Reduce Financial Liability by Complying with Wage-Hour Regulations

Transcription

1 Private Duty Conference April 8, 2011 Osage Beach, Missouri Reduce Financial Liability by Complying with Wage-Hour Regulations Conducted by Bill Ford P.O. Box 1848 Bristol, Tennessee (423) (423) (Fax) web site:

2

3 Table of Contents Introduction Trends in Workplace Litigation: The Rising Popularity of FLSA Class Actions...1 White-Collar Exemptions The Executive Salary Classification Tests...2 The Administrative Salary Classification Tests...2 The Learned Professional Salary Classification Tests...2 The Creative Professional Salary Classification Tests...3 The Computer Employee Salary Classification Tests...3 The Outside Sales Salary Classification Tests...4 Highly-Compensated Employees...4 Technical Requirements of the Guaranteed Salary for White-Collar Exempt Classifications...5 SESCO Staff Recommendations for the Home Care and Hospice Industry The Home Health Care Industry Under the Fair Labor Standards Act (FLSA)...6 Nurses and the Part 541 Exemptions Under the Fair Labor Standards Act...7 Common Wage and Hour Violations Trap #1 Misclassifying Non-Exempt Employees As Exempt...8 Trap #2 Not Knowing What Is And Isn t Considered Work...10 Trap #3 Not Paying For Off-The-Clock Working Hours...11 Trap #4 Not Calculating Employees Regular Rates Properly...12 Trap #5 Taking Improper Pay Deductions...12 Trap #6 Improper Or Incomplete Recordkeeping...13 Independent Contractor Guidelines...14 State of Missouri Wage and Hour Regulations Employment-at-Will...17 Fair Employment Law...17 New Hire Reporting...18 Payment of Wages...18 Unused Vacation at Time of Termination...19 Overtime...19 Breaks/Meal Period...19 Child Labor Law...19 Breaks for Nursing Mothers...20 Smoking in the Workplace...20 Drug Testing...21

4 Military Leave...22 Volunteer Firefighter...22 Jury Duty...22 Access to Personnel Files...22 Health Care Continuation...23 Service Letter...23 About SESCO...24 SESCO s Professional Service Agreement...25

5 Introduction TRENDS IN WORKPLACE LITIGATION: THE RISING POPULARITY OF FLSA CLASS ACTIONS -- Why Plaintiffs Attorneys Love the Fair Labor Standards Act The FLSA was an act of Congress in 1938 in midst of the Great Depression. The purpose of the Act was to protect workers from substandard wages and oppressive working hours and conditions that were detrimental to the health, efficiency and general well-being of workers. The FLSA was designed to give specific minimum protection to individual workers and to ensure that each employee covered by the Act would receive a fair day s pay for a fair day s work and would be protected from the evil of overwork as well as underpay. The Act was primarily aimed at protecting vulnerable workers -- children and low-paid sweat shop employees. Although most employers and human resource professionals know and understand the Fair Labor Standards Act, FLSA litigation has significantly increased in the past few years as employees and their attorneys have become captivated by the promise of multi-million dollar verdicts and settlements. In fact, FLSA litigation has taken over all employment litigation to include Title VII discrimination charges. The recent increase in FLSA litigation can be traced in part to increased awareness by plaintiffs attorneys of the lucrative nature of FLSA lawsuits. Attorneys have recently awakened to the FLSA for two (2) reasons -- multi-million dollar verdicts attorney fees. Multi-million dollar verdicts are common in FLSA cases because an FLSA violation generally applies to large segments of employees. Attorneys fees are mandatory if an FLSA violation is proved. While an attorney would not normally prosecute an overtime lawsuit for one employee where only $5,000 in damages is available, the attorney would bring the same lawsuit on behalf of 200 employees, where the potential exists for $1 million in damages and hundreds of thousands of dollars in attorney fees. As such, it behooves employers to take a second look at their compliance posture and compensation practices. As SESCO was founded by a Wage-Hour officer in 1945, SESCO s history is deeply rooted in Wage and Hour compliance and SESCO consultants have assisted literally thousands of employers in conducting onsite Wage and Hour compliance assessments in all industries, in all 50 states. In addition, SESCO has represented an untold number of clients before the Department of Labor, Wage-Hour Division. Based upon this extensive expertise in Wage and Hour accounting, the following are the most common mistakes uncovered by SESCO audits. 1

6 White-Collar Exemptions THE EXECUTIVE SALARY CLASSIFICATION TESTS To qualify for the Executive employee exemption, all of the following tests must be met: 1. The employee must be compensated on a salary basis at a rate not less than $455 per week; 2. The employee s primary duty must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise; 3. The employee must customarily and regularly direct the work of at least two (2) or more other full-time employees or their equivalent; and 4. The employee must have the authority to hire or fire employees, or the employee s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight. Primary duty means the principal, main, major or most important duty that the employee performs. Determination of an employee s primary duty must be based on all the facts, with the major emphasis on the character of the employee s job as a whole. THE ADMINISTRATIVE SALARY CLASSIFICATION TESTS To qualify for the Administrative employee exemption, all of the following tests must be met: 1. The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; 2. The employee s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer s customers; and 3. The employee s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. THE LEARNED PROFESSIONAL SALARY CLASSIFICATION TESTS To qualify for the Learned Professional employee exemption, all of the following tests must be met: 1. The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; 2

7 2. The employee s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; 3. The advanced knowledge must be in a field of science or learning; and 4. The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. THE CREATIVE PROFESSIONAL SALARY EXEMPTION TESTS To qualify for the Creative Professional employee exemption, the following tests must be met: 1. The employee must be compensated on a salary or fee basis at a rate of not less than $455 per week.* 2. The employee s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. This includes such fields as music, writing, acting, and the graphic arts. *The minimum salary requirement does not apply to bona fide teachers. Teachers are exempt if their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. THE COMPUTER EMPLOYEE SALARY CLASSIFICATION TESTS To qualify for the Computer Employee exemption, the following tests must be met: 1. The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour; 2. The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below; 3. The employee s primary duty must consist of: The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; 3

