, frequency or duration of the service is unreasonable. However, the employer is permitted to bring any related concerns to the attention of the appropriate military authority.

is the employee entitled to any specific reemployment benefits if he or she has a disability that was incurred in or aggravated during the period of service? Yes. A disabled service member is entitled to the escalator position after uniformed service. If the employee has a disability incurred in or aggravated during the period of service, the employer must make reasonable efforts to accommodate it and help him become qualified to perform the duties of the reemployment position. If these efforts have been made and the employee is still not qualified, the employer must work to assign the employee a position that is either equivalent in seniority, status and pay to the escalator position or one that is the nearest approximation to the equivalent position—consistent with the circumstances of the employee’s case—in terms of seniority, status and pay. A position that is the nearest approximation to the equivalent position may be a higher or lower position, depending on the circumstances. n

As you have just read in “Plan Ahead for the Reemployment of Returning Veterans,” it is important for businesses to understand the legal requirements that apply when veterans return.

ADP TotalSource spoke with several members of our Human Resources Business Partners—the HR professionals who work the front lines with employers every day—to gain answers and insight

into some of the questions employers are asking.

Which employers are covered by usErra?The Uniformed Services Employment and Reemployment Rights Act (USERRA) applies to all public and private employers in the United States,

regardless of size. Even an employer with only one employee will have coverage.

What types of service are covered by usErra? USERRA covers all categories of military training and service, including duty performed on a voluntary or involuntary basis, in times of peace or war. Although most often associated with National Guard and reserve military personnel, USERRA also applies to those serving in the active components of the Armed Forces.

how does usErra protect individuals against employer discrimination? Under USERRA, an employer must not deny initial employment, reemployment, retention in employment, promotion or any benefit of employment to an individual on the basis of his or her membership, application for membership, performance of service, application for service, or obligation for service in the uniformed services. An employer also must not retaliate against an individual by taking any adverse employment action against him because he has taken an action to enforce a protection afforded any person under USERRA; testified or otherwise made a statement in connection with a proceeding under USERRA; assisted or participated in a USERRA investigation; or exercised a right provided for by USERRA.

What criteria must the employee meet to be eligible under usErra for reemployment after service in the uniformed services? In general, if the employee has been absent from a position of civilian employment by reason of service in the uniformed services, he or she will be eligible for reemployment under USERRA by meeting the following criteria: (1) The employer had advance notice of the employee’s service, (2) the employee has spent a cumulative five years or less in the uniformed services while in a civilian employment relationship, (3) the employee returns to work or applies for reemployment in a timely manner, and (4) the

Ask the Experts: HR Business Partners

7 The Bottom Line | Ask The Expert The Bottom Line | Ask The Expert 8

Employee Education – Make the Most of Your EmployeesIn today’s competitive work environment, businesses of all sizes strive to hire the “right” employee: someone with a specific skill set to get the job done. But as the global war for talent wages, supply—or the number of “right” employees—falls far short of demand. As such, organizations must train and develop their own people to become the “right” employee, through mentoring and training. While some companies view this as a cost, strategic ones see it as an investment. But you don’t need Fortune 500 budgets to have a positive impact. Learn about mentoring and training to make the most of your employees and improve your bottom line.

mEntoring 101Are leaders born or made? While academics and psychologists endlessly debate this topic, one aspect of leadership is not debatable: Companies must develop their next generation of leaders. Mentoring is key to growing your future leaders.

so what is a mentor? There are many definitions, but a mentor is generally someone who shares known resources, expertise, values, skills, perspectives, attitudes and proficiencies. According to the Merriam-Webster dictionary, a mentor is a counselor or guide. But oftentimes, a mentor will become more than that. A mentor will become a friend and confidante. There are several different types of mentors:

1.Informalmentor: a more experienced person who spontaneously gives guidance to a less experienced person

2.Structuredmentor: a program created by organizations, companies and schools to develop leaders, enhance diversity and improve retention of newcomers

3.Peermentor: a mentor assigned to someone with experience, in the same age group, to share knowledge

No matter the type, a mentor must understand her role in order to be successful.

When mentors and mentees establish mutually beneficial relationships, everyone wins.

a mentor must be prepared to… a mentor must not…

◆ Cultivate a mentee’s individual talents

◆ Learn with the mentee and have a genuine desire to empower

◆ Balance giving out information with making the mentee figure things out for himself

◆ Provide caring, open and facilitative feedback

◆ Be the mentee’s manager

◆ Try to shape a mentee into the mentor’s image

◆ Offer lip-service support (i.e., give no impression of real interest)

◆ Direct conversation back to herself

Organizations mold their employees into the “right” employees through mentoring and education.

