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Monthly Archives

July 2011

DEDUCTIONS FROM PAY: DOS AND DON’TS

By Your Employee Matters | No Comments

Many employers are confused over what they may or may not deduct from pay. Here’s what the FLSA has to say:

“[T]o qualify for exemption under the FLSA generally an employee must be paid at a rate of not less than $455 per week on a salary basis. As a rule, if the exempt employee performs any work during the workweek, he or she must be paid the full salary amount. An employer may not make deductions from an exempt employee’s pay for absences caused by the employer or by the operating requirements of the business. If the exempt employee is ready, willing and able to work, an employer cannot make deductions from the exempt employee’s pay when no work is available.

“To qualify for exemption, employees generally must meet certain tests regarding their job duties and meet certain compensation requirements. Job titles do not determine exempt status. You should also review the other sections of this Advisor for help in determining whether the employee meets the duties tests for exemption.

“Deductions from pay are allowed:

  • When an employee is absent from work for one or more full days for personal reasons other than sickness or disability.
  • For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness.
  • To offset amounts employees receive as jury or witness fees, or for temporary military duty pay.
  • For penalties imposed in good faith for infractions of safety rules of major significance.
  • For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.
  • In the employee’s initial or terminal week of employment if the employee does not work the full week.
  • For unpaid leave taken by the employee under the federal Family and Medical Leave Act.

“In addition, deductions may be made from the pay of an exempt employee of a public agency for absences due to a budget-required furlough, and special rules apply when such employees take partial-day (or hourly) absences not covered by accrued leave.”

Each of these allowable deductions is described elsewhere in the Compensation Requirements section:

What kinds of deductions are not allowed?

“Deductions for partial day absences generally violate the salary basis rule, except those occurring in the first or final week of an exempt employee’s employment or for unpaid leave under the Family and Medical Leave Act. If an exempt employee is absent for one and one-half days for personal reasons, the employer may only deduct for the one full-day absence. The exempt employee must receive a full day’s pay for the partial day worked. Other examples of improper deductions include:

  • A deduction of a day’s pay because the employer was closed due to inclement weather.
  • A deduction of three days pay because the exempt employee was absent for jury duty.
  • A deduction for a two-day absence due to a minor illness when the employer does not have a bona fide sick leave plan, policy or practice of providing wage replacement benefits.
  • A deduction for a partial day absence to attend a parent-teacher conference.

What’s the effect of isolated or inadvertent improper deductions?

“Improper deductions that are either isolated or inadvertent will not violate the salary basis rule for any employees whose pay had been subject to the improper deductions, if the employer reimburses the employees for the improper deductions.

What if the improper deductions are not isolated or inadvertent?

“If an employer makes improper deductions from employees’ pay (as opposed to isolated or inadvertent improper deductions), the salary basis rule will not be met during the time period in which the improper deductions were made for employees in the same job classification working for the same manager(s) responsible for the actual improper deductions. Therefore, the affected employees will not have been paid on a salary basis as required for exemption during that time-period.

How do you distinguish between isolated or inadvertent improper deductions and an actual practice of making improper deductions?

“A practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis. The factors to consider when determining whether an employer has an actual practice of making improper deductions include, but are not limited to:

  • The number of improper deductions, particularly as compared to the number of employee infractions warranting discipline.
  • The time period during which the employer made improper deductions.
  • The number and geographic location of employees whose salary was improperly reduced.
  • The number and geographic location of managers responsible for taking the improper deductions.
  • Whether the employer has a clearly communicated policy permitting or prohibiting improper deductions.

“If an employer has a clear policy prohibiting improper pay deductions that includes a complaint mechanism, reimburses employees for any improper deductions and makes a good faith commitment to comply in the future, the salary basis of pay will not be violated unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints.

What if the employer does not reimburse the employee for the deductions?

“If the facts show that the employer has a practice of making improper deductions and the employer fails to reimburse employees for any improper deductions or continues to make improper deductions after receiving employee complaints, the salary basis rule is not met and the exemption is lost during the time period in which the improper deductions were made for employees in the same job classification working for the same manager(s) responsible for the actual improper deductions.”

Readers lucky enough to have to comply with California’s laws can go to http://www.dir.ca.gov/dlse/FAQ_Deductions.htm for more information.