8 The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or A combination of the aforementioned duties, the performance of which requires the same level of skills. THE OUTSIDE SALESPERSON SALARY CLASSIFICATION TESTS The Wage-Hour Division defines the classification of Outside Salesperson as any employee primarily hired in the capacity of an outside sales representative and who performs the following job duties and responsibilities on a regular, recurring basis: Employed for the purpose of and who is customarily away from the place or places of business in making sales or obtaining orders or contracts for services, or for the use of facilities for which a consideration is paid by the customer. It is the general enforcement policy of the Wage-Hour Division that so-called in-house salespeople who are engaged primarily in taking orders by telephone on a daily basis are not eligible for the outside salespersons salary classification free from the minimum wage and overtime requirements. There is no minimum salary required for personnel meeting the outside salesperson accounting tests. HIGHLY-COMPENSATED EMPLOYEES The regulations contain a special rule for highly-compensated workers who are paid total annual compensation of $100,000 or more. A highly-compensated employee is deemed exempt under Section 13(a)(17) if: 1. The employee earns total annual compensation of $100,000 or more, which includes at least $455 per week paid on a guaranteed salary basis; 2. The employee s primary duty includes performing office or non-manual work; and 3. The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee. The $100,000 in salary must be guaranteed and there can be no portion at risk such as a commission or incentive pay plan. 4

9 TECHNICAL REQUIREMENTS OF THE "GUARANTEED SALARY" FOR WHITE-COLLAR EXEMPT CLASSIFICATIONS A week is the shortest period over which the minimum guaranteed salary payments can be made in deciding whether or not the minimum wage salary test has been met. However, the salary requirements for Executive, Administrative, Computer Related, Professional and Outside Sales salaried employees can be paid into equivalent amounts for periods longer than a week as outlined in the table below. Paying employees more frequently than every week is also permitted by the Wage-Hour Division. Executive and administrative employees may be paid on a daily shift basis so long as the arrangement specifies that not less than the required weekly amount will be paid in any week in which the employee performs any work. Weekly Guarantee Bi-Weekly Guarantee Semi- Monthly Guarantee Monthly Guarantee Executive $455 $910 $ $1, Administrative $455 $910 $ $1, Computer $455 $910 $ $1, OR $27.63 per hour or more, if paid hourly. Professional $455 $910 $ $1, Outside Sales No minimum salary requirement. So far as deductions from these guaranteed wages, the general rule is that those employees who meet the salary and duties tests for these white-collar exemption classifications must receive full salary in any week they do any work without regard to the number of days or hours worked. Deductions may not be made for absences caused by the employer if the employee is ready, willing, and able to work, or for absences caused by jury duty, attendance as a witness or temporary military leave, during the specific workweek. You may offset amounts received by the employee as jury or witness fees or military pay for a particular week against the salary due for the lost days in that week. Of course, no pay is due for weeks in which no work is performed. However, deductions from a guaranteed salary may be made in the following circumstances: Deductions may be made when an employee absents him or herself from work for a day or more for personal reasons, other than sickness or accident. Thus, if an employee is absent for a day or longer to handle personal affairs, his exempt status will not be affected if deductions are made from the salary for such absences. 5

10 Deductions may also be made for absences of a day or more occasioned by sickness or disability (including industrial accidents) if the deduction is made in accordance with a bona fide plan, policy, or practice of providing compensation for loss of salary occasioned by sickness and disability. Thus, if the employer s particular plan, policy, or practice provides compensation for absences, deductions for absences a day or longer because of sickness or disability may be made before an employee has qualified under such plan or after the individual has exhausted his leave allowances thereunder. To offset amounts employees receive as jury or witness fees, or for military pay. Deductions from pay may be made for penalties imposed in good faith for infraction of safety rules of major significance. Deductions from pay of exempt employees may be made for unpaid disciplinary suspensions of one (1) or more full days for infractions of workplace conduct rules. Unpaid leave under the Family and Medical Leave Act may be deducted in full day, partial day or hourly increments according to policy. Finally, deductions may be made in initial and terminal weeks of employment. In such weeks, the payment of a proportionate part of the employee s salary for the time actually worked will meet the salary requirements. SESCO Staff Recommendations for the Home Care and Hospice Industry THE HOME HEALTH CARE INDUSTRY UNDER THE FAIR LABOR STANDARDS ACT (FLSA) Characteristics Employers who provide home health care services for individuals who (because of age or infirmity) are unable to care for themselves may or may not be required to pay minimum wage and/or overtime premium pay depending upon the type of services provided and the nature of the working relationship. Employees providing "companionship services" as defined by the FLSA need not be paid the minimum wage or overtime. Trained personnel such as nurses, whether registered or practical, are not exempt from minimum wage or overtime under the exemption for companions, but registered nurses may be exempt as professionals. Certified nurse aides and home health care aides may be considered exempt from the FLSA's wage requirements depending upon the nature of their work. 6

11 Requirements Persons employed in domestic service in households are covered by the FLSA. Nurses, certified nurse aides, home health care aides, and other individuals providing home health care services fall within the term "domestic service employment." An employee who performs companionship services in or about the private home of the person by whom he/she is employed is exempt from the FLSA's minimum wage and overtime requirements if all criteria of the exemption are met. "Companionship services" means services for the care, fellowship, and protection of persons who because of advanced age or physical or mental infirmity cannot care for themselves. Such services include household work for aged or infirm persons including meal preparation, bed making, clothes washing and other similar personal services. General household work is also included, as long as it does not exceed 20 percent of the total weekly hours worked by the companion. Where this 20 percent limitation is exceeded, the employee must be paid for all hours in compliance with the minimum wage and overtime requirements of the FLSA. The term "companionship services" does not include services performed by trained personnel such as registered or practical nurses. Registered nurses are exempt from the FLSA's wage requirements where their time is spent in the performance of the duties of a nurse and are paid on a salary or a "fee basis" as defined by Regulations. Individuals other than trained personnel (such as nurses) who attend to invalid infants and young children are considered companions, rather than babysitters, and their status may thus be within the companion exemption. Covered domestic service employees who reside in the household where they are employed are entitled to the minimum wage but may be exempt from the Act's overtime requirements. Typical Problems An employee hired as a companion to an aged individual with a physical infirmity spends more than 20 percent of his/her time doing general household work. That person must be paid at least the minimum wage and one and one-half the regular rate of pay for hours in excess of forty in a workweek. An employee who provides care and protection for minor children, where the children are not physically or mentally infirm, must be paid the minimum wage and proper overtime compensation. This activity would not constitute exempt companionship services. NURSES AND THE PART 541 EXEMPTIONS UNDER THE FAIR LABOR STANDARDS ACT (FLSA) The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hour worked and overtime pay at time and one-half the regular rate of pay 7