9 The Bottom Line | Employee Education The Bottom Line | Employee Education 10

tips for your training program

Follow these five tips* to get started on or improve your training program:

1. Emphasizetrainingasaninvestment,notacost. The reason training is often considered optional at many companies is that it is thought of as an expense rather than an investment. While it’s true that training can be costly up front, it’s a long-term investment in the growth and development of your human resources.

2. Promoteacultureoflearning. In today’s fast-paced economy, if a business isn’t learning, it’s going to fall behind. A business learns as its people learn. Communicate your expectations that all employees take the necessary steps to hone their skills and stay on top of their professions. Make sure you support those efforts by providing the resources needed to accomplish this goal.

3. Startoutsmall. Before rolling out your training program to the masses, rehearse with a small group of users and gather their feedback. This sort of informal benchmarking exposes weaknesses in your training plans and helps you fine-tune the training process.

4. Makeitongoing. Don’t limit training solely to new employees. Organized, ongoing training programs will maintain all employees’ skill levels and continually motivate them to grow and improve professionally.

5. Measureresults. Without measurable results, it’s almost impossible to view training as anything but an expense. Decide how you’re going to obtain an acceptable rate of return on your investment. Determine what kind of growth or other measure is a reasonable result of the training you provide. You’ll have an easier time budgeting funds for future training if you can demonstrate concrete results.

*Source: Dun & Bradstreet Credibility Corp.

mentoring is a win-win-win Successful mentoring programs allow everyone to benefit—the mentor, the mentee and the organization.

mentees benefit by:◆ Gaining a better understanding of strengths and opportunities for improvement

◆ Increasing networking opportunities and visibility within and outside the organization

◆ Obtaining challenging development assignments

◆ Identifying new strategies for accomplishing work objectives

◆ Acquiring knowledge and skills from experienced and successful employees

mentors benefit by:◆ Enhancing skills in coaching, counseling, listening and being a role model

◆ Demonstrating expertise and sharing knowledge

◆ Learning new perspectives and approaches

◆ Contributing to others in the organization

◆ Extending professional networks

◆ Obtaining a greater understanding of the barriers experienced at lower levels of the organization

the organization benefits by:◆ Improving retention

◆ Increasing morale

◆ Identifying and accelerating leadership development

◆ Enhancing the understanding of organizational values and relationships

◆ Creating knowledge sharing across functions

Managerial productivity increased by 88 percent when mentoring was involved, versus only a 24 percent increase with training alone. (Source: aStd)

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Five tips to a

better training

program!

hoW adp totalsourcEsm can hElp

Every organization has top performers, the employees who are head and shoulders above their coworkers in terms of the value they bring. But retaining those employees is a challenge. The good news? You don’t have to do it alone. ADP TotalSource can help you offer:

◆ Competitive benefits and perks programs

◆ Employee satisfaction surveys to better understand employee engagement

◆ Compensation analysis to align your employees’ pay with the local market

In addition, ADP TotalSource can also provide training and development opportunities to keep your top performers engaged through their flexible learning program, TotalSource University. When you partner with ADP TotalSource, TotalSource University becomes your springboard for developing your employees’ essential skills and knowledge of today’s workplace, giving your organization the competitive advantage it needs to grow and prosper. With TotalSource University, you can take advantage of:

Virtual-classroomtraining: Instructor-led courses give participants a classroom experience with the convenience of learning from their desk. These interactive courses are approximately 90 minutes in duration and require participants to have a telephone and a computer with Internet access.

On-siteclassroomtraining:Instructor-led courses designed to assist you in management development, compliance and employee growth. These courses range from one to three hours in duration.

13 The Bottom Line | Employee Education

Leadershipseries: A variety of full- and multi-day workshops focused on the vital skills that can have the greatest positive impact on our workplaces and business decisions. Workshops are generally structured as follows:

◆ pre-work: A basic introduction to the course content, which may include an assessment or inventory that must be completed prior to the workshop and which will be the basis for the learning experience.

◆ Workshop: Class time during which participants will thoroughly explore the topic, practice skills and begin to formulate plans for incorporating the information into their leadership strategy.

◆ post-work: A follow-up tool or meeting to gauge the learner’s success after class and to help reinforce key ideas.

Onlinetraining: Offers cost-effective courses that are available 24 hours a day, seven days a week, giving participants the freedom to learn when their schedule permits.

Investing in your organization and your employees has never been easier— or more important. n

The Bottom Line | Employee Educations 14

50 Is the New 40 – Motivating Your Employees

“Do less with more” is the mantra heard in most offices these days. Budget cuts, reductions in force and organizational changes leave remaining employees with heavy burdens and big deficits to fill. No matter your company’s size, heavy workloads with a shorthanded staff can be difficult and stressful. On top of this, those left standing often feel a mix of emotions—relief and uncertainty about the changes within the organization, and guilt about co-workers who were let go. It’s upsetting and de-motivating to constantly wonder, “What’s going to happen next? Will I lose my job? Can I get everything done that’s now expected of me?” The good news: Companies can take action to mitigate these feelings and motivate their employees. Learn what to do to and what not to do to help your employees manage change and drive your organizational goals.