THE ACCOMMODATION PROCESS: HURDLES, PITFALLS, AND GETTING OUT OF YOUR OWN WAY

By Your Employee Matters | No Comments

What causes the accommodation process to break down? Job Accommodation Network (JAN) studies on the costs and benefits of job accommodations for people with disabilities show that there are three major hurdles to effective job accommodation solutions:

Hurdle #1. Lack of information on what medical documentation an employer can request. Employees might not understand that their employers can request them to provide certain medical documentation in response to an accommodation request, and if they fail to do so, they might not be entitled to the needed accommodation.

To determine whether a particular employee has a disability, you may request medical documentation that shows whether the person has an impairment that substantially limits one or more major life activities. You may require that this documentation come from an appropriate health care or rehabilitation professional, including — but not limited to — doctors (including psychiatrists), psychologists, nurses, physical therapists, occupational therapists, speech therapists, vocational rehabilitation specialists, and licensed mental health professionals.

For more information on medical exams and inquiries, including forms for employers, individuals, and medical professionals, visit http://AskJAN.org/topics/medexinq.htm.

Hurdle #2. Lack of clarification on determining the essential functions of a position. Employees might request the removal of an essential job function without realizing that this isn’t required as a reasonable accommodation.

You may require an individual with a disability to meet the skill, experience, education, and other job-related requirements of a position, including the performance of its essential functions with or without an accommodation. To determine whether a job function is essential, begin by determining if the employee in the position is actually required to perform the function. According to the Equal Employment Opportunity Commission, other criteria include: (1) a limited number of other employees available to perform the function or among whom the function can be distributed; and (2) the need for special expertise or ability to perform the function. To determine whether a job function is essential, consider these factors:

  • The employer’s judgment
  • A written job description prepared before advertising or interviewing applicants for a job
  • The amount of time spent performing the function
  • The consequences of not requiring a person in this job to perform a function
  • The work experience of people who have performed the job in the past and are currently performing similar jobs.

Although employers are not required to eliminate an essential function, lower production standards, or provide personal use items, they can do so if they wish. For information on identifying the essential functions of a job, including other relevant factors and examples, visit http://AskJAN.org/links/ADAtam1.html#II.

Hurdle #3. Lack of agreement on effective reasonable accommodations, including the role of temporary accommodations, leave time, and reassignment. Employees might reject an offer of reassignment, not realizing that reassignment to a vacant position is a form of reasonable accommodation when there is no accommodation available in the current position.

In most situations, you should first consult with the employee who requested the accommodation to clarify what the individual needs and identify the appropriate reasonable accommodation. The employee will often be the best resource for information about accommodation needs. By talking with the employee who requested the accommodation and obtaining medical information if needed, you should be able to identify the problem, which is the first step in determining effective accommodation solutions.

Once you have identified the employee’s limitations and abilities, the next step is to determine how they impact the employee’s ability to perform the job. To make this determination, consider what specific job tasks, work environments, equipment, or policies are creating barriers to successful job performance. It might sometimes be necessary to go beyond a traditional job description and consider other factors, such as the equipment used to perform a task, where the work is performed, and why certain policies are being followed.

Once you have identified the employee’s limitations and abilities and determined how they impact job performance, you’re ready consider accommodation options, such as temporary accommodations, leave time, and reassignment.

For more information on determining accommodations, see: JAN’s Five Practical Tips For Providing And Maintaining Effective Job Accommodations at http://AskJAN.org/media/FivePracticalTips.doc.

You can often avoid these hurdles by discussing the situation in advance and expedite the process by understanding your rights and responsibilities. To discuss your case in detail, contact JAN directly for one-on-one consultation.

Thanks to JAN Principal Consultant, Beth Loy, Ph.D.

SOCIAL SECURITY ‘NO–MATCH’ LETTERS RETURN WHAT’S AN EMPLOYER TO DO?

By Your Employee Matters | No Comments

From 2009 until recently, the Social Security Administration did not issue “no match letters” — the notices from SSA that alert an employer to a mismatch between an employee’s name and social security number. The SSA halted these letters due to substantial controversy — and litigation — that challenged rules promulgated by the Department of Homeland Security mandating how employers had to respond. Now that the SSA has resumed sending these letters, you need to understand what responses are and are not appropriate.

