Nonprofit Report - March 2015
How Simple is that Simple Retirement Plan, Really?
By Mary Claire Chesshire
Small employers with less than 100 employees may opt to install a “SIMPLE” IRA Plan or a Simplified Employee Pension Plan (SEP) as an alternative to a traditional qualified retirement plan such as a profit sharing plan or 401(k) plan. The benefits of the arrangements are meaningful – there is no required discrimination testing, no annual reporting, and no lengthy plan document required to be adopted, but, by establishing such a plan, a small employer can provide a meaningful retirement benefit to employees and a business owner can shelter income from current taxes.
However, along with the lack of administrative requirements comes a lack of oversight and guidance – the financial institutions that custody the funds the employer and employees contribute generally do not actively advise the employers who sponsor the plans or check to ensure that the plans are being administered correctly. Failure to administer the programs correctly could result in loss of the tax benefits of the arrangements and the assessment of penalties by the Internal Revenue Service.
Following are some of the frequent issues confronted by sponsors of these arrangements.
Are the plan documents current? The Internal Revenue Service periodically updates the forms by which SIMPLEs and SEPs are established. The Forms 5304 and 5305-SIMPLE were most recently updated in March of 2012 and the Form 5305-SEP was most recently updated in December of 2004. Is your plan set forth on the most recent form? Could you find your plan document if asked to produce it?
Are you offering participation to the correct employees? The different plans have different participation requirements. A SEP can limit participation to employees who are at least age 21 and who have performed service for three of the last five years. However, there are no minimum hours of service an employee must work during those three years. For example, if an individual worked during summer breaks from school for three years, then becomes a full time employee in the fourth year, that employee would be immediately eligible to participate in the SEP. Furthermore, the years during which service is performed do not have to be consecutive. A SIMPLE plan generally may only exclude employees who earn less than $5,000 per year and who earned at least $5,000 during each of the last two years. Note: eligibility requirements can always be less stringent than the maximum age and service requirements imposed by the IRS. But, the eligibility provisions set forth in the plan document need to be followed.
Are you contributing enough money to the plan? SEP contributions are discretionary to the employer and a different amount (or no contribution) can be made each year. However, all eligible employees are entitled to a contribution, including those employees who terminate employment during the year. A uniform percentage of pay must be contributed for each participant. The employer’s contributions to the SIMPLE plan are specified in the Form 5305-SIMPLE and are set forth as a matching contribution on participants’ contributions or a 2% “nonelective” contribution.
Did you contribute too much money to the plan? The maximum contribution to the SEP is the smaller of $53,000 (for 2015) or 25% of pay. Only the first $265,000 (for 2015) of pay can be taken into consideration. Contributions to SIMPLE plans can take the form of matching contributions or nonelective contributions, not both, in the percentages specified in the Form 5305-SIMPLE.
If errors have been made in the administration of your SEP or SIMPLE plans, the IRS sponsors correction programs to address the issues. However, securing ongoing guidance and review of the plan’s operations by a retirement plan professional will go a long way towards avoiding having to correct errors.
Social Media & Employment Law
By Ari Ghosal
The advent of social media has changed the landscape of how people communicate, share and connect with others online, through applications such as Facebook, Twitter, LinkedIn, Instagram, and Snapchat, among others. As social media has become the conduit by which people share thoughts, comments and videos online, employers have begun using the same tools to recruit potential hires, convey their brands, retain employees and increase visibility in the marketplace.
But mixing personal and professional communications on a social media platform can lead to real legal liability. One of the appeals of social media is speed: as fast as you type, your remarks can be posted for public viewing. But, as we all know, speed is a trap. Careless or emotional remarks, posted by an employee or supervisor, can be held against the employer.
The courts are grappling with this issue.
For example, in Roberts v. IBM, 733 F.3d 1306 (10th Cir. 2013), a terminated employee relied upon multiple instant messages between human resources professionals regarding Roberts’ “shelf life” to support his claim of age discrimination. The Tenth Circuit found that the messages were not direct evidence of age discrimination.
However in Espinoza v. County of Orange, 2012 WL 420149 (Cal. App. 4 Dist. 2012), the plaintiff sued Orange County under California law for disability-based harassment and failure to prevent harassment, based on employees’ online activities. The County conducted a cursory investigation eight weeks after the comments were posted online and failed to interview the plaintiff or the alleged bloggers. The court upheld a jury verdict awarding the plaintiff damages, lost earnings and damages for mental distress.
Until the law is clearer, what can employers do?
- Create a clear social media policy, in writing.
- Consider how employees, managers and supervisors particularly, treat requests for connecting via social media.
- Apply the same employment law concepts, i.e. discrimination, harassment, or retaliation, to the social media context.
- Investigate allegations thoroughly and engage in the interactive process just as you would handle a traditional complaint.
- Align your social media policy with your information technology policy, code of conduct, and confidentiality policies.
- Do not request usernames and passwords from employees or try to gain access to non-public or password protected social media.
- Finally, train employees, managers, supervisors and human resources on the appropriate use of social media in the employment context.