3 The Bottom Line | Motivating Your Employees15 The Bottom Line | Motivating Your Employees The Bottom Line | Motivating Your Employees 16

Poor work/life balance can also impact an organization’s innovation. In a recent Wall Street Journal article, Dr. Alan G. Robinson, a professor at the Isenberg School of Management at the University of Massachusetts, Amherst, explains, “Giving employees time for open-ended ideas can be expensive, especially with many companies short-staffed, but it may pay off. When managers cut to the bone, one of the things they stifle is innovation.”

Make the most of your top performers by following these quick tips to motivate your employees and drive innovation in difficult times.

motivating your EmployEEsNo one said it would be easy, but motivating your employees after layoffs or significant organizational change is critical to the health of your company. So where do you begin? Start with your top performers. By addressing your organizational challenges head-on with them, you build trust and potentially prevent them from “jumping ship” when a new opportunity comes along. Reach out to your superstars, and make it personal.

According to Paul Falcone, author of the article “Doing More With Less: How to Motivate and Reward Your Overworked Staff During Lean Times — Management Tools,” first you must determine what motivates your direct reports when it comes to these six key areas:

◆ Career progression through the ranks/promotion◆ Lateral assumption of increased job responsibilities/skill broadening◆ Acquisition of new technical skills (typically requiring outside training or certification)◆ Acquisition of portable management, administration and people skills◆ Work/life balance◆ Money and other forms of compensation

Next, to encourage more open communication and discussion, ask your top performers:

◆ If you could change one thing about the department to make it more effective or more fun, what would it be?

◆ If you could add or subtract one thing to or from my management style to help me become a better-performing manager and people developer, what would it be?

◆ Most important, if you could focus on one area where you would like to develop your skills or gain more experience to broaden your résumé and prepare for your next move in career progression (at our company or elsewhere), what would it be?

Once you establish this dialogue, don’t consider the job done. You must keep open communication and continue to monitor the situation. Work together to find a job solution that is a win-win for everyone—and don’t forget to celebrate your success. Have an impromptu lunch delivered or a contest awarding a hard worker with an early dismissal on a Friday. Remember, everyone is working hard and stress levels are high. It’s important to have a little fun to help motivate your employees when times are tough. n

Acknowledge that times are tough and keep open communication.

You may feel like you’re spending more and more time at the office. Well, you’re not alone. Gone are the days of the 40-hour workweek. According to a new survey of more than 300 companies in the United States and Canada from professional-services company Towers Watson, nearly two-thirds of employers say their workers have been asked to put in more hours than normal over the past three years. About half expect the longer hours to continue for the next three years as well.

Employees are also taking less time off. In fact, one in three companies say their staff has been using less of their vacation time over the past three years, reports The Daily Mail. Working longer hours and taking less time off is a recipe for poor work/life balance.

While many organizations are aware that the increased workload negatively affects their employees’ work/life balance, Towers Watson noted that companies may be underestimating the effect work-related stress has on their business.

“Employees generally don’t mind doing more with less, especially when economic conditions are tough,” says Ryan Johnson, CCP, vice president of research for WorldatWork. “But when this drags into multiple years, and they start to hear anecdotes of recovery, they become less understanding.”

Once your employees tire of the ongoing workload and poor work/life balance, they will leave the organization and find a job that fits their desired lifestyle. Laurie Bienstock, North America leader of rewards consulting at Towers Watson, explains, “In the short run, having employees work extra hours can increase productivity, but in the long run, extended hours can negatively affect employee well-being and retention.” Furthermore, “employees at many organizations are already suffering from change fatigue. As a result, when the labor market does recover, companies can expect a sharp increase in voluntary turnover, especially if they do not address employee concerns and deliver reward and talent management programs more effectively.” Remember, when employees leave, you could be losing your top talent and future leaders of the organization.

thE nEW Work WEEk

A “vacation-starved” nation goes on a diet. Americans today are working more and taking even less time off.

17 The Bottom Line | Motivating Your Employees The Bottom Line | Motivating Your Employees 18

But there are other characteristics like salary, longevity and age of the company that should also be considered when defining small businesses. And it’s important to remember that not all small businesses are traditional mom-and-pop stores and start-ups. For example, some that have just under 500 employees are big enough to trade on the New York Stock Exchange. So for companies that exhibit only some of the aforementioned characteristics, this begs the question: Should size be the determining factor of job creation? According to a report by University of Maryland economist John Haltiwanger and two Census Bureau economists, the answer is no. To help your small business outperform your old way of doing things, check out these new resources.

