News & Articles

Human Resource Management
Published in the Rochester Business Journal
July 22, 2005
© 2005 HR Works, Inc.

Are you up to date on HR compliance issues?
HR Works' quiz offers a reality check

By Candace Walters

Managing the human resources function at a small company involves many technical complexities and exposures. At companies that do not employ a trained HR professional, the CFO or CEO bears the burden of frequently updating his or her knowledge of these sometimes mundane but crucial rules. And, as the legal landscape shifts continually, the risks of being caught out of compliance remain a serious threat. What company can afford an unfavorable Department of Labor ruling, costly litigation, bad publicity, or loss of reputation in the eyes of employees, customers, lenders and suppliers?

To help small-business leaders gauge their knowledge of relevant rules, and to assist them in identifying where knowledge gaps exist, HR Works offers the following quiz. (Answers and scoring follow.)

1. An Affirmative Action Plan (AAP) must be filed by an employer with:

A. 100 employees and $25,000 in federal contracts.
B. 50 employees and $50,000 in federal contracts.
C. 50 employees and $15,000 in federal or state contracts.
D. At least $15,000 in federal or state contracts.

2. In May 2005, the Internal Revenue Service announced that employers may now permit cafeteria plan participants an additional _____ months after the end of the plan year to claim Flexible Spending Account contributions that were unused during the plan year.

A. 2
B. 2.5
C. 3
D. 6

3. New rules under the Fair Labor Standards Act (FLSA) went into effect in August 2004, but many small businesses still have not adequately updated their job-classification processes. Under FLSA, which one of the following terms is NOT a legitimate job classification for a non-computer employee?

A. Hourly, non-exempt
B. Salaried, exempt
C. Hourly, exempt
D. All of the above

4. To help employers maintain some control over spiraling health-care costs, lawmakers have created several tools that allow relaxed tax treatment of health-related expenditures. Two such tools -- health savings accounts (HSAs) and flexible spending accounts(FSAs) -– have distinct differences but often are confused. Which of the following is/are true of HSAs?

A. HSA balances can be rolled forward indefinitely, including into retirement.
B. HSAs cannot be forfeited.
C. Employees can take non-medical distributions from HSAs at any time.
D. All of the above.

5. To avoid a charge of negligent hiring, employers should specifically pay attention to which phase of the selection process?

A. Physical examinations
B. Polygraph testing
C. Reference checking
D. Skills testing

6. An employee who is frequently absent because of a recurring illness may or may not be covered by the Family and Medical Leave Act (FMLA). How can an employer legally determine whether the problem is a "serious health condition" subject to FMLA rules?

A. The employer can ask the employee about the nature of his/her illness and absences, and decide whether s/he is eligible.
B. The employer can call the employee's doctor to get more information about his/her health status.
C. The employer can provide the employee with a health certification form for his/her health care provider to complete.
D. The employer cannot do anything, because under FMLA employers are not permitted to obtain medical information from employees.

7. Which of the following terms should never be used in an employee handbook?

A. Employment contract
B. Permanent employee
C. Earned but unused paid time off
D. A and B

8. If a 43-year-old man dies, leaving a wife and three children under the age of 14 years, what federally mandated benefit(s) will be provided?

A. COBRA health continuation for the wife and dependent children for no more than 18 months.
B. Social Security death benefits of $255 and a monthly income for the wife and all dependent children under age 18.
C. Medicare health coverage for the wife and dependent children under age 18.
D. All of the above.

ANSWERS

1. B

All federal contractors, except those in the construction industry, that employ 50 or more employees and have government contracts of $50,000 or more are required, under Executive Order 11246, to develop and implement a written AAP for each establishment.

The construction industry, however, is subject to a distinct approach that takes into account the temporary nature of the construction workforce. The federal government, rather than the contractors themselves, establish goals and specify affirmative action for federal and federally assisted construction contractors.

Any contractor violating E.O. 11246 may see its contracts canceled, terminated or suspended in whole or in part, and the contractor may be declared ineligible for future government contracts.

2. B

FSA participants can claim unused contributions for 2.5 months after the end of the plan year.

3. C

The FLSA classifies positions as either exempt or non-exempt, and only certain positions can qualify as exempt from specific provisions, including overtime. The terms "hourly" and "salaried" refer to the method used to pay an employee. Exempt employees –- with the exception of computer employees –- may never be paid on an hourly basis.

4. D

HSAs are similar to FSAs in that both allow employees to use pretax dollars to pay for medical costs -– including deductibles, out-of-pocket amounts and over-the-counter drugs -- not covered by their health care plans.

FSAs require annual, use-it-or-lose-it elections, from which medical costs are reimbursed throughout the plan year. In contrast, HSAs help employees pay for current and future medical costs. Under HSAs, medical cost reimbursements are the only distributions to receive favorable tax treatment; other distributions from HSAs are allowed but subject to penalties.

5. C

In the case of negligent hiring, an employer is held liable for harm caused by one of its employees, because the employer knew or should have known that the employee was likely to engage in the type of behavior that caused the harm. An employer is expected to take reasonable care in making its hiring decisions. By checking a prospective employee's references, an employer may satisfy its duty to take reasonable steps to determine whether an employee would present a danger to others after hire.

6. C

A certification form –- the Department of Labor's WH-380 -- allows a medical professional to make the determination, eliminating guesswork and avoiding privacy issues. An employer also can create its own form, which then should be reviewed by an employment law attorney before use.

7. D

Use of these terms can weaken or destroy the "employment at will" relationship that many employers establish. At-will employment is a common-law concept that allows employees and employers to terminate the employment relationship at any time for any reason, except for reasons specifically prohibited by law or by contract.

8. B

Social Security provides insurance benefits to survivors. Eligible survivors may include widows, widowers (and divorced widows and widowers), children and dependent parents. If COBRA applies, the coverage period for a surviving spouse and dependent children may extend up to 36 months.

SCORING

7-8 correct. You're doing a fine job of keeping yourself current with compliance-related matters.

5-6 correct. Not bad, but you might consider an occasional refresher course or consultation with an HR consultant.

3-4 correct. Hmmm. Your lack of familiarity with employment regulations could be putting your organization at risk for legal or enforcement action.

1-2 correct. Run, don't walk, to the nearest training course or HR professional.

A low score indicates that your knowledge of technical compliance details is outdated. Consider this quiz a friendly wake-up call, and take action now to protect your organization from needless disruption that could result from incomplete understanding and application of employment law.

Candace Walters is president and CEO of HR Works, Inc., an HR management outsourcing and consulting firm serving more than 600 clients in the Rochester, Buffalo, Syracuse and Baltimore/Washington areas. HR Works provides HR Department outsourcing, part-time and interim HR managers, affirmative action plans, HR*Stars recruitment services, legally reviewed employee handbooks and supervisor manuals, compensation programs, training and more. To offer comments, write walters@hrworks-inc.com

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