Hat Fight: NLRB Ruling Against Company Hat Policy Rejected by D.C. Circuit
By Jeffrey Seaman
In World Color Corp. v. NLRB (D.C. Circuit No. 14-1028), the Court addressed a petition by a graphic printing company for review of a decision by the NLRB that the company’s employee hat policy violated the National Labor Relations Act (“the Act”). The employer’s policy prohibited the wearing of baseball caps other than company caps bearing the company logo. The National Labor Relations Board (NLRB) determined that the policy violated the Act because it prohibited employees from wearing union caps that bore union insignia (and thereby violated the employees’ rights under the Act). However, the policy also permitted employees to accessorize “in good taste and in accordance with all safety rules.” The company argued that the NLRB erred in failing to consider the employees’ ability, under the “accessorizing” portion of the policy, to apply union insignia to their company caps, and that, because employees were permitted to accessorize with union insignia, the policy did not violate the Act.
The NLRB had found that there was “no dispute” that the policy prohibited employees from wearing caps that bore the union insignia. The Circuit Court disagreed, noting that the NLRB had failed to consider the “accessorizing” portion of the policy, which would permit employees to attach union insignia to their company caps. The Circuit Court remanded the case back to the NLRB for further consideration of the policy, including the employees’ ability to accessorize with union insignia.
Takeaway: If uniformed employees are permitted to accessorize, such that they could display union insignia, there’s probably not a violation of the NLRA.
Check Your Policies - They May be Unlawful
By Jennifer Jackman
On March 18, 2015, the National Labor Relations Board’s (“NLRB”) General Counsel issued a Memorandum with the intention of providing guidance to employers as to employment policies the NLRB considers unlawful. This Memo is extensive and covers many policies you likely have in your employee handbook. Many employers incorrectly believe that the National Labor Relations Act (“the Act”) does not apply to their organization if they do not have a union. To be clear, unless your organization falls within a few very limited exceptions, you should assume that your business or organization is covered by the Act which covers condominiums, service providers, non-profits and employee-owned businesses.
The NLRB Memo addresses policies most employers have in their employment manuals including provisions covering confidentiality, social media, employee conduct toward management, employee conduct toward fellow employees, and use of company logos. Like me, you may be surprised by policies that the NLRB contends are unlawful. While the NLRB Memo provides more questions than answers, what is clear is that the NLRB’s determination as to lawful vs. unlawful policies is largely determined by the context of the policy and the conduct that is intended to be addressed. From the NLRB’s perspective, any employee policies which employees might think covers conduct protected under the Act are unlawful.
For example, the Act prohibits policies that forbid employees from discussing the terms and conditions of their employment such as wages, hours and complaints. Accordingly, confidentiality and non-disparagement provisions may be overbroad, at least in the NLRB’s view, depending on the context, what conduct is intended to be addressed, and where the policy is found in the manual since the analysis includes “what conduct the employee might think is covered”.
Another surprising example includes policies addressing employee conduct toward supervisors. As an employer, you may assume that you have the right to prohibit employees from making false or defamatory statements about the employer or engaging in insubordinate behavior. Not so, says the NLRB, unless it is clear that the policy does not prohibit “protected concerted criticism of the employer”. What about policies providing for termination if an employee does not appear for work without prior authorization? The NLRB says these policies are unlawful if they could be read to include protected strikes and walkouts.
The NLRB rulings are wide-ranging and sometimes are inconsistent with positions taken by other governmental agencies and interpretations, including the E.E.O.C. To test your ability to distinguish lawful vs. unlawful provisions (at least according to the NLRB), try to answer the following: (Click here for the Answers.)
||Do not discuss customer or employee information outside of work, including phone numbers and addresses.
||Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.
||Employees are prohibited from disclosing all information acquired in the course of one's work.
||Each employee is expected to work in a cooperative manner with management/supervision, coworkers, customers and vendors.
||Be respectful to the company, other employees, customers, partners and competitors.
||Do not make fun of, denigrate, or defame your coworkers, customers, franchisees, suppliers, the Company, or our competitors.
||Disrespectful conduct or insubordination, including, but not limited to, refusing to follow orders from a supervisor or designated representative is prohibited.
||Do not make insulting, embarrassing, hurtful, or abusive comments about other employees online and avoid the use of offensive, derogatory or prejudicial comments.
||Do not send unwanted, offensive or inappropriate emails.
||No use of racial slurs, derogatory comments, or insults.
||Employees are not authorized to answer questions from the news media. When approached for information, you should refer the person to the media relations department.
||Company logos and trademarks may not be used without written consent.
||Employees are prohibited from wearing cell phones, making personal calls, or viewing and sending texts while on duty.
||Entering or leaving the company property without permission may result in discharge.
||Failure to report to you scheduled shift for more than 3 consecutive days without prior authorization is prohibited.
The above test uses actual examples cited in the NLRB Memo. The NLRB Memo is expansive and encompasses numerous policies routinely adopted by employers including:
- Confidentiality Provisions
- Employee Conduct Provisions
- Social Media Policies
- Anti-Harassment Policies
- Third Party Communication Policies
- Restrictions on use of employer logos, copyrights and trademarks
- Restrictions on Use of Photography and Recording in the workplace
- Attendance policies
- Conflict of Interest policies
Employers should review the NLRB Memo and compare it to their own policies and when in doubt, consult legal counsel to ensure that their provisions comply with this new guidance.