THE BooST YoU NEED: TooLS AND RESoURCESProviding an edge in the marketplace can make all the difference in your company’s success. There are numerous tools and resources that support your needs and encourage the growth of small businesses. Read on to find the right ones for you.

on the docket! the american Jobs act supporting small Businesses

Introduced by President Obama on September 12, 2011, the American Jobs Act is intended to get more Americans back to work by encouraging small-business growth. According to the SBA, its provisions include:

◆ Cutting small businesses’ payroll taxes in half for the first $5 million in wages.

◆ Temporarily eliminating employer payroll taxes for small businesses that create jobs or give raises to existing workers.

◆ Extending an immediate 100 percent expensing write-off into 2012, encouraging the investment in more machinery by more businesses.

◆ Large tax credits for companies that hire those unemployed for six months, and increased credits for hiring unemployed and service-disabled veterans.

◆ Financial investments (billions of dollars) in roads, rails and airports, and the foundation of the National Infrastructure Bank.

◆ Allocating $25 billion to modernizing 35,000 schools, enhancing small construction firms and improving STEM education to strengthen our young entrepreneurs.

◆ Supporting small-business contractors competing for infrastructure contracts and boosting SBA surety bonds up to $5 trillion.

◆ Setting up wireless high-speed Internet for 98 percent of Americans—students, entrepreneurs and small businesses in rural areas.

Give Your Small Business a Boost – Helpful Resources and Programs

Representing 99.7 percent of all employer firms, small businesses are key to maintaining and strengthening the U.S. economy. In fact, through new tools for tracking job creation, the Small Business Administration (SBA) estimates such firms create about 65 percent of the nation’s net new jobs—jobs created minus jobs eliminated. So, how small is small? According to the SBA’s Office of Advocacy, the definition of a small business is based on size standards depending on the industry. A general rule of thumb: Small businesses are those with fewer than 500 employees

SMALL BUSINESS: DOES SIzE MATTER?

small businesses, the backbone of the u.s. economy, have endured a wild ride these past few years. plummeting sales, reductions in workforce and a web of new legislation to untangle—many wonder: Where do small businesses go from here? america is working hard to pave a new road for them, with new programs and resources to ensure that they continue to serve as the engine of our economy. let’s take a deeper dive into the world of small businesses and review the new provisions available to help you make the most of your organization.

DiD you know?

From 1992 to 2010, companies with fewer than 500 employees created 64 percent of net new jobs, while small-business employees made up just 55 percent of the private-sector workforce.

*Bureau of Labor Statistics

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To learn more about the resources available through Startup America, visit www.startupamericapartnership.org/get-registered and register for your free Startup America success kit.

othEr small-BusinEss rEsourcEs

Not sure where to go for more help? In addition to the American Jobs Act and Startup America, there are various resources available to small-business owners:

◆ Small Business Association: http://www.sba.gov/sba-direct.

◆ IRS: http://www.irs.gov/businesses/small/content/0,,id=98864,00.html

◆ Inc.: http://www.inc.com/financing-a-small-business n

Goals of Startup America

• Expand access to capital for high-growth start-ups throughout the country.

• Increase entrepreneurship education and membership programs that empower more Americans to not only get jobs, but to also create them.

• Strengthen commercialization of about $148 billion in annual federally funded research and development.

• Identify and remove unnecessary barriers to high-growth start-ups.

• Expand collaborations between large companies and start-ups.

◆ Making it easier for each state to allow unemployed workers to create their own businesses and jobs.

◆ Expanding training skills to account for the transition to the modern economy for youth and adults.

◆ Increasing the cap on mini public offerings of small businesses from $5 million to $50 million and reducing the high costs to become public companies.

This proposed legislation can make it easier for innovators to increase their business and job creation.

For more information on the American Jobs Act, visit http://www.americanjobsact.com.

nEW! startup amErica

Launched in January 31, 2011, Startup America brings it all together: entrepreneurs, corporations, universities and foundations to work with federal agencies to support entrepreneurs as they start and scale companies. By focusing on new companies with the potential for increased development, the goal of this initiative is to help drive job creation over the next three years. This partnership celebrates the success of America’s entrepreneurs while maximizing competitiveness by providing assistance in five areas: expertise, services, talent, customers and capital.

This initiative benefits new businesses in every stage:

◆ idea: An idea has been developed, but the business has not been established.

◆ start-up: A business created by at least two people with the determination to build a company.

◆ ramp-up: A business with at least five employees and at least two customers, with the goal of increasing their customer base.

◆ speed-up: A company with at least 25 employees that has earned a revenue run rate of $10 million or more.

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How ADP ToTAlSourceSM cAn HelP

Employers today are challenged to do it all: staying on top of changing regulations and being aware of new resources, tools and programs to manage their business and grow their organization. ADP TotalSource can help. ADP TotalSource is committed to keeping its clients informed of the latest legislation changes and guiding them through available resources, tools and programs. By partnering with ADP TotalSource, you can focus on growing your organization without worrying about the rest.

