NOTE: Cerasis is not taking any political side when it comes to the Affordable Care Act, also known as “Obamacare”, but to stay true to educating those in the manufacturing, distribution, logistics, and freight worlds, we want to provide the highest of integrity factual information on issues which affect the operations of companies. At Cerasis our technology, people, and services we provide have a vision of decreasing any inefficiencies in the supply chain and logistics departments so that our customers can stay focused on their core and remain profitable. We feel, the more you know about the facts of things such as the Affordable Care Act, the better prepared you are to stay in business as well as remain profitable. This a guest blog from employment attorney, Mario K. Castillo, who has written a book on the facts of the Affordable Care Act.
By now most employers are aware that the Affordable Care Act’s Employer Mandate defines a full-time employee as an individual that performs at least 30 hours of service or more during a one week period or more than 130 hours of service a month (Note: the 130 hours a month accounts for months that are longer and shorter than 30 days–it is not a typo). I’ve spoken to many employers that describe a full-time employee under the ACA as an employee that works at least, on average, 30 hours a week. That definition is only partially correct. There is a legal difference between “hours of service” and “hours worked,” and explaining the importance of the distinction is the aim of today’s post.
Hours of Work is simple enough to explain, it is the time that each employee actually expends performing labor for the benefit of your business enterprise. This could be working a machine if you are a manufacturing company, loading a truck if you are shipping company, or driving a truck if you are transportation company. Conversely, “Hours of Service” is a much broader term that includes not only Hours of Work, but in fact includes:
This second category includes non-working period such as paid vacations, paid sick leave, paid incapacity (paid disability leave), paid jury duty, paid military duty, paid maternity or paternity leave, or other leaves of absence where the employer has agreed to pay the employee. For hourly, non-exempt employees, time clock punch-in and punch-out records will provide Hours of Work for a particular employee, but they will probably not include Hours of Service. This is where employers are going to have to come up with ways to include those Hours of Service into their Employer Mandate calculations (or risk under-representing an employee’s Hours of Service). This is the first take away from this post: if you have more than 50 human beings working for your company you better ensure that you are counting Hours of Service and not just Hours of Work in determining whether you are an Applicable Large Employer. If you currently do not have good records of an employee’s Hours of Service, now is the time to start implementing those procedures.
Secondly, it is now more important than ever that employers have good management and accounting practices that account for all compensable time. For example, suppose that as an employer you have an employee that works 29 hours a week, on average. Your clock-in and clock-out records show that said employee worked those 29 hours. You then count that employee as a part-time employee. Years later the Department of Labor or the Internal Revenue Service is auditing or investigating your workforce and it turns out that said employee was showing up to work an hour early everyday to meet his quotas but was not clocking in. Traditionally, under the FLSA the employee is entitled to be paid for that time. Once that extra hour is added back into the employee’s average Hours of Work, the employee ends up being a full-time employee under the ACA. Different industries run into different problems when it comes to unreported and unpaid compensable time, but generally things to watch out for are:
The above situations have always triggered FLSA problems for an employer, but they also will likely trigger ACA problems. Harking back to that first example, if that 29-hour employee is your 50th full-time employee, a simple oversight could be the difference between being an employer subject to the Employer Mandate and an employer that is otherwise free of its regulations. It is important for employers to review company handbooks to ensure they are aware of all avenues through which the company has promised an employee pay (e.g., bereavement pay, jury duty pay, etc) and have mechanisms in place to account for an employee’s total Hours of Service, not just Hours Worked. Moreover, review of company procedures and communication with employees is key to ensuring that all Hours Worked actually appear on time clock printouts. Employers do not want to find out that an employee was showing up early, staying late, or working through lunch and not being paid. The FLSA has always penalized such employers, but now the ACA’s Employer Mandate adds a whole different dimension of potential liability.
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