Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit

On March 18, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act into law. HIRE provides tax incentives for businesses that hire unemployed workers.

On March 31, the IRS issued a draft Form W-11 HIRE Act affidavit used to certify employee eligibility for the program. The IRS has now issued a final version of the W-11, available here and a new set of FAQs, available here.

Instructions to the Employer

Section references are to the Internal Revenue Code.

Purpose of Form

Use Form W-11 to confirm that an employee is a qualified employee under the HIRE Act. You can use another similar statement if it contains the same information as on the form and the employee signs it under penalties of perjury.

Only employees who meet all the requirements of a qualified employee may complete this affidavit or similar statement. You cannot claim the HIRE Act benefits, including the payroll tax exemption or the new hire retention credit, unless the employee completes and signs this affidavit or similar statement under penalties of perjury and is otherwise a qualified employee.

A "qualified employee" is an employee who:

• begins employment with you after February 3, 2010, and before January 1, 2011;
  
  
• certifies by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins employment with you;
  
  
• is not employed by you to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing); and
  
  
• is not related to you. An employee is related to you if he or she is your child or a descendent of your child, your sibling or stepsibling, your parent or an ancestor of your parent, your stepparent, your niece or nephew, your aunt or uncle, or your in-law. An employee also is related to you if he or she is related to anyone who owns more than 50% of your outstanding stock or capital and profits interest or is your dependent or a dependent of anyone who owns more than 50% of your outstanding stock or capital and profits interest.
  

If you are an estate or trust, see section 51(i)(1) and section 152(d)(2) for more details.

The Service has not yet addressed the issue of electronic signatures regarding this form; however since it is considered an act of perjury to make a false claim on the new hire affidavit, it would lead one to think they are NOT likely to accept electronic signatures.

President Obama Signs H.R. 4851, the Continuing Extension Act of 2010

Late on Thursday, April 15th, President Obama signed H.R. 4851, the Continuing Extension Act of 2010. Final passage in the House (289-112) and Senate (59-38) guaranteed several extensions to government programs, including Consolidated Omnibus Budget Reconciliation Act (COBRA) health care insurance benefits and emergency unemployment benefits.

The bill provides:

An extension on the period that individuals may file applications for Federal Emergency Unemployment Compensation (EUC) from April 5, 2010 to June 2, 2010, and the period which individuals may claim and be paid EUC from September 4, 2010 to November 6, 2010.

An extension on the period that individuals may qualify for the Federal Additional Compensation (FAC), (the extra $25 per weekly benefit amount on state and federal unemployment compensation) will be extended for the same weeks as the EUC extension.

An extension of the period that the federal government will provide 100% reimbursement for weeks of regular federal extended benefit payments from April 5, 2010 to June 2, 2010, with the state option to continue the benefit extension period from September 4, 2010 to November 6, 2010.

An extension on the eligibility for the COBRA health insurance 65% subsidy for people who have lost their jobs through May 31, 2010. The bill also provides transition relief for individuals who lost their jobs between March 31, 2010, and the date of enactment.

EUC and FAC payments will be paid for from general revenue, and regular employment benefits will be draw from the Federal Emergency Unemployment Compensation Account that is funded with FUTA taxes paid by employers.

At this time, it is unclear if Congress will consider a longer extension of unemployment and COBRA benefits. The current legislative proposal, H.R. 4213, would extend benefits through the end of 2010.

Labor Department Toughens Enforcement on Internships

In recent days, there have been several news reports about the legality of unpaid internships and the Labor Department’s plan to crack down on employers’ who use unpaid interns.

For example, this week The New York Times reported that Nancy J. Leppink, the Acting Head of the Department of Labor’s Wage and Hour Division, confirmed that the agency is “cracking down” on unpaid internships.

According to Ms. Leppink, “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.”


According to the Department of Labor (DOL), there are six criteria that employers must use to determine whether an intern should be paid. Other than what has appeared in news reports, there is little information on how the agency intends to increase enforcement on unpaid internships


The U.S. Department of Labor’s Wage and Hour Division (WHD) has developed the six
factors below to evaluate whether a worker is a trainee or an employee for purposes of
the FLSA:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
   
2. The training is for the benefit of the trainees;
   
3. The trainees do not displace regular employees, but work under their close observation;
   
4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
   
5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and
   
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

If all of the factors listed above are met, then the worker is a “trainee”, an employment relationship does not exist under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the worker. Because the FLSA’s definition of “employee” is broad, the excluded category of “trainee” is necessarily quite narrow. Moreover, the fact that an employer labels a worker as a trainee and the worker’s activities as training and/or a state unemployment compensation program develops what it calls a training program and describes the unemployed workers who participate as trainees does not make the worker a trainee for purposes of the FLSA unless the six factors are met. Some of the six factors are discussed in more detail below.

Training Similar to Vocational School/The Primary Beneficiary of the Activity

In general, the more a training program is centered around a classroom or academy as opposed to the employer’s actual operations, the more likely the activity is training. Also, the more the training is providing the workers with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the worker is a trainee. On the other hand, if the workers are engaged in the primary operations of the employer and are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits is unlikely to make them trainees given the benefits received by the employer.