A mismatch between an employee’s name and SSN might be due to a simple mistake (a misspelled name, oversight in registering a name change with the SSA) or illegality (an undocumented worker using a fraudulent SSN). Under the SSA’s new procedures, employers will get a no-match letter when the individual can’t be reached directly about the discrepancy. The letter states, “This letter does not imply that you or your employee intentionally provided incorrect information about the employee’s name or SSN. It is not a basis, in and of itself, for you to take any adverse action against the employee, such as laying off, suspending, firing, or discriminating against the individual.” The letter warns that taking action against the employee might violate the law. However, failing to take action in response to the letter or taking the wrong action can subject an employer to criminal investigation and prosecution, such as for knowingly employing or “harboring” unauthorized workers if the worker is in the country illegally.

A guidance document from the U.S. Department of Justice’s Office of Special Counsel (OSC) offers these recommendations for employers in responding to these letters:

  • Check company records to see if there’s a clerical error.
  • Ask the employee to verify the exact name and SSN number on his/her card. Although the OSC guidance does not so state, the no-match letter specifies that, while an employer should ask the employee for this information, “the employee is not required to show you the Social Security card. However, seeing this card will help ensure that the records are correct.”
  • If the mismatch remains, have the employee contact the SSA to resolve the matter (and give them reasonable time to do so). An OSC frequently asked questions document notes that, although no statute defines “a reasonable period of time” SSA discrepancies can take up to 120 days to resolve.
  • Meet with the employee periodically to learn and document the status of their efforts to address or resolve the mismatch.
  • Follow the same procedure with all employees regardless of citizenship status or national origin.
  • Review any document the employee offers that demonstrates resolution of the mismatch and submit any corrections to the SSA.

The OSC guidance document also makes these recommendations about what an employer should not do:

  • Do not assume a mismatch conveys information about an employee’s immigration status or work eligibility.
  • Do not use the letter as the sole basis to terminate, suspend, or take other adverse action.
  • Do not attempt to re-verify the employee’s employment eligibility immediately by requesting the completion of a new I-9 based solely on the letter.
  • Do not require that employees present specific I-9 documents to address a no-match.
  • Do not require employees to provide a written verification report from the SSA as it might not always be obtainable.

Neither the SSA nor the OSC provides any guidance on what to do if the employee is unable to resolve the mismatch. However, consistency in the way you address these issues is critical to avoid violations of anti-discrimination laws (including discrimination based on national origin or immigration status), and you must make decisions about whether to keep employing individuals who can’t resolve the matter. Otherwise, you might face a charge of “constructive knowledge” that you employed undocumented workers. We’d recommend that you work with counsel to develop policies that address these matters and resolve individual “no-match” cases.

Provided courtesy of the Worklaw Network firm Shawe Rosenthal.

FIVE WAYS TO IMPROVE YOUR EMPLOYEES’ EXPERIENCE

By Your Employee Matters | No Comments

Management is concerned about employees meeting the specifications of their jobs. Beyond this, it makes sense to manage your employees so that they motivate themselves to exceed these requirements. Here are some guidelines that can help the cause:

  • Be clear about what you expect from employees. One of my favorite questions is: “What are the five most important things you do in your job and how would you know if you are doing then well- without you having to ask me or without me having to tell you?” Until all of your employees can answer this question, they don’t understand their job clearly. Make sure that the employee’s “job description” covers not just what they do, but how they should do it — and what results you expect from them.
  • Respect their need to manage their time. Don’t ask employees to waste time on nonsensical or nonrevenue producing tasks. Allow them to work in their highest and best use. If you want employees to grow you must delegate work to them. Even better, invite them to take work away from you and when they do, help them figure out a way to delegate their lowest-value work, perhaps to a new employee, intern, or third party. I would also help employees do a better job of understanding time management. Most managers and employees have not taken time management classes. To join the class I’ll be doing in July, click here. If you can’t make it live as an HR That Works Member, you’ll be able to view the presentation on a stored basis later.
  • Help them to understand the difference they make every day. Do your employees understand the “processional impact” of what they do? For example, does the tailor fully understand the joy a well-sewn dress brings to the bride? Does the customer service rep truly understand how good service that they deliver to a client or customer will pay dividends? Do we understand that how we treat each other ends up affecting how we treat loved ones? When we understand these “processional impacts” of our work, we can move closer towards the goal of self-actualization — literally feeling good about the work that we do every day. When employees create connections with fellow employees, customers, clients, vendors, etc. they make their work that much more meaningful.
  • Encourage their personal growth. Let employees know what their future at the company can look like and what it would take for them to get there. Then offer them the skill testing and training they need to move forward.
  • Consider their health. Whether it’s how you manage your employee health insurance or your wellness program, helping employees do a better job of managing their health will go a long way towards boosting their productivity, attendance records, general mood, creativity, etc. Find out how your health insurance broker can help you install a wellness program at your company.