12 for all hours worked over 40 in a workweek. However, Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempts certain computer employees. To qualify for exemption, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Nurses To qualify for the learned professional employee exemption, all of the following tests must be met: The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week; The employee s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; The advanced knowledge must be in a field of science or learning; and The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. Registered nurses who are paid on an hourly basis should receive overtime pay. However, registered nurses who are registered by the appropriate State examining board generally meet the duties requirements for the learned professional exemption, and if paid on a salary basis of at least $455 per week, may be classified as exempt. Licensed practical nurses and other similar health care employees, however, generally do not qualify as exempt learned professionals, regardless of work experience and training, because possession of a specialized advanced academic degree is not a standard prerequisite for entry into such occupations, and are entitled to overtime pay. Common Wage and Hour Violations TRAP #1 MISCLASSIFYING NON-EXEMPT EMPLOYEES AS EXEMPT Employees who are non-exempt must be paid overtime at one-and-one half times their regular rates of pay when they work more than 40 hours in one week. Employees who are exempt, on the other hand, are owed no overtime, regardless of how many hours they work. Employees who are exempt usually fall into one of two basic categories executive or administrative. Other exempt categories cover professionals, such as lawyers and computer professionals. Outside salespersons occupy their own exempt category. 8

13 Exempt executives and administrators must earn a minimum of $455 a week. Warning: Titles and job descriptions mean nothing when it comes to assessing whether employees are exempt. What counts: the duties these employees perform. To determine whether employees are exempt, compare their actual duties to the FLSA s tests for exempt status. The executive exemption can be broader than you think. Assistant managers can qualify as executives, if they earn the requisite weekly salary and pass the duties test. The duties test mandates that an executive must: have as a primary duty managing the enterprise, or a customarily recognized department or subdivision (e.g., setting and adjusting employees pay rates and work hours, directing employees work, maintaining production or sales records, handling complaints and grievances, planning and controlling the budget, implementing legal compliance measures); customarily and regularly direct the work of at least two other full-time employees or their equivalent; and have the authority to hire or fire employees, or have particular weight given to suggestions and recommendations regarding the hiring, firing, advancement, promotion, or any other change of status of other employees. Managers commonly lament that they re not executives because almost all of their time is spent doing the same work as their subordinates. In fact, managers at various Starbucks locations took this lament to court, and lost. Rule: Otherwise exempt managers retain that status, even if they re filling in for a non-exempt employee who is out sick or on vacation, helping out in emergencies, or lending a hand during a busy period. In addition, the routine performance of some nonexempt work generally won t be enough to alter the status of an executive. The court in the Starbucks case concluded that the managers, who regularly poured coffee (a non-exempt duty), were training subordinates. Key: Who the decision maker is. Generally, executives decide to perform non-exempt work, and they remain responsible for the success or failure of the business or their department as they re performing that work. Businesses have a considerable amount of trouble determining who are exempt administrators. Administrators work to support the primary business. Where executives can wear several hats, administrators usually wear only one an HR hat, a marketing hat, an accounting hat, and so on. To qualify for the administrative exemption employees must: have as their primary duty the performance of office or non-manual work that s directly related to the management or general business operations of the employer or the employer s customers; and exercise discretion and independent judgment with respect to matters of significance, including the authority to formulate, interpret, or implement management policies; carry out major assignments; and spend significant amounts of company money. Warning: Exercising discretion and independent judgment is more than using skill in applying well-established techniques, procedures, or specific standards that are described in manuals. Likewise, it 9

14 doesn t include clerical or secretarial work, recording or tabulating data, or other mechanical, repetitive, or routine work. The basic allegation administrators make in FLSA lawsuits is that they re not exempt because they don t use discretion and independent judgment, but rather apply facts to a predetermined formula or outcome. The essence of these claims is that their work doesn t support the business, it is the business. So, for example, claims adjusters for an automobile insurance company alleged they weren t exempt because their duties, which consisted of adjusting property damage and bodily injury claims, were the company s product. The insurance company contended that they were exempt administrators because they produced no product and their work facilitated management. On the eve of trial, the insurance company settled with their adjusters to the tune of $120 million. Insurance underwriters, on the other hand, have been found to be administrators because they exercise independent judgment and authority to negotiate premiums and coverages. TRAP #2 NOT KNOWING WHAT IS AND ISN T CONSIDERED WORK Non-exempt employees must be paid for every hour they work. But not every minute employees spend on the premises is working time, and some of the time they spend not technically working is, nevertheless, counted as compensable working time. To sort everything out, it s essential to have a good grasp of the full extent of non-exempt employees actual jobs, including knowledge of any pre-work prep or post-work wrap-up. The first set of problems employees performing activities before their workdays begin or after they end arise due to the Portal-to-Portal Act, which is an amendment to the FLSA. Under the Portal Act, activities performed either before or after the regular work shift are compensable, if those activities are an integral and indispensable part of the employees principal work activities. Factors used in making this determination include whether the activity: is required by the employer; is necessary for the employee to perform his/her duties; and primarily benefits the employer. Some situations require great sensitivity to potential Portal Act violations. Generally, employees who must power up computers or check at home prior to going out on the road would be considered to be working, as would employees who are required to change into elaborate protective gear prior to hitting the factory floor. A second set of problems arises during employees workdays. Take break time, for example. Employees need not be paid for their lunch breaks provided they re completely relieved of their work duties while eating, or the time during which they spend eating is spent primarily for their benefit (minimal work-related activities are okay). Rest breaks, which usually last for no less than five minutes and no longer than 30 minutes, are compensable. 10