Displacement and Supervision Issues

Employers with bona fide training programs typically do not utilize trainees as a substitute for regular workers. If the employer uses the workers as substitutes for regular workers, it is more likely that the workers are employees as opposed to trainees. As well, if the employer would have needed to hire additional employees or require overtime had the workers not performed the work, then the workers are likely employees. Conversely, if the employer is providing job shadowing opportunities where the worker learns certain functions under the close and constant supervision of regular employees, but performs no or minimal work, this type of activity is more likely to be a bona fide training program; however, if the worker receives the same level of supervision as employees, this would suggest an employment, rather than a training, relationship.

No Job Entitlement/No Entitlement to Wages

Typically, before the work-based training begins, both the employer and the worker agree that the worker is not entitled to a job at the conclusion of the training period or wages for the time spent in training. The parties’ expectations regarding the compensation and job opportunities are relevant but not determinative. Even when such an agreement exists, hiring workers who finish the training program is considered in determining whether an employment relationship exists, and frequently hiring such workers suggests that the workers are not trainees. Finally, if the worker is placed with the employer for a trial period with the hope that the worker will then be hired on a permanent basis (even if the worker is not automatically entitled to a job at the end of the period), then the worker is not likely to be a trainee during the trial period.

Examples:

1. The worker is placed in a classroom setting maintained by an employer to learn to be an electronic technician with no guarantee of future employment with the employer. After the training period, the employer hires the worker (even though the worker was not entitled to a job and most training participants do not receive offers of employment). Because the employer did not benefit from the worker’s activities during the training period and the training is very similar to the training that is provided in a vocational school, the training program is likely bona fide, and the worker is not an employee under the FLSA.
   
2. A worker who participates in a program at a retail store or restaurant and who assists customers or operates a cash register with little supervision may be an employee because the employer derives tangible benefit (i.e., productive work) from the worker’s activities. Also, a worker who performs such work may result in the employer’s not hiring an employee whom it would otherwise hire, or result in a regular employee working fewer hours than he or she would otherwise work–-both of which suggest an employment relationship.
   

ADVISORY: TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 12-09 (PDF file)

Is Your Employee Handbook Too Wordy?

New employees commonly are asked to sign an acknowledgement form saying that they “have read and understand” their company’s employee handbook. But such documents often contain a level of detail that can overwhelm a new hire.

This issue was recently put before members of the Society for Human Resource Management’s Employee Relations Special Expertise Panel and was presented to HR professionals on the business networking site LinkedIn. The challenge: Write an employee handbook using 25 words or less.

The responses, though varied, had a number of common themes that hearken to early childhood guidance, such as: Work hard and be nice to people.

For example, Amanda Haddaway, director of human resources and marketing for Folcomer Equipment Corp. in Frederick, Md., said: “Be a responsible employee by being present, working hard, using common sense and acting in a legal and effective manner. When in doubt, ask manager.”

And Jenilee Deal, an HR associate at the California investment firm Bailard, Inc., said: “Use your best judgment and exceed the highest standards. Foster enthusiasm, reliability, communication, positivity and honesty.”

Panel member Chana C. Anderson, SPHR-CA, CCP, director of HR for the Jewish Home San Francisco, used a couple of extra words to emphasize the consequences employees face when they don’t follow the rules: “Do your best, be honest, and treat each other and the company with respect. Do this and we’ll all get along fine! Don’t and it’ll be time to find yourself another job.”

Fellow panel member, Vicki K. Kuhn, PHR-CA, HR manager for Fugate Enterprises, a company that operates fast food restaurants such as Pizza Hut and Taco Bell, customized her mini handbook for restaurant employees: “We’re here to run good restaurants so be clean, polite and don’t steal. Practice the golden rule and common sense and don’t touch others.”

Some who chimed in to the LinkedIn discussion emphasized the importance of personal responsibility and included advice such as “do the right thing” and “do your best to enjoy life.”
Bob Mosby, strategic account manager at the staffing services company Johnson Service Group Inc., included a list of priorities in his submission: “You are president and CEO of your work performance,” he told SHRM Online. “Success formula: customers first, company and colleagues second, self third. Always do your best for others.”

And Elliot Echlov, an information technology professional for a South Carolina-based health care organization, provided an employee’s take on an ideal 25-word handbook: “Be honest. Be ethical. Take ownership. Take responsibility. Share knowledge. Think differently. Work together. Be professional.”

Keep It Simple

Twenty-five words might not be enough to communicate everything an organization needs its employees to know, but HR professionals said simple is good.

Phyllis Hartman, SPHR, president of the HR firm PGHR Consulting, Inc., in Pittsburgh, said a handbook should be only the length necessary to communicate expectations clearly. “Detailed policies can be developed and provided to those who want or need them,” she told SHRM Online. “In today's world of rapid, constant change, having too much in writing can defeat employees and companies!”

Dawn M. Adams, PHR, owner of the Hartland, Wis.-based consulting firm HResults, and member of SHRM’s employee relations panel, said that employee handbooks should be “strong enough that they set the rules, yet broad enough that they don't handcuff managers to one set procedure.”