Those are a few ways in which you can improve your employees’ work experience and gain their commitment. Think of how you can use these factors in your workforce.

EDITOR’S COLUMN: WHAT CEOs ARE LOOKING FOR FROM HR

By Your Employee Matters | No Comments

When I gave a webinar for nearly 500 CEOs in the Vistage community, they asked me to respond to these questions:

  • How do you drive productivity and customer service where the primary delivery is person-to-person?
  • Would you address the Employee Free Choice Act?
  • When facing downsizing, how do you keep key staff motivated?
  • Can you discuss exempt and non-exempt employees?
  • What are the best practices for hiring?
  • What are the best practices for performance reviews?
  • How do you engage employees?
  • How do PEOs and outsourcing HR impact employee productivity?
  • How do you get managers and supervisors on board when they, as well as employees, focus on this downward economy?
  • What are the barriers to changing organizational culture?
  • How do you structure a bonus plan that’s objective and motivates everyone, especially top performers?
  • What can we do to help departments work together?
  • How do you increase productivity and, in general, change corporate culture with an older “veteran” workforce?
  • What do we do to calm the nerves of people who remain employee during layoffs? * How do you hold people accountable without making them feel that you’re beating up on them or getting overly defensive?
  • What are the best practices for employee retention? What metrics do you monitor? * What’s the most successful method to reduce “blame games?”
  • How do you get people to admit responsibility for their actions?
  • With our current economic conditions, how do you perceive HR as an asset to an organization, i.e., revenue generating?
  • How can I help people with strong and different personality types get along so they can truly listen to one another?
  • In a small company where people wear many hats and must adjust expectations quickly, how do you conduct performance reviews?
  • What’s the single largest change we could make to improve productivity?
  • How do you feel about using profit per employee as a productivity metric?
  • What are your thoughts on the pros and cons of telecommuting?
  • What are the top five techniques for getting the most from contractors?
  • Which Web sites can we use to find information about our specific state laws?
  • What are the keys to success for a new work-from-home employee?
  • What are the major differences in manufacturing environments versus office or other workplaces?
  • How do you keep a pipeline of qualified desirable employees even if there are no openings at present?
  • How would you handle operating in a community with high drug use, high turnover and absenteeism?

These questions are similar to those that all employers face — focused on hiring, performance, and retention, HR That Works offers excellent tools in each of these areas to help. So use them today!

TAKE A STAND FOR YOUR HEART HEALTH AND LIVE LONGER

By Life and Health | No Comments

Six hundred thousand Americans die each year due to heart disease, and more than 25 million live with heart disease each day. You can reduce your risk by making wise decisions regarding your diet and lifestyle. Here are 10 steps you can take to get started.

  1. Eat fish that is high in oils. Tuna and salmon, among other oily fish, are high in omega-3 fatty acids. These fatty acids have been shown to reduce blood pressure as well as cholesterol levels. In fact, the American Heart Association (AHA) suggests eating at least two 3-1/2 ounce servings of oily fish each week. If possible, choose a natural source of omega-3, rather than a supplement.
  2. Opt for whole grains rather than refined grains. There are several benefits in choosing whole grains such as brown rice, oatmeal, and whole-wheat flour, rather than refined grains such as white bread or white rice. The fiber in whole grain not only lowers cholesterol, but it also keeps you feeling full, which is an important factor in calorie reduction.
  3. Be stingy with the salt shaker. The AHA states that you should limit your diet to a half a teaspoon of salt per day. Choose foods without added salt, prepare home-cooked meals, and avoid processed and fast foods.
  4. Make smart choices regarding meat. The kind of meat you eat and your portion size are both significant factors when it comes to heart health. Choose lean meats, and no more than about 6 ounces per day. Chicken is preferable to red meat, and avoid all smoked meats, as they contain unhealthy additives.
  5. Keep tabs on your cholesterol levels. The AHA recommends that healthy grown-ups aged 20 and older should receive cholesterol tests every five years. Those who are at high risk of heart disease should be tested more frequently. Don’t wait for warning signs or symptoms to occur. In this case, an ounce of prevention is worth more than a pound of cure.
  6. Get regular exercise. Get at least 30 minutes of moderate level exercise five times per week. Start off slowly, and gradually advance to a fast paced walk or jog. You’ll feel better, look better, and your heart will thank you.
  7. Avoid added sugars. Studies show that too many sweets and starches increase the risk of heart disease. The AHA suggests consuming only 100 calories of added sugar per day for women, and 150 for men. That’s not a lot of sugar. Your body doesn’t need it to function correctly, and it only adds pounds to your mid-section.
  8. Eat lots of fruit, vegetables, and low-fat dairy items. Buckle down and eat more of the foods that you know are good for you. Eat a colorful variety of fruits and veggies. These are the best sources of vitamins and fiber, and you should have 4-1/2 cups per day. Avoid frozen and canned options – opt for fresh whenever possible. It is also good to add some low- or non-fat dairy products to your diet each day, and to limit whole milk products.
  9. Read, read, read food labels, before you buy. Many food products contain hidden fats, sugars and unhealthy additives. Be sure to do your math, too. Labels list serving sizes and calories, so a little multiplication or division might be necessary to count calories.
  10. Avoid risk factors for diabetes. Diabetes is a big risk factor for heart disease, so if you can avoid this unhealthy disease, you can protect your heart at the same time. Watch your weight, resist physical inactivity, abstain from a diet high in unhealthy carbohydrates, and have your blood sugar checked annually.

