The Trump Effect: Small Business and Regulation with Tammy Tyler
How may future policies affect employment law? Learn about potential changes to wage and hour compliance and the Final Overtime Rule, as well as immigration, the gig economy, compliance complexity, and infrastructure.
Learn more about the Trump Effect on small businesses with:
Gene Marks: Hi, everybody. Welcome. My name is Gene Marks. I write every day for the Washington Post and a bunch of other places, online, for the most part. And I also run a small business outside of Philadelphia. We're a ten-person financial management – technology management – consulting firm. I am here with Tammy Tyler. Tammy is a vegetarian. So thanks for joining us today. I know it's completely irrelevant to this conversation, but I thought I would bring that out there. The people want to know this.
Tammy Tyler: Yeah, I'm sure. It's a need-to-know thing.
GM: Tammy, so your title is Senior Employment Law Compliance Analyst.
TT: OK, that's fine.
GM: I'm very bad with titles.
TT: That's OK.
GM: You've been with Paychex for a number of years – 21 years –
TT: 27 years.
GM: 27 years, which is – that is amazing. All on the compliance side?
TT: Well, we didn't have a compliance department from the beginning.
GM: Really – when you first joined? Well, it's a good thing I wasn't a Paychex customer, then. You guys didn't know what you were doing.
TT: I should say, it wasn't centralized.
GM: I see.
TT: So people are doing it within their products. So I did start in the HR products, so with the handbook, and the job descriptions, and then where we exploded from there, when they bought the PEO and offered the ASO products.
GM: Do you still work – I mean, being on the compliance side for labor as it is, are you still heavily involved?
TT: I am still involved. So I have, almost for the entire time I've been at Paychex, been the person who works with our outside legal counsel, who does a semiannual review on that. And in between those reviews, it's the responsibility of my group to monitor the legislation that will likely impact the handbook and create the need for either new policies or changes to the policy.
GM: That is absolutely fascinating. And how many versions of the employee handbook do you think Paychex has?
TT: I mean, just limitless – We make changes every six months to it. The number of changes certainly varies depending on what's going on. But we change it every six months. And we push that out to everybody who has a handbook. And they can have the policies updated that are applicable for them, add new policies –
GM: When you say, "everybody that has a handbook" first of all, do people have to pay extra for the service from Paychex to get a handbook?
TT: It is bundled in a lot of our services. So the PEO and the ASO have it bundled in. We have a couple of other product lines where that is a focus of what they get. But they would get other things, as well, like the newsletter and the poster kits, and those kinds of things.
GM: Do you have to be a certain size of a company to have an employee handbook? I have 10 people in my company. I don't have an employee handbook. That's bad, right?
TT: In my opinion, I certainly think that you qualify for having an employee handbook.
GM: Basically, you're telling me I'm an idiot because I don't have a handbook, right?
TT: More from the perspective that your employees want to know things. And it's easier to have it in a central location than it is for them to come up and knock on your door every two seconds and ask you, again, what is that vacation policy, Gene?
GM: Got it.
TT: So there's definitely benefits to having it, no matter how small you are. Because you have policies. You just may or may not have them written down.
GM: Got it.
TT: And then there are certainly laws that apply to even a business as small as your own – jury duty.
GM: Paid time off is a big issue that a lot of people are talking about. There's millennials – the 18 to 34-year-olds make up 50% of the workforce. And I'm sure you've seen like survey after survey, millennials want time off. They want flexibility. They want mobility, and all that. So it's a big issue. So what are you seeing as far as paid time off? What are some of your customers doing? What are you seeing from the laws?
TT: Big spectrum. So in terms of company policy, we see some firms offering unlimited vacation, because it's OK. People don't take that much vacation when they're--
GM: Does that work?
TT: I think that it depends on the company, the industry, almost – the philosophy of the company itself.
GM: Do you see any best practices about that? First of all, I guess, there's no national law for paid time off. Some cities and states – I think in Philly, where I'm from, I think it's like, employers have to offer, like, five paid sick days.