In order for the provision of a cell phone (or reimbursement of cell phone expenses) to be considered for reasons related to the employer’s trade or business, there must be substantial reasons relating to the employer’s business, other than providing compensation to the employee, for providing the phone. Examples of such “noncompensatory” business reasons include:

The Tax Man Speaks: An Update on Recent IRS DevelopmentsCELL PHoNES

In the past 20 years, the number of cellular phone users has skyrocketed. More than 90 percent of employees now have cell phones. While they use the devices for personal reasons, they also often use them to complete work-related tasks and stay in touch with their employers. Recognizing their value, many employers now provide employees with cell phones.

The Internal Revenue Service has recently clarified that when an employer provides an employee with a cell phone for “noncompensatory” business reasons, the provision of the phone will not be taxable income to the employee, even to the extent that he uses the phone for personal reasons. Moreover, IRS Notice 2011-72 indicates that the employee will not need to substantiate that all or a portion of the cell phone use is for business purposes. This is effective for taxable years after December 31, 2009.

In an audit memorandum issued contemporaneously with IRS Notice 2011-72, the IRS stated that certain reimbursements received for the business use of an employee’s personal cell phone also will not be taxable to the employee to the extent that the employer requires him to maintain and use his personal cell phone for business purposes.

23 The Bottom Line | Recent IRS Developments The Bottom Line | Recent IRS Developments 24

i. The employer’s need to contact the employee at any time for work-related emergencies

ii. The employer’s requirement that the employee be available to speak with clients while away from the office

iii.The employee’s need to speak with clients in other time zones at times extending beyond the employee’s normal work day

A cell phone provided to promote morale or additional compensation will not meet these requirements and will be subject to normal rules regarding taxation of fringe benefits.

In sum, an employer may treat the provision of cell phones (or reimbursement of cell phone expenses) to employees as a nontaxable benefit to employees to the extent that the cell phones are provided (or reimbursed) for reasons related to the employer’s trade or business without any substantiation requirements. Employers should review their cell phone policies to ensure that they are consistent with IRS requirements.

To be eligible, an applicant must have consistently treated the workers as nonemployees; filed all required Forms 1099 for the workers for the previous three years; not be under audit by the IRS; and not be under audit by the Department of Labor or a state agency concerning the classification of these workers. Interested employers can apply for the program by filing Form 8952 Application for Voluntary Classification Settlement Program at least 60 days before they want to begin treating the workers as employees.

Employers accepted into the program will pay an amount effectively equaling just over 1 percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes. n

VoLUNTARY WoRKER CLASSIFICATIoN SETTLEMENT PRoGRAM

The U.S. Labor Department has estimated that up to 30 percent of employers misclassify employees. The Government Accountability Office has estimated that worker misclassification costs the federal treasury $4.7 billion annually in income-tax revenue. Not surprisingly, the president’s budget for the 2011 fiscal year included provisions that target the misclassification of employees as independent contractors. These provisions are estimated to raise more than $7 billion in revenue over 10 years.

As part of that plan, the IRS launched a new program that will enable many employers to resolve past worker-classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers. The program will allow employers to achieve compliance by making a minimal payment covering past payroll-tax obligations rather than waiting for an IRS audit.

This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities. “This settlement program provides certainty and relief to employers in an important area,” says IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”

The new Voluntary Classification Settlement Program is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. It will allow eligible employers to obtain substantial relief from federal payroll taxes they may have owed for the past if they prospectively treat workers as employees. The program is available to many businesses, tax-exempt organizations and government entities that erroneously treat any of their workers as nonemployees or independent contractors and want to correctly treat these workers as employees.

25 The Bottom Line | Recent IRS Developments The Bottom Line | Recent IRS Developments 26

State Employment Law Roundup: Summary of Key State Laws Passed as of October 31, 2011

Connecticut:Gender-IdentityDiscriminationEmployers are prohibited from making employment decisions or otherwise discriminating against employees based on gender identity or expression.

HealthCareEmployersHealth care employers must take action to prevent and respond to workplace violence. They must establish and convene an ongoing workplace-safety committee and conduct an annual work-violence-risk assessment. The law also imposes recordkeeping and reporting obligations.

SickLeaveEmployers with 50 employees or more in the state must provide service workers with up to 40 hours of paid sick leave per calendar year for absences due to the illness, injury, health condition, treatment or preventive medical care of the service worker, her child or spouse or for the service worker’s absence due to family violence or sexual assault. Retaliating against employees who request or use paid sick leave is prohibited. The mandate to provide up to 40 hours of paid sick leave applies only to “service workers,” defined as hourly and salaried employees not exempt from the federal Fair Labor Standards Act, who are primarily engaged in an occupation falling within a lengthy list of positions identified in the legislation, ranging from miscellaneous office and administrative support workers to waiters and waitresses to home health aides.

