Are you at risk for Joint Employer Liability?

As a business owner, the liabilities faced are endless. You are liable for making sure employees have the proper pay documentation, sick days, harassment and discrimination policies, proper wages and W-2 submitted on time. You are even liable for data breaches and workplace injuries. If we added an entire list of liabilities to this article, the page would go on for at least a few scrolls of your mouse.

Being a business owner sometimes requires you to obtain a high level of legal knowledge to handle these situations. With precious hours spent researching these liabilities, many businesses are surprised to learn that they also have a similar list of liabilities for someone else’s employees. Determining your level of liability relies heavily on your business relationship and operations with other companies.

Companies have seen lawyers and the government back employees to ensure the wrongs or alleged wrongs the employee has suffered were made right. Due to the diligence of the lawyers and government working together, they have created what is known as joint employer liability. Media outlets such as Forbes have published articles in this area with its growing popularity and fear from employers becoming more at risk.

What is joint employer liability?

According to the article, Joint Employer Liability – Are you At Risk? by Joel Greenwald, “The factors that are considered in making this determination are whether the company that is receiving the benefit of the employees’ work (even if those employees are technically on another company’s payroll) (i) hires or otherwise selects the workers, or has input into the selection process; (ii) pays the workers or determines their compensation; (iii) directs the workers’ day to day activities, sets schedules or supervises performance; or (iv) has the authority to discipline the workers, enforce workplace rules or terminate the workers’ employment.” To paraphrase, if two or more companies control some of the work or working conditions of an employee, all the companies involved are considered to be “joint employers” under these laws. Of course, this are always subject to interpretation.

What are some examples of joint employers?

Some examples of joint employers include:

A communications firm uses a staffing agency to provide department administrators.
A franchisor of a restaurant might train its franchisees’ wait staff.
A laundry service might outsource its deliveries to another company.
These are examples of “joint employers” where, even though a company might not be directly employing the staff, they still become liable for legal issues such as pay, benefits, harassment and provision of employee leave.

How does a company avoid joint employer liability?

Since the law is constantly changing and due to the fact that we are not lawyers, there are no 100% bullet proof answers to this question. However, here are some suggestions of steps that companies can follow to protect themselves:

1. Require contacts!

Make sure contracts with staffing agencies, outsourced companies, and franchisees explicitly state that the client company is not the employer of the other company’s employees and does not control the employment (terms and conditions).

2. Avoid control!

Create procedures and policies which directly avoid actual and alleged control over another company’s employees. The companies you work with should also make that clear to their employees as well as the public.

3. Do your research!

Research the companies you plan on working with and make sure they have good standing with their employment practices and can be relied on.

4. Limit liability!

Require companies that you share employees for to indemnify you in the event of joint employer liability.

Due diligence in the front end will save you a lot of work and effort if you are ever faced with joint employer liability. Make sure you are staying up-to-date with the latest practices and are working with companies that share similar understanding and employer practices that you do.

Author: Scott Evers, VP of Sales at HR Ledger, Inc.
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How Employees Are Finding Loopholes to Paid Sick Leave Law

Implemented two years ago, the Paid Sick Leave (PSL) law went into effect and employees benefited from new rights. Many employers thought they were compliant by simply knowing and abiding by the new law, however what many failed to understand is that without a defined written policy, mandatory sick leave can more than double and even roll over year to year.

Under California’s mandatory PSL law, employers can limit the amount of PSL to three days or 24 hours per year, ONLY if the PSL limitation is communicated in writing. If employees are not provided with a written communication, companies are subject to the statutory mandated accrual rate of one hour of sick pay for every 30 hours worked and being carried over each year. That means that a full time employee can gain over 69 hours of PSL or nine days per year and are allowed to carry that over next year.

Here are some things to consider to ensure you can uphold your PSL policy without defaulting to the state policy:

1. What companies are required to participate in PSL?
The PSL law covers all types of employers regardless of employee size.