TT: So there's actually – paid sick leave – just that segment of it – has, for lack of a better word, exploded over the last couple of years. So there's really over 40 jurisdictions that have paid sick leaves. And that's state and local jurisdictions – like you say, Philly. Certainly, there's a push for employers, even where they're not required to offer it, to start doing that. Employees need to have some time off to care for themselves, their family members, again, being a big issue, now, too, whether it's your children, or your parents, or your brothers and sisters. So we're seeing that.
GM: There's sick days. There's vacation days. There's –
TT: Personal days.
GM: Personal days. And then there's just PTO. And do you find the trend going more to just PTO – paid time off?
TT: I feel like we went there. And we're almost scaling back, because of the paid sick leaves that are coming out there. Because, for example, in California, if you have a vacation day, you can't lose it. You can't ever lose it. If you don't use it that year, you have to be able to carry it over or be paid for it. But sick days, you could. But now they have their state-wide paid sick leave. So really encouraging employers to separate that out, follow the paid sick leave requirements, and have your vacation. You could still have kind of a pseudo-PTO, where it's your vacation and your personal days combined, but to keep the sick days out of it. In other jurisdictions, where you don't have that kind of restriction, you may still elect to do that – but probably not where you have a paid sick leave in effect. It does kind of muddle it up.
GM: Do you see anything, on average – and again this is anecdotally – I mean, we offer, like, two weeks of paid time off to employees. Is that average? Is that good? Is that bad? I mean, how do you benchmark that?
TT: I think that's average. I think where we see some variation is at what point you get two weeks. So while you might offer to them as they walk in the door, some people wait a year. Other employers say you need to be here six months, or I'm going to give you one day for every month you work here – those kinds of variations. But I think the two weeks for a year is pretty standard.
GM: Let's start with overtime. That's kind of stuck right now. And if I'm getting this right, if you're making around $24,000 a year right now – anything more than that, you're not entitled to overtime.
TT: You've got to make the duties test, too, but –
GM: Yeah, you've got to make the duties. You're not supposed to be supervising any people. You're salaried. And then the Department of Labor regulations that were supposed to go into effect back in December were supposed to raise that to around $47,000.
GM: $47,476. And that means, again – it tends to be people, again, customer service reps, people that are un-salaried. It was creating a lot of angst for business owners. It's going to increase their – plus, people don't forget that – if I email you over the weekend, that could be considered to be work, right? And that's overtime. And then people say, oh, well, the Department of Labor, they're never going to fine me if I don't do this. But the employees will report you.
TT: Yes. They'll find you if they're called.
GM: Kind of an issue. So anyways, that got held up. So business groups sued the government. The government responded back to them. But since the Trump administration has taken over, the government has been doing nothing with it.
TT: So the rule is currently enjoined in federal court. There are actually two lawsuits against it. One was the businesses, one was the states. And the DOL appealed that injunction –
GM: Under the Obama administration, they appealed it.
TT: Right, so since then, we have transitioned to the Trump administration, been waiting on a Secretary of Labor for really any action. So again, I think Acosta wasn't real transparent about what he would do. But he did indicate that he thought that the final overtime rule is written, but probably very difficult for the economy. At the same time saying that the current salary thresholds that we have today are not adjusted--
GM: Pretty low.
TT: --as they should be for inflation. So I think our best guess, if you will, at this point is that the DOL will not continue to defend their appeal, and that in the event that doesn't become permanently enjoined, that they will rescind the rules, or issue an administrative delay, and then go back and write new rules. Those new rules, I think, would probably still have a salary threshold increase from what we have today –
GM: Higher than that $24,000.
TT: Right, but something more that's kind of like $24,000 adjusted for inflation. So in 30s kind of area.
GM: There seems to be broad bipartisan support for an increase in the minimum wage. I mean $7.25 an hour—
TT: Of some amount, yes.
GM: Some amount. Many states are way ahead of that, and cities as well.
TT: Very much so.
GM: So where do you see that going?