HR manager and SHRM panel member David J. Koesters, SPHR, agreed. “While it’s important to do things right, it is more important for a company to do the right thing based upon the circumstances,” he said. “The handbook is a guideline that allows a manager flexibility to do the right thing in a given situation based upon the facts.”

Fellow panel member Darlene J. Porter, SPHR, senior manager, talent management/employee relations, for AFLAC in Columbus, Ga., added that policies and handbooks should be “as simple as the company culture and employee mind-set will allow.”

Her mini handbook gives employees the answer to the “what’s in it for me?” question: “Work is a partnership. If you do your job to your best ability the company can share the rewards of mutual success with you.”

“Extensive HR policies and procedures only allow individuals to abdicate their personal responsibility and deflect people being fully human at work,” said Patti Digh, a management consultant, speaker and author from Asheville, N.C. Her message to employees? “Be kinder than necessary. Speak truth to power. Create your best job. Respect the company’s assets. Be your own boss. Learn from your mistakes.”

Why Handbooks Rarely Are Simple

Although the idea of a 25-word handbook might be appealing to employers—and employees— employment laws often prescribe requirements that make such brevity a challenge.

Every policy in a handbook can have legal implications, Devora L. Lindeman, senior counsel for the management-side law firm Greenwald Doherty LLP in New York, told SHRM Online. “Even with appropriate ‘the handbook is not a contract’ language, policies should not be worded as guarantees, and no benefits should be provided without employer flexibility to change them.”

In the United States some policies have more specific legal implications than others, such as “discrimination and harassment policies, Family and Medical Leave Act and other leave policies, computer and phone use policies (which should include an express disclaimer of privacy and indicator of potential monitoring) and social media/blogging policies,” she said.

Employment-at-will statements “are key, keeping in mind that states such as California differ as to requirements,” Lindeman said. “Depending on state law, certain wage and hour policies, as well as policies regarding benefits such as vacation and sick leave, are required to be in writing.”

Kuhn said a certain level of detail is essential. “Because I want to keep our unemployment rates as low as possible as a part of payroll costs, sometimes I have to be very, very picky—to the point of insanity—[about] what is in the handbook.”

Anderson acknowledged that there are some policies that require extensive detail but suggested a compromise approach: “Keep the majority of it simple [and] easy for employees to understand, and allow organizations to have flexibility/discretion in most of the policies.”

“Handbooks are both a sword and a shield for employers – but only if properly drafted,” Lindeman said. “Any handbook should be reviewed by legal counsel familiar with the local laws to ensure that the handbook provides the employer with the protections they need.”

Yet if she could draft a 25-word handbook, Lindeman said, it might read something like this: “Act like you want to be here. Do your job well to be rewarded. Fail, and be fired. Play nice. Do no harm.”

Getting Employees to Sign Off

Regardless of whether a particular organization’s employee handbook is detailed or succinct, it will generally be accompanied by an acknowledgement form that employees—new and old—are expected to sign. In addition to noting that the handbook is not a contract, is subject to change and provides no guarantee of continuing employment, most forms ask employees to affirm that they “have read and understand” the contents of the handbook.

But depending on when the handbook and form are given out, an employee might not have had the opportunity to read it. For that or other reasons, the employee might be reluctant to sign the form.

That’s why Lindeman said that employee handbook acknowledgement forms should require employees to confirm that the handbook has been received, that they will read the handbook and that they know that they are responsible for understanding and complying with the contents. “This should be distributed within an employee's first few days of employment,” she said, after providing the employee with an opportunity to read through the handbook.

Porter agreed and said that in her organization the handbook acknowledgement form is used to acknowledge that the employee received the document and that the policies and procedures apply whether an employee signs the form or not.

The form Anderson’s organization uses takes a similar approach and says, in part, “I understand and agree that it is my responsibility to read and familiarize myself with the provisions of the employee handbook and to abide by the rules, policies and standards set forth in the employee handbook.”

According to Adams, employees should have a reasonable time period in which to read the handbook. Her organization’s form says “I understand that it is my responsibility to read its contents within seven calendar days of my hire date and understand its contents. If I have any questions or concerns with its contents or other issues related to my employment, it is my responsibility to raise them.”

But some employees, whether new to the organization or not, refuse to sign such a form.

“If an employee refuses to sign the acknowledgement of receipt of the company policies, especially if it's a new employee, this action is an indication that the employee sees him/herself as above the company's laws,” Frances O'Malley-Saxton of FOS Consulting LLC in Lake Orion, Mich. told SHRM Online. “Even if you have the signatures of witnesses of this signature refusal, by allowing him or her not to sign you're sending the message that the employee is in a stronger position to manage you; not the other way around.”

“I have never had an employee refuse to sign,” Anderson noted. But if she did, she said, she would respond by reminding the employee that they are still responsible for following the policies in the handbook and would make a note in the employee’s file that the employee refused to sign but was educated about the policies.

Kuhn said her employees must acknowledge that they have read the handbook and agree to abide by it: “If they refuse to sign the acknowledgement, then they don’t work for us.”

by Rebecca R. Hastings, SPHR, an online editor/manager for SHRM

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