Georgia:GarnishmentsEmployers must use a lawyer to serve and file an answer to a garnishment summons. However, it is unclear at this point whether this new rule applies to garnishments that are filed in magistrate court, which is the equivalent of small claims court.

E-VerifyPrivate employers must begin using E-Verify as early as January 1, 2012, depending on the size of the business. Employers with 500 employees or more must begin using E-Verify January 1, 2012; those with 100-499 employees, July 1, 2012; and those with 11-99 employees, July 1, 2013.

UnfairCompetitionA new law applies to noncompetition and customer non-solicitation covenants signed after May 11, 2011. The following individuals and entities can be parties to such restrictive covenants: employers and employees; distributors and manufacturers; lessors and lessees; partnerships and partners; franchisors and franchisees; sellers and purchasers of a business or commercial enterprise; two or more employers. The law provides reasonably presumptive time periods, provides sample language for employers to use and permits judges to modify covenants.

State legislatures around the country were busy in 2011 passing new employment laws. Several of the new laws are discussed below.

Alabama: Employers must use E-Verify starting April 1, 2012. However, certain contractors had to begin using E-Verify, and obtain related attestations, beginning September 1, 2011, the law’s effective date. E-Verify is an Internet-based system operated by the federal government. It allows employers to determine the work eligibility of applicants by verifying their information against federal databases.

California: BackgroundChecksEmployers who are seeking to fill only specific, identified “exempt” positions are permitted to obtain and use credit reports to screen applicants and current employees, effective January 1, 2012. The use of the credit reports in other occupations generally is prohibited. The “exempt” categories are:

1. Positions with the state Department of Justice

2. Managerial positions, i.e., employees who qualify for the “executive exemption” under California wage-and-hour law

3. Sworn peace officers or other law-enforcement personnel

4. Positions where the information sought in the credit report must be revealed by law

5. Positions that involve regular access to the personal information of others (i.e., bank or credit-card account information, Social Security numbers, dates of birth), other than the regular solicitation of credit-card applications at retail establishments

6. Positions requiring the employee to be a named signatory on the employer’s bank or credit card or otherwise authorized to enter into financial contracts on behalf of the employer

7. Positions involving access to confidential or proprietary information of the employer

8. Positions that involve regular access to $10,000 or more in cash

GeneticDiscriminationBusinesses may not discriminate based on an individual’s genetic information with respect to housing, employment, education, public accommodations, health insurance coverage, life insurance coverage and mortgage lending.

OvertimePayNonresidents of California are entitled to overtime pay under state law for work performed in California. Though not clear, it appears this new law may only apply to California-based employers. Whether an out-of-state employee working in California for a non-California-based company is still an open question.

27 The Bottom Line | State Employment Law The Bottom Line | State Employment Law 28

BreakPeriodsEmployers who operate retail establishments must provide nonexempt retail employees with break periods based on the length of the shifts the employees work. A shift of four to six consecutive hours requires a nonworking shift break of at least 15 minutes; a shift of six or more consecutive hours requires a nonworking shift break of at least 30 minutes; and a single shift of eight or more consecutive hours requires a second nonworking shift break of at least 15 minutes for every four consecutive hours. However, if an employee works fewer than six consecutive hours, the nonworking shift-break requirement may be waived by a written agreement between the employer and the employee. A “working shift break” is permitted in lieu of a nonworking break so long as the employer and employee agree to that arrangement in writing and either (1) the type of work prevents employees from being relieved of their duties, or (2) employees are allowed to consume a meal while working, and the working shift break is counted toward the employee’s work hours.

NewJersey:Employers are prohibited from publishing job advertisements, in print or on the Internet, that exclude unemployed individuals from applying.

NewYork:Employers must provide a religious accommodation to their New York City employees unless doing so would pose an “undue hardship”—an accommodation requiring significant expense or difficulty (including a significant interference with the safe or efficient operation of the workplace or a violation of a bona fide seniority system).

Nevada:Employers may not discriminate against their employees based on gender identity or expression. Gender identity or expression is defined as “gender-related identity, appearance, expression or behavior of a person, regardless of the person’s assigned sex at birth.”

NorthCarolina:Employers with at least 25 employees must use E-Verify. Employers with 500 or more employees will be required to use it by October 1, 2012; those with 100 to 499 employees, by January 1, 2013; and those with 25 to 99 employees, by July 1, 2013.

Illinois:CivilUnionsAll state law protections and responsibilities afforded to married heterosexual couples are extended to all committed couples in Illinois, by allowing same-sex couples to enter into a civil union.

PregnancyDiscriminationEmployers may not refuse to hire, segregate, or act with respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure or terms, privileges or conditions of employment on the basis of pregnancy, childbirth or related medical conditions.