2. What employees are covered under PSL?
Employees include seasonal, part-time, hourly, seasonal, exempt and nonexempt employees. Any employee who has worked in California for the same company for at least 30-days is included in the PSL law. The only exclusion is for employees covered by a collective bargaining agreement that provides paid sick days or a paid time off policy that permits the use of sick days, in-home support service workers, airline flight deck and cabin crew, and certain public sector workers. However please be aware that this can vary by city with the city where the employee works trumping the California PSL law.

3. If companies have a generous sick leave policy, do they need to revise it?
YES! There are variations of the new law that might not be written into your policy including how and why the employee may use their sick leave. Limiting how the employees use sick leave can easily void the written policy and default to the state policy. Also, older sick leave policies might not include part-time employees whereas the new law does. Making sure the pre-existing policy meets the requirements of the new PSL law is important.

4. Can companies use different methods for different groups of employees?
YES! There are two options available where employees can be grouped into accrual options (one hour of PSL for every 30 hours worked) or three days/24-hours at the beginning of each year of employment.

5. Are there different laws depending on where the employee works?
YES! Knowing the laws where the employee works is very important as these laws trump the California state PSL law. Currently San Francisco, Oakland, Emeryville, Los Angeles, San Diego and Santa Monica have different variation of the PSL law.

Unfortunately this is just the beginning of the various loopholes an employee can use to default to the California PSL law. Understanding recordkeeping obligations, calculating sick leave time, reporting requirements, communication policies, and understanding local ordinances are a must when revising and preparing a PSL policy within your company. Simply forgetting to report an accrual on a paystub can leave you defaulting to the state PSL law without your knowledge.


For a review of where you are with your PSL compliance please call Malcolm or Scott today at 800-451-1136.

Author: Scott Evers, VP of Sales at HR Ledger, Inc.
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Time Clock and Attendance Systems

Businesses of all sizes need to use some type of time clock and attendance systems to record when employees start and stop work, and the departments where that work is performed.  Recently, it’s becoming more common to track meals and breaks, the type of work performed, and for whom.  In addition to tracking when employees work, businesses and organizations need to track when employees are not working.  Vacation time, Personal Time Off, Sick Time (mandated and not) FMLA time, and jury duty should be recorded.  Some organizations also keep detailed records of attendance issues such as who calls in sick and who comes in late.

A dedicated time clock and attendance system provides many benefits.  It enables an employer to have at their fingertips all of their employees working hours.  It helps control labor costs by reducing over-payments, which are often caused by transcription error, interpretation error and intentional error.  It is often difficult to comply with labor regulation, but a time and attendance system is invaluable for ensuring compliance with labor regulations regarding proof of attendance.

A time clock and attendance system also protects a company from payroll fraud and provides both employer and employees with confidence in the accuracy of their wage payments all while improving productivity.

So what is the best for you and your company?

Manual Systems

Manual systems rely on highly skilled people laboriously adding up paper time cards which have times stamped onto them using a time stamping machine, or simply hand written in by the employee.  Many times this is the owner who thinks if I do the work there is no cost.  Nothing could be further from the truth.  The owner’s time is the most expensive time the company has or should have to spend.  The time you spend doing this is not spent in sales, development, production, shipping or any of the countless other revenue generating activates you should be involved in.

Hiring young minimum wage people to do this task is a receipt for disaster filled with inaccuracy, error and fraud!

Time stamping machines have been in use for over a century are still used by many organizations as a perceived cheaper alternative to time and attendance software.  But are they really a savings?  Although more accurate than hand written cards Time Stamping has many draw backs above and beyond the exorbitant labor cost and potential fraud.  The “data” still needs to be entered into the payroll system adding additional cost and chance for error or theft.