15 There are at least four types of travel. The two simplest are normal commuting, which isn t compensable, and travel between work sites during the workday, which is always compensable. The other two travel time situations continue to cause great confusion. Special one-day travel, where employees return home at the end of the day, is considered to be compensable working time to the extent that employees travel beyond their normal commuting time. If, for example, an employee attends a one-day seminar two hours away from her home, and her normal commuting time is 30 minutes, she must be paid for 90 minutes. Lastly is overnight travel. This time isn t only hours worked during regular working hours on normal working days, but also during corresponding hours on non-work days. If, say, an employee normally works Monday to Friday, 8 a.m. to 5 p.m., flies on Tuesday at 12 p.m., and arrives at 7 p.m., the travel time after 5 p.m., which is outside the employee s regular working hours, isn t counted as compensable working time. TRAP #3 NOT PAYING FOR OFF-THE-CLOCK WORKING HOURS Managers and employees can face excruciating pressure to work off-the-clock either at the beginning of the day (which could implicate the Portal-to-Portal Act), during the day (e.g., working lunches), or at the end of the day, when employees are asked (or told) to punch out and return to work. The FLSA is strict non-exempt employees must be paid for all of their working hours, including hours worked off-the-clock. You must pay an employee who works unauthorized overtime. Then, discipline the employee and, if necessary, that employee s manager, to prevent a recurrence in the future. To prevent offthe-clock overtime, the best strategy is to proactively audit the time records of employees who arrive early or stay late: Stress the need for managers to be conscious of employees hours. Ensure that employees are aware of company policies that prohibit off-the-clock overtime. Pay special attention to employees who routinely volunteer to continue to work at the end of their shifts to finish assigned tasks or correct errors. Keep an ear to the company grapevine. What to listen for: Employees griping about managers who pressure them to stay late or come in early to complete work. Investigate all complaints, written or oral, that employees make. Monitor employees who routinely take laptops home. 11

16 TRAP #4 NOT CALCULATING EMPLOYEES REGULAR RATES PROPERLY Non-exempt employees who work more than 40 hours in one week must be paid time-and-a-half their regular rates of pay as an overtime premium. If employees earned a straight hourly wage, and nothing more, calculating their regular rates would be a snap: multiply that hourly rate by 1.5 and then multiply that figure by the number of overtime hours worked. Unfortunately, things are rarely that easy these days. For example, employees often receive vacation pay, incentive bonuses, suggestion awards, or holiday bonuses. The general rule is that any payment that s based on employees productivity, work, efficiency, etc., must be included in the regular rate calculation. This applies to incentive and other nondiscretionary bonuses, and to most prizes and awards. If a payment must be included in the regular rate calculation, it must be apportioned back over the periods during which it was earned. Upshot: This retroactive calculation increases both the regular rate calculation and employees overtime pay. Not every bonus, however, needs to be included in the regular rate calculation. And with some creative planning, retroactive recalculations can be avoided altogether: Discretionary bonuses can be excluded from the regular rate calculation. A bonus is discretionary if the employer retains sole discretion over the fact and the amount of the payment until quite close to the end of the bonus period. Holiday bonuses and bonuses paid on other special occasions (e.g., a longevity or anniversary bonus) can also be excluded from the regular rate calculation if they re modest in amount and aren t measured by employees productivity (e.g., a two-week bonus paid every December). Suggestion awards can be excluded from the regular rate calculation if the awards are geared to the value the company places on the suggestion; they result from additional effort or ingenuity unrelated to, and outside the scope of, employees customary duties; and employees voluntarily participate in the suggestion system. But the general rule also works in reverse payments that aren t based on employees work, productivity, efficiency, etc., can be excluded from their regular rate calculation. This means that in addition to some suggestion awards, vacation pay, sick pay, and other idle time pay can be excluded from the regular rate calculation. TRAP #5 TAKING IMPROPER PAY DEDUCTIONS Almost every business experiences losses in the form of bad loans, equipment breakage and overpaid wages. One of the most effective ways to recoup the loss, and ensure that it doesn t happen again, is to take the amount out of employees pay. The FLSA allows deductions, but sets strict guidelines. 12

17 General rule aside, pay deductions aren t likely to garner much support from employees. To head off a potentially disastrous employee-relations problem, a company policy should specifically allow loss-related deductions, and employees should understand how loss-related deductions will be calculated. TRAP #6 - IMPROPER OR INCOMPLETE RECORDKEEPING The FLSA puts the burden of proper recordkeeping squarely on employers shoulders. Inadequate recordkeeping is itself an FLSA violation. If recordkeeping is deficient, courts will often take employees word regarding their working hours or illegal pay deductions. Employees usually record their working time on time sheets or time cards. While it s common for managers to make adjustments to employees time directly on their time sheets, managers should always have a valid reason for making adjustments, since any alteration of employees time records will raise red flags with DOL investigators. Employers must be vigilant in ensuring that employees accurately report their hours worked and managers accurately maintain time records. With that in mind, here are some tips for both: Make sure the company has a time card policy that strictly forbids employees from allowing someone else to mark their time sheet or punch their time card. Put procedures in place that managers must follow when employees forget to punch out. Consider having employees initial and date adjusted time sheets, so they can t later claim that the change was made illegally to save on overtime costs. Also include steps for employees to take in case of a dispute over time records. They should understand the proper way to request a change, and that they can t make adjustments without management s approval. Records must include identifying information about employees and data about their hours worked and wages earned. Records must reflect weekly hours and wages, even if employees aren t paid weekly. Most of what s required for recordkeeping is payroll data, which the IRS already requires companies to collect, so the FLSA s recordkeeping requirement isn t quite as burdensome as it seems. The following is a list of the basic records you must maintain: 1. Employees full names and Social Security numbers. 2. Employees addresses, including ZIP codes. 3. Employees sex and occupations. 4. The time and day of the week employees workweek begins. 5. Employees hours worked each day. 6. Employees total hours worked each workweek. 7. Employees birth date, if younger than