TT: I think there's a really good chance for a federal minimum wage increase under Trump. I do think it's probably going to be around that $10 or less. I don't think we're going to see anything more than that. But to your point, it's moot for a lot of states now. And a lot of the states who passed their legislation to increase their minimum wage are above $10, certainly above $7.25, but above $10.
GM: $15 an hour in some jurisdictions, right?
TT: Or they've stepped it up. So while it might not be quite there yet, they've already planned for the next three years of increases. It's still very important to the American people. It's still important to states. But they have done a lot out there at the state level to address it. So it won't be as big a deal when it happens.
GM: But I feel like an increase in the national minimum wage – doesn't that put a pressure on all wages?
TT: Yeah, wage compression.
GM: Yeah, I mean, it's all relative. So if you're making twice the minimum wage right now, and then they increase the minimum wage to even $10 an hour, then suddenly you're not making twice anymore.
TT: Right, and you've got people below you that just got a raise, and you didn't.
GM: Yeah, that's another good point. They just got a raise, for doing nothing. So don't you think from a business owner's, manager's – that's why they need to be paying and figuring out how that's going to impact their overall budget for their salaries.
TT: They do. They do need to be aware of it. They need to stay on top of it. And I suspect that when it might get passed, there will be a burn-in period. It will not happen that it's changing tomorrow. And employers will have an opportunity to budget, adjust for, look at their jobs, to see how they can accommodate that.
GM: So under the fairly steep Fair Labor Standards Act, the Department of Labor issued this sort of saying that most employees are employees--
TT: Most workers are employees.
GM: --workers are employees, rather. So it was sort of in this world of the gig economy and a lot of independent contractors. And a lot of this came from certain issues with Uber and InstaCart and Lyft, in that they were calling them independent contractors. But they now have to be employees. And that's a big issue for a lot of employers. So do you think those kinds of things would be rescinded, actually, is what your expectations would be?
TT: Well, I think the DOL – it is their initiative to make sure that all workers receive the pay they are entitled to. And I think they're very cognizant of the fact that the economy is changing. And we have a lot of these workers who don't fit nicely into what we have in the past said is an employee and is an independent contractor. They don't fit either place. And I think they really are looking to make sure that workers have access to basic rights, which might be minimum wage and overtime in a lot of these situations. So I think they will again be looking – and need to be looking – at the specifics of a worker. Do they meet or don't they meet, as opposed to the overall interpretation? So more to follow, for sure, in what those workers look like.
GM: Before I leave that topic, though, I'm kind of curious. Only because this impacts me personally. I have 10 employees and about a dozen independent contractors, and depending on the month, I am in gross violation of IRS, and other months I'm doing great and all that. What do you tell your customers when it comes to independent contractors? Because a lot of businesses use that.
TT: It is. And we certainly see that from our employers. It's an opportunity. They're looking at nontraditional ways for workers.
GM: And by the way, the independent contractors that I use, they have no desire to be my employee. They've got their own business thing going. And it might be for that month, they're working 50-hour weeks for me. But then they're done.
TT: Then they take three weeks off.
GM: Yeah. Whatever, I don't see them again for six months.
TT: So I think what employers really need to be aware of is that there are lots of laws in play here. So the IRS has their definition for an independent contractor. There's a definition that the DOL uses under the FLSA – unemployment, something different – DHS, something different. So it's really difficult. It's a hard thing to do. So we encourage employers to be really careful, essentially, and to make sure that they're making that determination with the bigger picture there. Because you don't want to end up with fines from the IRS, or fines from the DOL, or something worse from the DHS, because you didn't do a form I-9 on the person. So to look at the different areas, and to make that even more complex, states are passing some laws, too, with their own –
GM: New York City, for example, has their own–
TT: Right, so their own definition of what an independent contractor is –
GM: And what should be in the agreements, and legal requirements for paying them – pretty interesting.