Louisiana:State contractors are prohibited from bidding or contracting for state work without first submitting an affidavit attesting that they will use the federal E-Verify program to verify the legal work status of workers throughout the project. In addition, private employers are prohibited from employing unauthorized workers. E-Verify is a defense to any such charge, which effectively encourages, but does not mandate, that employers use E-Verify.

Maryland:BackgroundChecksEmployers may not use an applicant’s or employee’s credit report or credit history in determining whether to deny employment to the applicant; discharge the employee; or determine compensation or the terms, conditions or privileges of employment. Exemptions exist where a prospective or current employee’s credit-report information is “substantially job-related.” Exempt positions include:

1. Managers and/or those who have the authority to set the direction or control of a business or a department, division, unit or agency of a business

2. Those that involve access to personal information of a customer, employee or employer (including an individual’s first and last name, Social Security number, driver’s license number or financial account number); however, a position that involves access solely to personal information that is customarily provided in retail transactions is not exempt

3. Those that involve a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money or enter into contracts

4. Those that are provided an expense account or a corporate debit/credit card

5. Those that have access to trade secrets or proprietary or confidential business information

29 The Bottom Line | State Employment Law The Bottom Line | State Employment Law 30

Employers must also request and retain one of the documents listed for any nonemployee individual with whom it contracts for labor.

Employers with at least 500 employees must comply with the law beginning January 1, 2012; employers with 200-499 employees must comply beginning July 1, 2012; and any employer with 5-199 employees must comply beginning January 1, 2013.

JuryDutyEmployers generally are required to compensate their workers for travel time to and from jury duty. Tennessee law requires employees to receive their usual compensation for travel time, even if they normally are not paid for it, with limited exceptions. Companies are not required to pay such compensation if they have fewer than five employees on a regular basis or if the employee serving on a jury has worked for the employer for less than six months.

Texas:EmployerParkingAreasEmployers may not prevent employees who otherwise lawfully possess a firearm or ammunition from transporting or storing those items in a locked, privately owned motor vehicle in employer-provided parking areas. Employers can still prohibit employees from carrying a concealed handgun elsewhere on their premises, and the law does not alter the personal liability of an individual who causes harm to another through the use of a firearm or ammunition. The law contains some exceptions. For example, an employee cannot store a firearm or ammunition in a company-owned vehicle used by the employee in the course and scope of employment unless doing so is part of his job.

ExpandedProtectionforStateMilitaryPotential legal remedies are expanded for members of a state military force, such as the Texas National and State Guard, who are terminated because they were ordered to training or duty or who are denied a return to the same employment after a release from duty. An employee can now potentially recover back pay for a period of up to two years and/or be reinstated to the original position. The employee also may recover punitive and compensatory damages (including future pecuniary losses, emotional pain, suffering, inconvenience and mental anguish) of up to a maximum amount specified in the statute, which depends on the size of the employer (e.g., $50,000 for employers with fewer than 101 employees, and up to $300,000 for employers with more than 500 employees).

Pennsylvania:PhiladelphiaCriminalHistoryLawEmployers may not ask job applicants questions related to criminal history prior to or during the first interview. Employers are also prohibited from obtaining criminal-background information on an initial employment application. The ordinance applies to employers that employ 10 or more persons within the City of Philadelphia. They retain the right to make inquiries regarding criminal background following a first interview and utilize such information in hiring decisions. With limited exceptions, it is an unlawful discriminatory practice for an employer to inquire about or take any adverse action against an applicant on the basis of an arrest or criminal accusation that is not pending and did not result in a conviction.

SouthCarolina:Employers may not employ persons who are not authorized to work in the United States. Beginning January 1, 2012, employers may no longer confirm new workers’ employment authorization with a driver’s license or state identification card. Rather, employers must use E-Verify.

Tennessee:E-VerifyEmployers must use E-Verify or request and retain one of the following documents from the employee before employment begins:

• A valid Tennessee driver’s license or photo identification issued by the department of safety

• A valid driver’s license or photo identification issued by another state where the issuance requirements are at least as strict as those in Tennessee, as determined by the department of safety

• An official birth certificate issued by a U.S. state, jurisdiction or territory

• A U.S. government-issued certified birth certificate

• A valid, unexpired U.S. passport

• A U.S. certificate of birth abroad

• A report of birth abroad of a citizen of the U.S.

• A certificate of citizenship

• A certificate of naturalization

• A U.S. citizen identification card

• Valid alien registration documentation or other proof of current immigration registration recognized by the U.S. Department of Homeland Security that contains the individual’s complete legal name and current alien admission number or alien file number

While this list is extensive, it is less broad than the list of acceptable documents for Form I-9 purposes and, in fact, includes documents that are not presently acceptable under federal law (i.e., certificates of citizenship and naturalization).