18 8. The basis on which employees wages are paid (e.g., $8 an hour, $300 a week, piecework). 9. Employees regular hourly pay rates. 10. Employees total daily or weekly straight-time earnings. 11. Employees total overtime earnings for the workweek. 12. All additions to or deductions from employees wages. 13. Total wages paid to employees each pay period. 14. The date of payment and the pay period covered by the payment. 15. The amount or nature of payments that are excluded from employees regular rate of pay (e.g., discretionary bonuses). No particular form of recordkeeping is required. The FLSA doesn t require you to keep records in any format; they may be stored on paper, on microfilm or microfiche, or in some other form. But if your records are a jumble, DOL investigators may obtain a court order requiring you to put your records in a useable format for inspection. Independent Contractor Guidelines 1. Instructions. A worker who is required to comply with another individual's instructions regarding where, when, or how work is done is generally deemed an employee. Instructions can be evidence that an employer had the right to and actually did direct and control how work is performed, indicating employee status. Instructions that would support independent contractor status would generally focus on the desired results rather than the means to accomplish those results. Guidance from the IRS training manual. The requirement that a worker obtain approval before taking certain actions is an example of instructions, according to the manual. However, the manual distinguishes between direction as to what must be done (by itself not indicative of employee status) and how the job must be done (indicative of employee status). The more detailed the instructions a worker must follow, the more likely the worker is an employee. Example. An independent truck driver can be told to pick up cargo at a certain time and deliver it to a certain address within two days; this is instruction as to what must be done. However, if the driver reports to the company everyday, is told what deliveries must be made, how to load the truck, what route to take, and the order of deliveries, the driver gets employee-like instruction on how the work is to be done. 2. Training. Training an individual to perform services in a particular manner reflects the employer's desire to control the way the work is being accomplished. An employer is more likely to train an employee than an independent contractor. In most instances, an employer should be cautious about requiring an independent contractor to train with an experienced 14

19 employee, to work with that employee, or to attend meetings. The employer should avoid providing training to independent contractors at periodic and frequent intervals. 3. Services rendered personally. When the worker's services are of a type that cannot be delegated, and an employer has a substantial interest in how the work is being accomplished and the results of the work, control is reflected. 4. Hiring, supervising, and paying assistants. If an employer hires, supervises, and pays a worker's assistants, this factor demonstrates control over the worker. If a worker hires, supervises, and pays his or her own assistants, with the worker being required to supply the materials and held responsible for the results, this indicates the worker is an independent contractor. 5. Integration. If the worker's services are being integrated into the operations of the business and the continuation or success of the business depends on the worker's services, then the worker may be placed under the control and direction of the employer. However, this factor is inherent in most situations where a business uses outside workers to perform core business functions. In addition, determining whether the success of the business depends on the worker's continued services may be a difficult determination to make. Guidance from the IRS training manual on business identification. The manual tells auditors that wearing a uniform or placing a company logo on a truck does not necessarily indicate that the worker is an employee. If the nature of the work requires the person to be identified with the business for security purposes, then these types of business identification do not, by themselves, establish an employment relationship. 6. Continuing relationship. If there is a continuing relationship between the business and the worker, the inference is that an employer-employee relationship exists, unless a continuing relationship is customary for independent contractors performing that type of work. For example, attorneys are often retained on a continuing basis as independent contractors. The relationship may be continuing if the work is being performed at frequently recurring but irregular intervals. When a worker's contract ends on completion of the task at hand, independent contractor status is indicated. Guidance from the IRS training manual on financial control. The manual says that a worker's economic dependence on the business for which services are performed is not an appropriate factor for use in analyzing worker status. IRS stresses to its agents that "this analysis has been rejected by Congress and the Supreme Court as a basis for determining worker classification." 7. Set hours of work. Employees generally have structured or established hours of work, but an independent contractor has greater freedom to schedule time away from the jobsite. 15

20 8. Full time required. An employee typically works for the employer full time, which demonstrates that the employer has control over the employee's time. An employer generally cannot require an independent contractor to be on the jobsite for a minimum number of hours during the day or a minimum number of days during the week. 9. Doing work on employer's premises. Control appears to be present when the work or services being performed by the worker is done on the employer's premises. Work accomplished off the employer's premises indicates some degree of freedom from control. The importance of this factor depends on the nature of the services involved and the extent to which an employer would require performance of similar services on its premises. 10. Order or sequence set. Control by an employer can be inferred if the worker is required to perform services in a particular order or sequence that is established by the employer or if the employer has the right to set the order or the sequence of the services to be performed. 11. Oral or written reports. If a worker is required to present regular reports to the employer, such a requirement indicates control by the employer. 12. Payment. If the worker is paid by the hour, the week, or the month, the presumption is that the worker is an employee, unless that method of payment is standard for the trade. Payment of a flat fee by the job tends to indicate that the worker is an independent contractor. 13. Furnishing of tools and materials. If the employer furnishes sufficient tools, materials, and other equipment to perform the services, this tends to show the existence of an employer-employee relationship. The employer should require an independent contractor to supply his or her own tools, materials, supplies, and equipment necessary to provide the contracted services. 14. Significant investment. Where the worker does not invest in supplies, materials, equipment, and other items necessary for the performance of services, but relies on the employer for such things, the lack of investment indicates dependence on the employer. Control can be inferred and the worker is probably an employee. If the worker invests in the facilities he or she uses in performing services, this factor tends to indicate that the worker is an independent contractor. 15. Payment of business or traveling expenses. If the employer pays a worker's business or traveling expenses, the worker may be an employee, on the theory that an employer that can control expenses also generally retains the right to regulate and direct the worker's business activities. Guidance from the IRS training manual. The manual points out that companies often pay the business or travel expenses of both employees and independent contractors. Auditors are therefore encouraged to focus on unreimbursed expenses since independent contractors are more likely than employees to have unreimbursed expenses. 16