Automated Systems

Automated time and attendance systems such as HUB, SwipeClock and Attendance On Demand can provide Computer Logons, Key Fobs, expensive but “buddy punch” proof Bio-Metric clocks (vein reader, hand geometry, fingerprint, or facial).  The recorded information is then automatically transferred to payroll service like HR Ledger without the cost or risk of additional employee handling.  An automated system reduces the risk of errors that are common in a manual system, and allows the workforce to be more productive instead of wasting time and money on tedious administrative tasks thus saving cost, costly errors and downright stealing!

Whatever system you currently use, or don’t use, needs to be reviewed to determine if it is the best system for you and to see if a safer and more economical system should be installed.

Feel free to call your HR Ledger Payroll Consultant, Malcolm or Scott to discuss what system would be best for you.

Author: Scott Evers, VP of Sales at HR Ledger, Inc.
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National Crime Search: Drug Screening and Background Searches

Background and drug screening can help you choose the best candidates for your company without relying solely on resumes and the interview process. Through our partnership with National Crime Search, a full-service background screening company, you can have access to the following:

  • Multi-State Criminal Background Searches
  • SSN Validation and Address Tracker
  • Multi-State Sex and Violent Offender Searches
  • Motor Vehicle Reports
  • Employment Credit Reports
  • Healthcare Industry Searches
  • Employment and Education Verifications
  • Volunteer Screening
  • Tenant Screening

NCS is accredited by the National Association of Professional Background Screeners and provides fast, simple, affordable solutions with excellent customer support. There are no setup fees for criminal background searches or any monthly minimums. You simply pay for the searches that you order through the web-based system.

Employers who conduct background screening greatly reduce the risk of fraud, embezzlement and theft in the workplace. Background screening may save your company thousands of dollars by helping you prevent a bad hire.

For more information or to get started, visit

Author: Scott Evers, VP of Sales at HR Ledger, Inc.
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Security of Payroll Funds with HR Ledger

Over the last thirty days we have received a few inquires regarding the safety of client’s funds in our care and trust undoubtedly motivated by the recent sudden and unexpected failure of a major payroll vendor in northern California.  It is very to us that you understand and feel comfortable with how we protect your funds.

HR Ledger® has been processing payroll for employers since 2003. Over the years we have seen a number of bank fraud and deceptive practices perpetrated on employers by less that ethical payroll services and Employee Leasing Firms (PEOs).

My understanding of the recent failure of the payroll company in Monterey is that funds (to the tune of $1.8 mil) in the trust accounts both OBC (more about OBC later) and Tax were used to fund the company.  The company required their customers to use the OBC method where the payroll company held the employer’s funds.  HR Ledger does not make this requirement of our clients.

As a California based full service payroll bureau, we hold a bond of $50 Million over our client’s tax funds.  Our system has SAS 70 & SSAE 16 audit certifications, which means it meets HIIPA, GLBA, & Sarbanes Oxley for financial, security and privacy controls.

In 94% of our accounts we never take possession of the employer funds.  In the remaining 6% we do take possession of the funds and write checks against our account.  The extremely confusing name for this process is called Official Bank Check or OBC.  I think there are a lot of miss-perceptions of the process.  And that changes have not been clearly explained to employers as technology has improved.

Both our ACA Originators (the companies who send your transactions to the Federal Reserve System) and our Tax Processing Clearing House have been in business since the 1960’s.  They have very strict controls and checks & balances we must “jump” through each day.  They meet the same rigorous Federal & State we choose to adhere to and they are bonded against loss.

We also are required to have a Certified Audit each year.  The means hiring a CPA firm (other than our own) to put their stamp of approval on our security, systems, processes and accounting.  They certify that our processes are sound.

I feel we have gone above and beyond in our efforts to protect all our client’s assets.

We want to thank all you for your security issue questions, truthfully it is one which should be asked by each and every one of our clients & prospects and is so often is not.  And thank you for the opportunity to be your payroll service provider.

Author: Scott Evers, VP of Sales at HR Ledger, Inc.
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