TT: Right. It is. And then even the courts are getting into it, and trying to decide for that. So it's a precarious position. And I think that's why we will see the DOL start to look more at that. Their annual survey on contingent worker goes out next month. And they have added questions specifically around gig workers and the shared economy to get more information, to know how to deal with it in the future. I think that information is going to be very valuable to Congress, as well, who I think will take up the initiative at some point, also – whether that looks like a third type of worker – employee, independent contractor, and XYZ – that is entitled to some of these basic rights. The portable benefits they're considering for these people, too. I think there's a lot of flux, here. But these agencies, and Congress – EEOC is looking at it, too – want to make sure that workers have basic rights, but maybe not in the traditional sense that we've seen them in the past. Because these aren't traditional employees.
GM: I'm trying to think of what I'm potentially missing. I mean, when you talk about hot employment issues and compliance issues this year, paid time off is a big one. Minimum wage is a big one. Independent contracting is a big one. Those are all big issues, and just certain employee handbook issues that need to be adjusted. Is there anything else that you're seeing?
TT: Well, we're certainly seeing, immigration is certainly a priority –
GM: Immigration – how could I not ask for that?
TT: --for the Trump administration. He's looking to bring the jobs back to the American workers. He's looking to hire 10,000 ICE agents. So I think employers need to be cognizant of that, specifically around their employee verification – so the Form I-9s, and making sure that they are completing those and retaining them appropriately. And there's the chance, better than ever, now, for a workplace raid. And then, of course, we are thinking that e-verify has a really good chance, I guess, of becoming mandatory for private employers. It's something that there is some bipartisan support for. And I think to answer part of your question, there's a possibility that they can make this work and do away with I-9s.
GM: So Paychex provides all these external services to help businesses – HR compliance, obviously payroll, benefits, all that stuff. You work with a lot of HR managers. You hear about all the compliance issues that companies have to deal with. And most small businesses are not excluded for a lot – like we're talking about with e-verify. Do people ever ask you, like, how big do I need to be before I have to consider bringing on an HR manager into my company? Is there a general sort of rule of thumb?
TT: We often see that a small company, even the size of your own, would have someone dedicated to HR.
GM: Oh, you're kidding me.
TT: It may not be their entire job. Or it might be. It kind of depends on how much recruiting, maybe, you're doing. Or, again, your industry, do you have a lot of safety issues that they need to deal with? Are you a federal contractor? Those types of things, but it's really not unusual for us to see that. Yes, there's the companies where, when we build the handbook, we're doing it with the owner. But I would say that's less the norm than having somebody who is tagged in the company to do the recruiting, to make sure the Form I-9s are done, to collect the employment applications. And to your point, there's so much now that they need, when someone goes on jury duty, who do I talk to?
GM: Isn't there a federal requirement in 2018, I believe, that companies have to report all their employees by gender and what they're earning to the federal government?
TT: So you're referencing the EEO 1 Report. The reporting requirements for that were changed last year, and would not be effective until the report that's filed in March of 2018. It only applies to employers with a hundred or more employees, or federal contractors with 50 or more. And yes, the big change for that report was that they now need to include wage data. They need to breakout their jobs –
GM: And gender, and wage data, right?
TT: Well, it's their jobs, and then across in the protected classes. So it's gender, it's national origin, and then in these wage bands. And the idea was that the EEOC would have more information about gender discrimination. Although they wouldn't be able to tell from your report that you were discriminating – just kind of a piece of information for them to look at an aggregate. Not real popular with employers.
GM: No, it is not. Have you heard any feedback from the compliance side? Do you think that's something that will happen under the Trump administration? It seems like it won't.
TT: It's definitely one of those requirements that we think is tagged to be repealed or rescinded. It's kind of different, though, because it's not a regulation. It's not a law. It's a reporting requirement, that the EEOC has the ability to decide, we don't want to do.
GM: So Tammy, great conversation. Thank you very much. I learned a lot about employment law and compliance. And my takeaway is, I'm going to become an independent contractor. So thank you. I appreciate it.
TT: Thank you. It was nice to meet you.