21 16. Realization of profit or loss. If the worker cannot realize a profit or loss from performing services, and does not receive payment directly from the business's customers but only through the employer, then the worker is in an employer-employee relationship. If the risk of loss or the realization of a profit as a result of performing services is possible for the worker, this generally indicates an independent contractor relationship. 17. Working for more than one firm at a time. If the worker performs services for more than one firm at any given time, or has the discretion to do so, then that worker is probably an independent contractor. However, the employer should be aware that a worker who performs services for more than one employer may be an employee for each of the employers involved. 18. Making services available to the public. Control by an employer can be inferred if the worker is not free to promote his or her services to the general public on a regular or consistent basis. 19. Right to discharge. If the employer has the right to fire a worker without cause, then an employer- employee relationship can be inferred. 20. Right to quit. If the worker terminates the relationship with the employer but could remain liable to the employer because a specific job or service was not completed, then independent contractor status probably exists. An employee can terminate his or her relationship with the employer without incurring any such liability. State of Missouri Wage and Hour Regulations EMPLOYMENT-AT-WILL Missouri is an employment-at-will state. This means that the employment relationship between the employer and employee exists by agreement of both parties. This gives the employee the right to resign at any time or for the employer to terminate the employee at any time for any reason that is not prohibited by law. FAIR EMPLOYMENT LAW Employers may not discharge, discriminate with respect to compensation, terms, conditions, or privileges of employment, or refuse to hire because of race, color, religion, national origin, sex, ancestry, age, or disability. In addition, federal law prohibits discrimination in employment based on genetic information as well as past, present, or future military service. 17

22 NEW HIRE REPORTING Every employer doing business in Missouri must require each newly hired employee to fill out a federal W-4 withholding form. The employer must send to the Department of Revenue a copy of each such form or an equivalent form containing, at a minimum, the following data: name, address and social security number of the employee, and the name and address of, and federal tax identification number of, the employer. If the employer chooses to submit a form other than the federal W-4 withholding form, the form must also include the date the employee signed the W-4 form or the date the employer hired the employee. The form must be sent within 20 days after the date the employer hires the employee or in the case of an employer transmitting a report magnetically or electronically, by two monthly transmissions, if necessary, not less than 12 days nor more than 16 days apart. The date the employer hires the employee is the earlier of the date the employee signs the W-4 form or its equivalent, or the first date the employee reports to work, or performs labor or services. PAYMENT OF WAGES Payment of wages may be by check, draft, or other voucher. According to the state Department of Labor, an employer may require employees to receive wages by direct deposit. Employers must pay the wages and salaries of their employees as often as semimonthly, within 16 days of the closed of each payroll period; provided, however, that executive, administrative, and professional employees, and salespeople and other employees compensated in whole or in part on a commission basis, may be paid their salaries or commissions monthly at the option of the employer. For 2011, the state minimum wage is $7.25 per hour. Either as part of the check, draft, or other voucher paying wages or separately, employers in Missouri must furnish employees at least once a month a statement showing the total amount of deductions for the period. An employer can reduce an employee s wage rate without violating the law. Missouri law does require employers to give their employees written notice of a reduction in their wage rate at least 30 days before the reduction is to take effect. The reduction in wage rate may not reduce the employee s wage below the federal or state minimum wage. An employer may deduct funds from an employee s wages for cash register shortages, damage to equipment, repayment of cash advances or loans, for purchases made at the place of business, or for similar reasons. These deductions cannot reduce the employee s wages below the required minimum wage or overtime compensation for hours worked during any workweek. If an employee is discharged, final pay is due on the day of the discharge unless the employee s compensation is based primarily on commissions and whose duties include collection of accounts, care of a stock or merchandise and similar activities and where an audit is necessary or customary in order to determine the net amount due. 18

23 There are no requirements under Missouri law that address when wages are due when an employee quits a job. If wages are not paid by the next regular pay period, then the wages can be collected by legal action. UNUSED VACATION AT TIME OF TERMINATION State law does not require payment of earned vacation at the time of termination. An employee s right to unused vacation upon termination of employment is determined by the employer s policy. It is recommended that the policy be documented in the business s employee handbook. OVERTIME Unless otherwise exempt from overtime, employees must be paid not less than one and one-half times their regular rate for overtime hours worked in excess of 40 hours in a workweek. In the private sector, compensatory time off in place of payment for overtime to non-exempt employees is not legal. BREAKS/MEAL PERIOD There are no state laws regarding breaks or meal periods. Federal wage and hour regulations require that breaks, if given, be paid if the breaks are for less than twenty minutes in duration. Also, federal regulations define a bona fide (unpaid) meal period as at least 30 minutes of uninterrupted time, free of any work-related duties. CHILD LABOR LAW In Missouri, child means an individual under 16 years of age. Work certificates are required for youth 14 to 15 years of age before they start employment at any job during the school year. No child under the age of 14 may be employed in any capacity other than in the entertainment industry, newspaper delivery, babysitting, occasional yard work or farm work with parental consent, or some youth sporting events. Work certificates are issued by school superintendents or their designees only upon application requested in person by the child with the written consent of his or her parent, legal custodian, or guardian. Examples of unacceptable work for youth under age 16 include door-to-door sales (excluding churches, schools, or scouts), operating hazardous equipment, operating any motor vehicle, and handling or maintaining power-driven machinery (with the exception of lawn or garden machinery in a domestic setting). Acceptable work hours for 14 and 15 year olds: 19

24 Between 7 a.m. and 7 p.m. during the school year Between 7 a.m. and 9 p.m. from June 1 through Labor Day No more than three hours a day on school days No more than eight hours a day on non-school days No more than six days or 40 hours in a week BREAKS FOR NURSING MOTHERS Federal law requires that reasonable break time be provided for nursing mothers to express breast milk as often as needed during the workday and that a private location be provided (other than a bathroom) that is shielded from view and free from intrusion from co-workers or the public. These unpaid breaks for nursing mothers are available until the employee s child is one year of age. Employers with fewer than 50 employees may be exempted from this requirement if they can show that implementing the program would cause an undue hardship for the business by causing significant difficulty or expense. SMOKING IN THE WORKPLACE Smoking in Missouri is prohibited in public places and meetings, except in designated smoking areas. Public places are places such as retail or commercial establishments, health care facilities, vehicles used for public transportation, rest rooms, elevators, educational facilities and places used for entertainment. However, the smoking prohibition does not apply to: bars, taverns, restaurants that seat less than 50 people, bowling alleys and billiard parlors that conspicuously post Nonsmoking Areas are Unavailable signs; private residences; enclosed sports arenas seating more than 15,000 persons; areas used for private social functions that are under control of the function's sponsor; limousines and taxicabs where the driver and all passengers agree to smoking in the vehicle; tobacco shops; and performers on stage when smoking is part of the production. Smoking is not allowed in any area of a licensed child care facility during the time when children cared for in the facility are present. Persons in charge of public places and meetings have a duty to make reasonable efforts to prevent smoking by (1) posting no-smoking signs; (2) arranging seating and utilizing ventilation systems and physical barriers to isolate designated smoking areas; (3) making reasonable requests of persons smoking to move to a designated smoking area; and (4) allowing smoking in designated areas of theater lobbies only. It is an improper employment practice for an employer to refuse to hire, or to discharge, any individual, or to otherwise disadvantage any individual, with respect to compensation, terms or conditions of employment because the individual uses lawful alcohol or tobacco products off the premises of the employer during hours such individual is not working for the employer, unless such use interferes with the duties and performance of the employee, the employee's coworkers, or the overall operation of the employer's business. However, an employer may provide or contract for health insurance benefits at a reduced premium rate or at a reduced deductible level for employees who do not smoke or use tobacco products. Religious organizations and church- 20