31 The Bottom Line | State Employment Law The Bottom Line | State Employment Law 32

When Northrop Grumman Federal credit union operated under the corporate umbrella of Northrop Grumman—a leader in global security and a prominent Department of Defense contractor—it had high-quality employee benefits. After 65 years, the relationship came to an end, and the credit union executives had to look for a new partner that would provide the quality services they were familiar with, at comfortable prices. they chose adp totalsource.

Because northrop grumman federal credit union operates in multiple states, it needed help maintaining compliance across the organization. says richard Daly, the company’s vice president and controller: “We needed to find a Peo that could deliver services in the states we were in as well as any others where we might expand. Multistate compliance has become more critical as we’ve grown. We are no longer concerned about these issues, thanks to ADP Totalsource. They understand all the regulations and provide all the information we need. We trust their expertise implicitly.”

northrop grumman federal credit union tries to keep operating costs down so it can pass “profits” back to its customers through higher savings rates and lower lending rates. Daly explains, “We try to keep our costs low so we can provide our customers with higher quality services. We needed to match the benefits we had before with our corporate sponsor, and at a cost and with a partner that our employees would be comfortable with.” As a newly signed ADP Totalsource client, the company gained access to ADP®’s leading edge payroll systems and the ADP Totalsource 401(k) retirement savings Plan. “With ADP Totalsource, our benefits are as good as if not better than they were before.”

a change of this magnitude can cause concern on many levels, which can trigger employee turnover. Daly says, “We knew that the wrong decision could impact our ability to recruit and retain employees. ADP Totalsource made it easy. The transition was very smooth, and our employees are very happy. And that’s critical to us.”

additionally, northrop grumman federal credit union relies on adp totalsource for support in all hr issues. Daly explains, “With ADP Totalsource, we have a solution that is much more in tune with a financial institution than was the case before. They’ve provided a very extensive handbook that is explicit about what types of behavior are and aren’t allowed and what types of actions can result. When there is an issue, there are step-by-step procedures in place that help us document everything and protect the company.”

“adp totalsource provides everything we need.” daly says he looks forward to building a deeper relationship with adp totalsource. “ADP Totalsource was able to structure a plan around our needs. We know they have other services available should we need them going forward. For now, we’ve got everything we need to build a strong future.” n

What ADP TotalSourceSM

Clients Are Saying

How ADP TotalSource helped one client streamline its outsourced vendor relationships — and reduce the cost of managing HR.

northrop grumman fEdEral crEdit union

industry: Financial services

type of Business: Provides banking and credit services to current and former employees of Northrop Grumman and the Metropolitan Transit Authority of los Angeles

location: Gardena, california

number of Employees: 125

adp totalsource client: since 2009

Why adp totalsource? “We needed a Professional employer organization that we could count on for the long term. In every aspect of our review, ADP Totalsource came out head and shoulders above the rest.” —richard Daly, vice president and controller of Northrop Grumman Federal credit union

Creating a New Foundation forBusiness — With ADP TotalSource

The Bottom Line | What ADP TotalSource Clients Are Saying 34

Washington:VeteransPreferencePrivate employers are permitted—but not required—to give employment preferences to military veterans and certain spouses and widows, without violating federal, state or local equal employment opportunity laws.

SeattleLeaveOrdinanceEmployers in Seattle with at least five full-time employees (FTEs) must provide them with paid leave when they or their family members fall ill or are a victim of domestic violence. The rates of accrual and maximum caps depend on an employer’s tier or size:

EmployerSize MaximumCapAccrualRate

Tier 1: 5-49 FTEs 1 hour for every 40 hours 40 hours

Tier 2: 50-249 FTEs 1 hour for every 40 hours 56 hours

Tier 3: 250+ FTEs 1 hour for every 30 hours 72 hours

An employer’s FTEs both in and out of the Seattle city limits are counted toward determining its tier or size. Employees must be permitted to carry over sick leave from year to year. The ordinance, however, does not require a payout of unused accrued leave on termination of employment. An employer’s obligation to pay out sick leave is determined by the employer’s current contractual obligations and employee handbook obligations.

Wisconsin:Employers may prohibit an employee from carrying a concealed weapon. However, employers may not prohibit an employee, as a condition of employment, from carrying or storing a concealed weapon or ammunition in the employee’s own motor vehicle, regardless of whether the motor vehicle is used during employment or is driven or parked on property used by the employer.

33 The Bottom Line | State Employment Law

It is difficult to keep up with all of the new laws, determine how they affect you and stay in compliance. ADP TotalSource is well versed in state-law developments, updates clients about significant new developments in a timely manner and offers clear action plans that allow clients to focus on their business objectives. n

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ADP TotalSource publishes The Bottom Line free of charge to its clients and prospects. This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice or other professional services. ADP does not give legal advice as part of its ADP TotalSource Services. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. you should review applicable law in your jurisdiction and consult experienced counsel for legal advice.

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