Set small goals for yourself each day, and tackle them one-by-one. These seemingly small changes can make a big difference in the health of your heart.

GENERIC PRESCRIPTION DRUGS RESULTS IN SAVINGS

By Life and Health | No Comments

Considering that everything from groceries to gas has skyrocketed during the country’s ongoing tough economic times, almost everyone is looking for any way they can to save, even if those savings are counted in pennies.

In an attempt to save a few dollars on grocery bills, a lot of consumers have forsaken their usual name brand purchases for generic, lesser known name brands. After all, almost every product on the shelf, from coffee to detergent, has an option for a cheaper generic version.

Consumers are showing in numbers that they’re clearly willing to give up their name brand grocery products to save a few dollars on their overall grocery bill, but are they as willing to give up their name brand drugs for generic drugs?

If you’re looking to cut your monthly expenses, the switch should be a consideration. Did you know that generic drugs can cost 60%, 70%, even 80% less than their name brand counterparts? The few pennies you save by choosing a generic brand grocery item is great, but it pales in comparison to the substantial savings you can achieve just by choosing a generic drug.

Generic Drug Availability. Some people assume from past experiences that they might not have this option available. However, recent years have seen a surge of generic drugs literally pouring into the market. It’s much easier today than it was just a few years ago to find a cheaper version of most all brand name prescriptions, especially if your prescriptive drug has been on the market for several years. Most brand name drugs have patent protection, meaning that other companies can’t produce the same medication by a different name and offer it cheaper. However, drugs must eventually forfeit this patent protection. They then usually become available under a cheaper, generic label. Experts have predicted that there will be around $60 billion dollars worth of name brand drugs losing their patents over the next three years.

From depression, high cholesterol, diabetes, hypertension, allergies — there’s usually a generic drug available for almost any common medical condition. Of course, you’ll need to ask your health care provider if there is a generic version available for your current prescription, or if they would recommend a similar generic drug in the same class as your prescription so that you can take advantage of the savings.

Generic Drugs and Insurance Coverage. We’ve already discussed that generic drugs are less expensive than their name brand counterparts, but did you know that they also carry a lower co-payment too? If your name brand drug prescription is costing you a co-payment of $50 or so, then you’re likely looking at just $10 or so for the generic equivalent.

Even Bigger Savings. Coincidentally, many of the major, name brand stores with pharmacies are offering savings for choosing the lesser known, generic brand drugs. This trend was started back in 2006 when Sam’s Club and Wal-Mart began offering their consumers 30 day supplies of certain generic drugs for only $4.00/per prescription. Currently, Wal-Mart offers the 30 day/$4.00 generic prescription on more than 360 drugs. Similar generic drug discount programs are available elsewhere, such as at Costco, Walgreens, and Target pharmacies.

There are substantial savings from choosing a generic drug over a name brand drug. Even if you are the type of person that must have name brand groceries, clothes, and so on, you might not want to spend the additional money on a name brand drug. After all, the savings from a few generic prescriptions could fund a new pair of designer jeans.