25 operated institutions, and not-for-profit organizations whose principal business is health care promotion shall be exempt from this regulation. DRUG TESTING If a claimant for unemployment benefits is at work with a detectible amount of alcohol or a controlled substance in his or her system, in violation of the employer's alcohol and controlled substance workplace policy, the claimant shall have committed misconduct connected with the claimant's work and will be ineligible for unemployment benefits. The claimant must have previously been notified of the employer's alcohol and controlled substance workplace policy by conspicuously posting the policy in the workplace, by including the policy in a written personnel policy or handbook, or by statement of such policy in a collective bargaining agreement governing employment of the employee. The policy, public posting, handbook, collective bargaining agreement or other written notice provided to the employee must state that a positive test result may result in suspension or termination of employment. Test results shall be admissible if the employer's policy clearly states an employee may be subject to random, pre-employment, reasonable suspicion or post-accident testing. An employer may require a pre-employment test for alcohol or controlled substance use as a condition of employment, and test results shall be admissible so long as the claimant was informed of the test requirement prior to taking the test. A random, pre-employment, reasonable suspicion or post-accident test result, conducted under this section, which is positive for alcohol or controlled substance use shall be considered misconduct. All specimen collection for drugs and alcohol under this chapter shall be performed in accordance with the procedures provided for by the U.S. Department of Transportation rules for workplace drug and alcohol testing compiled at 49 C. F.R., Part 40. Any employer that performs drug testing or specimen collection shall use chain-of-custody procedures established by regulations of the U.S. Department of Transportation. The employee may request that a confirmation test on the specimen be conducted. If a confirmation test is requested, such shall be obtained from a separate, unrelated certified laboratory and shall be at the employee's expense only if said test confirms the original, positive test results. Any employer that initiates an alcohol and drug testing policy shall ensure that at least 60 days elapse between a general one-time notice to all employees that an alcohol and drug testing workplace policy is being implemented and the effective date of the program. 21

26 MILITARY LEAVE It is unlawful for an employer to refuse to hire or employ any individual because of membership in the National Guard or any one of the other reserve components of the armed forces of the United States or because the employee is called or ordered to active duty by the federal government, or to discharge from employment such individual, or to otherwise discriminate against such individual with respect to compensation, tenure, terms, conditions, or privileges of employment. Upon completion of military duty, the employee will generally be restored to the position held prior to the military leave or to a position of like seniority, status, and pay. The escalator provision of the federal USERRA regulation requires that the employee be placed in the job he would have occupied, had the military leave not occurred, provided that the employee is qualified for the job. This could mean placement in a job of higher or lower status than the initial assignment before the military duty. VOLUNTEER FIREFIGHTER No public or private employer may terminate an employee who is a volunteer firefighter, a member of Missouri-1 Disaster Medical Assistance Team, Missouri Task Force One, or Urban Search and Rescue Team because the employee, when acting as a volunteer firefighter, or as a member of Missouri-1 Disaster Medical Assistance Team, Missouri Task Force One, Urban Search and Rescue Team, or FEMA is absent from or late to his or her employment in order to respond to an emergency before the time the employee is to report to his or her place of employment. An employer may charge against the employee s regular pay any employment time lost by an employee in response to these emergencies. Also, the employer has the right to request the employee to provide a written statement from the supervisor of the volunteer fire department or applicable organization stating that the employee responded to an emergency and stating the date and time of the emergency. JURY DUTY Employers may not terminate, discipline, threaten or take adverse actions against an employee on account of that employee's receipt of or response to a jury summons. ACCESS TO PERSONNEL FILES Missouri has no specific provisions governing employee access to personnel files. It is recommended that the company s employee handbook address the procedures for employees to request a review of their own personnel records. 22

27 HEALTH CARE CONTINUATION Missouri health care continuation regulations generally follow the federal COBRA regulations in terms of eligibility, duration of coverage, etc. For example, the duration of coverage is 18 months for an employee whose employment is terminated. However, the provisions requiring that continuation coverage be offered to legally separated, divorced or surviving spouses who are 55 years of age at the time COBRA ends apply only to those employers with 20 or more employees. Employees and dependents who have been continuously covered under a group policy for the entire three-month period prior to termination of coverage are eligible for conversion coverage. Surviving and divorced spouses are also eligible. An employee is not eligible for conversion coverage if the employee is eligible for Medicare or for other group coverage, or if the group coverage is terminated for failure to make a timely premium payment. SERVICE LETTER Whenever an employee of a corporation who has been employed for a period of at least 90 days is discharged or voluntarily quits, and the employee then requests in writing by certified mail to the superintendent, manager or registered agent of the corporation, with specific reference to the statute, the superintendent or manager must issue to the employee, within 45 days after receipt of the request, a letter signed by the superintendent or manager, setting forth the nature and character of service rendered by the employee and the duration thereof, and truly stating for what cause, if any, such employee was discharged or voluntarily quit. This provision applies to corporations doing business in Missouri that have at least seven employees. The request must be made by the employee within a reasonable period of time, but not later than one year after separation. A corporation that violates these provisions will be liable for compensatory damages. If the evidence establishes that the employer did not issue the requested letter, the employer may be liable for nominal and punitive damages; no award of punitive damages may be based upon the content of any such letter. 23

