Work, the law and your business
by Beth O'NealCape Business is collaborating with Beth O’Neal, Esq., a partner in the Boston law firm of Masterman, Culbert & Tully LLP, to provide our readers with a new column, The Law at Work.
We encourage you to send us your questions. O’Neal will answer them in Cape Business magazine and address your issues in a monthly newsletter being launched at our Cape Business Connect conference on Nov. 17 at a workshop she will be conducting. Send questions to law@capebusiness.net or The Law at Work, Cape Business, 704 Main St. (Route 6A), Dennis, MA 02631.
Obligations under the new health insurance law
What are the obligations of employers under the new Massachusetts health insurance legislation recently passed, and when will it take effect?
Effective Oct. 1, 2006, employers with more than 10 full-time employees who do not make a “fair and reasonable” contribution to employee health insurance will be required to pay an assessment, which cannot exceed $295 per employee, per year. There are two tests to determine whether an employer is making a “fair and reasonable” contribution to employee health insurance (which, if so, will permit the employer to avoid the assessment).
First, the employer may provide a group health plan to its employees, in which at least 25 percent of its full-time employees are enrolled (determined in accordance with a specific calculation).
Second, if the calculation is less than 25 percent, the employer may offer to pay at least 33 percent of the premium cost towards an individual health plan for employees that were employed at least 90 days during the period from Oct. 1, 2006, through Sept. 30, 2007. If payable, the assessment can be made in equal payments annually, semi-annually, or quarterly.
An employer who does not offer to contribute towards or arrange for the purchase of health insurance will be subject to a free rider surcharge based on whether their employees use free care. If any one employee uses free care more than three times per year, or if an employer has five or more instances of employees receiving free care per year, the employer will be subject to the surcharge. This will be between 10 percent and 100 percent of the cost of the free care services (the exact percentage being based upon employer size and the number of free care visits) subject to an exemption for the first $50,000 in free care services used by the employees.
Employers with more than 10 employees will also be required to offer Section 125 plans, also called cafeteria plans, to allow employees to pay for health insurance premiums, day care and health care expenses from an account funded by the employee on a pre-tax basis.
The Legislature, mindful of the effect this legislation will have on small employers, has created the Commonwealth Health Insurance Connector. Employers with 50 or fewer employees will have access to the Connector, which will offer health insurance products, administration of health insurance premium deductions and allow multiple employers to contribute to an employee's premium where he or she has two or more jobs.
One of the goals of the legislation is to attain fairness in the costs of health care borne by employers. Currently, employers who provide insurance are bearing a heavier burden to compensate for employers who do not. Hopefully, the Connector will prove to be an excellent resource for small employers in their efforts to come into compliance by July 1, 2007.
Comp time instead of overtime
I am the manager of a small market, selling groceries and take-out sandwiches. With all the unpredictable weather lately affecting visitors, I have experienced some scheduling issues with my cashiers and cooks. On several occasions, I have sent a few home, and then needed others to work overtime unexpectedly. One of my employees recently asked if he could have comp time instead of overtime. How exactly does that work, and is it a good practice?
Your question raises several important issues regarding payment of wages, overtime and working hours, all which are governed by the Fair Labor Standards Act and by Massachusetts law.
Scheduling employees can be very difficult when customer flow fluctuates, but it can become quite costly for a small business that is not careful planning ahead. If you have assigned a shift to your non-exempt employees and they report to work, you are required to compensate them for at least three hours at the minimum wage, which currently is $6.75. If an employee actually works for fewer than three hours, you must pay that employee’s regular wage for the time worked and at least minimum wage for the balance of the three hours.
Comp time is another trap for the unwary manager. Your non-exempt employee has requested to exchange his overtime wage for time off. If he is scheduled for 40 hours in one week and then works two more hours during a dinnertime rush, he must be paid time and a half for the extra two hours. He cannot receive two hours off the following week at his regular pay because state and federal law requires employees to be paid overtime wages even if they prefer comp time.
When you make your schedule for the week, consider having at least one person assigned to a shift with flexible duties. When it is busy, that person can work as a cashier; when it is slower, perhaps that person could be charged with cleanup, telephone orders and light food preparation. Cross-training is very important in a small business, the more flexible your staff can be, the more efficiently the business can serve its customers.
But remember, if someone works in more than one position, he or she must be paid time and a half for any overtime worked in either position or both positions. If an employee works as a cashier for 35 hours and as a cook for 10 hours, he or she has earned the regular wage for 40 hours and five hours of time and a half. If the regular rate of pay for the two positions differs, the regular rate is the weighted average of both rates. In other words, the earnings from both rates are added together and this total is divided by the number of hours worked at both jobs.
You should also check with an attorney as to whether your employees may be exempt from overtime pay under Massachusetts law, which provides for an exemption for an employee who is employed in a restaurant. Without knowing the exact nature and extent of your food service business (you mention take-out sandwiches, but do not say whether patrons can eat in), you would be wise to get clarification on this potentially important issue.
The physical appearance of employees
I recently hired several new employees for the summer in my small inn. I am concerned about the appearance of two in particular. I don’t have any kind of policy in place other than a basic dress code (e.g., no jeans, no tank tops, no flip-flops) with which they are in compliance. One young man often chooses not to shave and when he does, it is in unusual patterns, each one more creative than the last. Another young lady has been wearing her long hair in a messy, twisted style. Can I require my staff to have a more conservative appearance beyond just the dress code?
Most business owners and managers are concerned about the appearance of their employees who are the face of the business and instrumental in attracting and retaining customers. The courts appreciate this and have provided guidance for Massachusetts employers regarding grooming and dress codes. However, the issue is not always clear, as these policies can give rise to claims of discrimination.
Generally, employers are free to implement dress and grooming codes for both men and women subject to the following considerations. The burdens imposed should be applied equally to both genders, although the policies need not be identical. For example, women may be permitted to wear long hair and earrings, while men are not because such differences in styles are based upon conventional societal custom. The code may not be implemented to discriminate against any protected class, including gender, race, national origin or religion.
A dress code should not be demeaning to one gender or revealing (e.g., women must wear low-cut tops) such that it potentially creates a sexually hostile working environment. Your inn likely requires conservative attire, which is appropriate.
Grooming standards are often tied to health and safety requirements, both of which are legitimate concerns. Employees can be required to maintain neat styles that keep hair away from food. Employers are also permitted to have grooming codes, which are based solely on perceived customer preference and the employer’s desire for professionalism.
For example, policies prohibiting facial hair and facial jewelry have been upheld. You may institute a policy that requires your (male and female) employees to cover up conspicuous tattoos, maintain neat, well-maintained hairstyles, etc., and if you would like to institute a clean-shaven policy for your employees, you may do so.
If you do receive a request for an exception from the dress or grooming code, inquire as to why the employee desires the exception and the accommodation the employee requires. Because these cases are very fact-specific, you should consider consulting an attorney who can advise you what the law requires in terms of accommodation.
This column, which may be considered advertising under the ethical rules of certain jurisdictions, is intended as a general discussion of the topics covered, and does not constitute the rendering of legal advice or other professional advice by Masterman Culbert and Tully LLP or its attorneys. In compliance with U.S. treasury regulations governing tax practice, any U.S. federal tax advice contained in this publication is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties or in connection with the promoting, marketing or recommending to any individual of any transaction or matters addressed therein.
Originally published in the Sept./Oct. 2006 issue of Cape Business.
Beth O'Neal Beth O’Neal, Esq., is a partner in the Boston law firm of Masterman, Culbert & Tully LLP. 
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