TERM LIFE INSURANCE: WHAT YOU NEED TO KNOW BEFORE YOU START SHOPPING

By Life and Health | No Comments

You certainly aren’t alone if you find shopping for Life insurance a perplexing, frustrating process. Even for those with a basic understanding, the intricate details of many Life insurance products can be overwhelming for consumers.

Term Life insurance is one of the simpler policies, and it also happens to be a product that meets the insurance needs of a variety of family types. It offers you protection for a specified time, or term. The policy’s term can be set at anywhere from one to 30 years. Your named beneficiary will receive a specified death benefit should you die within the term of the policy. Since Term Life insurance is designed for protection purposes, it’s usually less expensive than Permanent Life insurance. A large percentage of Term Life consumers are opting for it because they feel their need for Life insurance will shrink as they age. For example, a person might feel the need to protect their children by having a Term Life insurance policy, but feel that this need will decrease or end once their children reach a certain age.

Although Term Life insurance sounds simple and straightforward enough, there are still a few additional points that you should be mindful of as you begin shopping:

  1. Determine your objective. Don’t start shopping before you answer the following question: What am I trying to accomplish with a Life insurance policy? As you assess your goals, you might find that Term Life insurance is ideal for your needs, or maybe not. In most cases, a consumer will outlive the Term Life insurance policy’s term, meaning that benefits are never realized. This element can be problematic if you’re looking to protect your family long-term, or ensure future adult children or grandchildren receive a benefit. However, it can be ideal if you’re looking to protect your family for a limited amount of time and/or would like to ensure debts are covered should you pass away in the near future.
  2. Individual or Group? A Group Term Life insurance policy is usually an employee benefit through an employer. In most cases, a short health history questionnaire is all that’s involved in the application process. Those that qualify will have the monthly premiums automatically deducted from their paychecks. On the other hand, an Individual Term Life insurance policy requires you to apply for the coverage on your own. Unlike group, you will need to have a physical exam and provide the insurer with your medical history during the application process. Some insurers may also require a background check and permission to examine your medical records. It might seem like the Group Life insurance policy process is easier and less invasive, but the individual policy can offer you some advantages that the group doesn’t. First, you’ll own the individual policy and be able to retain it should you leave or be fired from your current employment. Second, rates on group policies typically increase every five years, but individual policies typically offer level premiums that don’t increase during the duration of the policy. Third, group policies are typically less flexible than individual ones.
  3. Know what you’ll do next. There will be a couple of different options available when the Term Life insurance policy nears expiration, including:
    • Allowing the coverage to expire, which may be an option for you if you don’t see the policy as a necessity any longer.
    • Retaining the policy, which might be an option for you if you feel you still need the policy or couldn’t qualify for a different policy for health or other reasons. Just keep in mind that your premiums could increase when you extend the term of your existing policy.
    • Obtain a new policy through an alternative insurer, which might be an option if you’re healthy and would like to still have a Term Life insurance policy, but don’t want to pay the increased premiums associated with extending the term of your existing policy. Upgrade to a permanent policy, which might be an option if you’d like to convert to a more permanent coverage.
  4. Understand how you can upgrade. Upgrading is one of your options when your Term Life insurance policy nears expiration. Should you choose this option, you need to read the fine print in your contract. Upgrades are usually allowed under a conversion privilege, but the fine print may place limitations on the upgrade. For example, a policy might not allow you to convert to a permanent policy after you reach 70-years-old, or might only allow you to convert to a specific type of policy.

Keeping these tips in mind as you shop can make the process much easier and help you obtain the right policy for your family’s unique insurance needs.

FIVE THINGS YOU SHOULD KNOW ABOUT CONDO ASSOCIATION INSURANCE

By Personal Perspective | No Comments

A condominium unit owner usually has their own insurance policy that covers for loss of personal belongings, parts of the building that the condominium agreement makes individual owners responsible for insuring, the additional cost of living elsewhere after a fire damages a unit, and legal liability for injuries or damages suffered by others. In turn, the condominium association has its own policy, which might cause some unit owners to wonder why they have to buy separate insurance. Doesn’t the association’s insurance cover the same things? Depending on the property at issue, the answer is maybe yes and maybe no. Insurance companies designed the two types of policies to complement each other in some cases and to overlap in others. Here are five things unit owners should know about their associations’ insurance.