28 About SESCO SESCO was founded in 1945 by Dr. J.W.R. Lawson, Sr., a Wage and Hour investigator. In 1945, Dr. Lawson became one of the first Wage and Hour experts assisting business and industry in understanding and complying with the Fair Labor Standards Act which was enacted in Since, SESCO has audited thousands of employers in all industries and in all states. SESCO has also represented hundreds of employers over our 60-year history before the Department of Labor Wage and Hour Division. No SESCO client has ever been fined for a Wage and Hour violation that SESCO audited and subsequently implemented our advice and counseling. SESCO has an unsurpassed track record and expertise in Wage and Hour accounting along with representing employers before State Human Rights and the EEOC with harassment and discrimination charges. A sample of SESCO s retained or endorsed clients include: American Association of Homes and Services for the Aging (AAHSA) American Council of Independent Laboratories (ACIL) Auto Parts Rebuilders Association (APRA) Automotive Training Institute (ATI) Exhibition Services & Contractors Association (ESCA) Independent Hardee s Franchisee Association (IHFA) International Truck Parts Association (ITPA) Kentucky Automobile Dealers Association (KADA) National Funeral Directors Association (NFDA) National Retail Tire Network (NRTN) Painting & Decorating Contractors of America (PDCA) Plumbing-Heating-Cooling Contractors Association (PHCC) SnowSports Industries America (SIA) TechSelect Tennessee Credit Union League (TCUL) Tennessee Hospital Association (THA) Tennessee Primary Care Association (TPCA) Tire Industry Association (TIA) TN & KY Tire Dealers & Retreaders Association (TKTDRA) Virginia Automobile Dealers Association (VADA) Virginia Automotive Association (VAA) Virginia Association for Home Care and Hospice (VAHC) Virginia Community Healthcare Association (VCHA) 24

29 SESCO S Professional Service Agreement SESCO s original service is that of our Professional Service Agreement. We have found over our sixty-five (65) years of providing professional service that clients and human resource professionals have the need to establish a reliable and cost effective, professional relationship to discuss day-to-day people problems, compliance issues, conduct special research, review systems, provide wage data and other information and resources on a daily basis. SESCO clients appreciate this service because they can contact us as needed without additional charges or fees. It is truly an unlimited service and therefore, it is more cost effective than hiring a human resource assistant, paying legal fees or their personal time in performing these duties. $50 per month provides the following at no additional charge: Unlimited telephone consultation, fax, and research consulting Free analysis and review of your personnel policies, work rules, and employee handbooks The SESCO Report, SESCO s monthly newsletter to be mailed to all management personnel selected by the client $125 per month provides the following at no additional charge: Unlimited telephone consultation, fax, and research consulting Free analysis and review of your personnel policies, work rules, and employee handbooks The SESCO Report, SESCO s monthly newsletter to be mailed to all management personnel selected by the client One (1) on-site Human Resource Assessment per year $150 per month provides the following at no additional charge: Unlimited telephone consultation, fax, and research consulting Free analysis and review of your personnel policies, work rules, and employee handbooks The SESCO Report, SESCO s monthly newsletter to be mailed to all management personnel selected by the client Two (2) on-site Human Resource Assessments per year 25

30 Organization: Principal: Address: Telephone Number: Professional Service Agreement Title: P.O. Box/Street City State Zip Fax Number: Effective Date: SESCO will make available and perform the following services as part of this Professional Service Agreement: 1. This Professional Agreement contains two (2) core elements: A. The SESCO professional staff will be available on a priority basis to provide, without charge, unlimited telephone consulting with officers and/or management team for the purpose of preventing and solving human resource management problems and complying with current Federal/State Employment Regulations. B. SESCO's monthly client publication, "The SESCO Report" will be mailed to key management personnel as the client directs. 2. Through client/consultant discussion of projected needs, the following additional services have been added to this Professional Service Agreement: An annual visit by the SESCO consultant. Monthly visits by the SESCO consultant. Semi-annual visits by the SESCO consultant. Other: 3. One (1) free set of federal and state compliance posters. 4. Additional consulting engagements with the client's officers and/or management team will be provided upon request by the client. Available on this basis are all of SESCO's current human resource management and management consulting services. All professional services rendered on these visits will be delivered on a priority basis and will be billed at reduced rates. 5. SESCO will keep in strict confidence and not divulge to any other employer or any other person except your accountant or attorney, the nature of any recommendation, system, fees, or reports implemented as a result of SESCO's consulting relationship. Except as required by law or pursuant to an order of a court of competent jurisdiction, SESCO will not disclose to any third party any non-public information regarding the company or any proposed transaction provided to it in connection with its engagement hereunder, other than its employees, without the prior written consent of the company. 6. If at any time hereafter SESCO becomes involved in any capacity in any action or legal proceeding in connection with its services or with matters that are the subject of this Agreement, the company agrees to indemnify and hold harmless SESCO and its officers, directors, members, shareholders, or consultants against any losses, claims (whether or not valid), damages, judgments, liabilities, or expenses (including legal expenses) actually and reasonably incurred, unless such losses or claims, damages, judgments, liabilities, or expenses are finally determined by a court of competent jurisdiction to have been caused by the gross negligence, bad faith, or willful misconduct of SESCO. 7. SESCO does not engage in the practice of law. Should legal assistance be required, client's designated legal counsel will receive SESCO's complete cooperation and assistance on all consulting, personnel, and labor relations matters. 8. Professional SESCO services described above will be provided for an annual service fee to be billed in monthly installments of $, in the month of service. For requested services provided on a pre-quoted or per diem basis, a statement will be sent monthly explaining the time and services rendered in detail. 9. Travel expenses and administrative expenses will be billed at cost to the client. 10. Past due receipts will include interest following 90 days at a rate of 20%. If past due receipts are forwarded for collection, the client will be responsible for all past due amounts including interest and collection fees. 11. During the term of this Agreement, and any renewals or extensions hereof and for a period of one (1) year thereafter, neither party shall, either directly or indirectly, employ or seek to employ any persons currently employed by the other to perform services for such party as employees, independent contractors or otherwise, unless mutually agreed IN WRITING BY THE PARTIES HERETO. 12. This Professional Service Agreement will remain in effect for a minimum of one year and will be renewed annually unless written notice is provided to SESCO at least sixty (60) days prior to the annual renewal date.