The association’s policy covers the building. Depending on the wording in the contract between the association and the unit owner, the word “building” may mean several different things. If the contract requires the association to insure them, “building” can include fixtures, improvements and alterations that are part of the building and that are within a unit. For example, if a unit owner installs new track lighting or an attached island in the kitchen, the association’s insurance would cover the cost of repairing or replacing them after a loss. Also if the contract requires, the association’s insurance will cover various appliances such as refrigerators, stoves and dishwashers.

The association’s policy covers personal property “owned indivisibly by all unit owners.” Furniture in the building’s lobby, hand carts and other moving devices, and exercise equipment in an exercise room available to all residents are examples of the types of property that the association’s policy insures.

The association’s policy does not cover the unit owner’s personal property. A unit owner must buy their own insurance to cover furniture, electronics, clothing and other belongings. Assume, for example, that the condominium contract requires the association to insure appliances. If fire damages a unit owner’s space, the association’s insurance will cover the refrigerator but not the sofa. The unit owner’s policy will cover the sofa. The association’s policy also does not cover an individual unit owner’s legal liability for injuries or damages suffered by others. The unit owner needs their own insurance to provide for legal defense and to pay any judgments.

It is possible that both policies may apply to the same item of property. In the above example, both the association’s and unit owner’s policies may cover the refrigerator. In that situation, the association’s policy will apply first; if it does not completely pay for the repair or replacement, the unit owner’s policy will cover the balance. For example, if the cost of replacing the refrigerator is $5,000, and for some reason the association’s policy covers only $4,000, the unit owner’s policy will pay the other $1,000 (the example doesn’t include deductibles that may apply.)

The association’s insurance company will not try to get its money back from a unit owner. Suppose a unit owner left a candle burning overnight and the unwatched candle caused a fire that damaged part of the building. Many types of insurance policies would allow the insurance company to pay its customer for the damage, then try to recover its payment from the person who caused the damage. However, a condominium association policy specifically states that the company waives its right to recover from a unit owner. It still has the right to seek recovery from a person who is not a unit owner and is responsible for the damage.

Although comprehensive, the association’s policy is no substitute for a unit owner’s own insurance. Work with our professional insurance agents to ensure that you have the proper coverage.

HIRING A NANNY – KNOW AND MANAGE YOUR RISKS

By Personal Perspective | No Comments

Many working parents have had various issues and complaints with daycare and childcare centers. As an alternative to these forms of childcare, more and more parents are choosing to hire their own nanny or share one with another parent. However, many parents aren’t fully aware of the many financial risks involved with bringing a nanny into their home.

When you hire a nanny, you’ve basically just become an employer. Did you know that your new nanny could cause you IRS problems if you improperly pay him/her and not withhold payroll taxes? Even if you withhold payroll taxes, you can still find yourself facing some costly penalties and fines if they aren’t calculated correctly and submitted on time. One way to eliminate this risk is by hiring a payroll provider to appropriately handle the taxes, just as any other employer would do.

Another financial risk is being sued by your nanny following an injury on the job. This risk of injury is why it’s prudent to purchase Workers Compensation. Otherwise, you’d be responsible for paying all the benefits that your nanny would’ve received under such a policy and any penalties or fines that your state might impose. Before you falsely assume that your nanny’s injury would be covered by your Umbrella Liability policy or Homeowners policy, it won’t. These policies typically exclude any injury where Workers Compensation would normally be due to the injured party.

However, you will need an Umbrella policy that includes excess employer’s liability coverage beyond that provided by Workers Compensation coverage. Your nanny’s spouse, children, or other family members could initiate a lawsuit for loss of his/her services if your nanny is injured on the job. Employer’s liability coverage is provided under Workers Compensation coverage, but lawsuits of this nature can easily exceed the limits.

One final concern would be from another parent’s child being injured while under the care of a nanny at your home. Even if the parent was involved in the vetting and hiring process of the shared nanny, you could still be sued by them for the child’s injury. If you share a nanny with another family, then you’ll want to ensure that your personal umbrella limits are high enough to adequately protect your assets.

If you want to avoid all the liabilities and insurance concerns, but still have the benefit of a personal nanny, then you might consider using an agency nanny. When you hire a nanny through a service or agency, the nanny is their employee, not yours. This puts the responsibility of payroll taxes, insurance coverage, background and reference checks, and so forth on their shoulders, not yours. Some agencies will even have added perks, such as having an equally qualified nanny on standby for times when your regular nanny isn’t available. Considering that you can avoid the countless hours interviewing nannies, potential liability risks, and the need for various costly insurance policies, the additional fees associated with a nanny service may be well worth it to you in the long run.