Blockchain Will Become a Necessity for HR

We are already living in a digital age but soon a wave of technological disruptions will change the current HR scenario. While AI is already making it big, Blockchain will revolutionise the way data is shared. Apart from this, the most uplifting part of Union Budget 2018 is the fact that AI and Blockchain became buzzwords not only within the technology community but also the wider world and common man. The words which were only used by some communities, these days they are known by all.

What is Blockchain?

Blockchain can be seen as a transparent and secure transaction ledger where transactions are both recorded and confirmed. All participating parties in a distributed network can share access to this continuously growing database to address their needs for information. Users in the network can contribute to the database by adding new transactions (or blocks) to the ledger stream. And, more importantly, every transaction across the network is recorded and stored without the ability to alter it, whether intentionallyor accidentally. This level of security in technology creates a beautiful new reality for a decentralized trusted information source in a landscape of broken global trust.

More than 40 leading financial firms and a growing number of companies across industries are already using Blockchain, according to The Wall Street Journal.

While there are numerous reasons that Blockchain is a game changer, here are few which will change Human Resource industry:

  • Blockchain will be very helpful in verifying and assessing the educational credentials, skills and performance of potential recruits – enabling those recruits to be allocated to the most appropriate roles, thereby reducing the amount of time recruiters spend cross checking and verifying information
  • Blockchain has always been seen as a quicker cross-border payment option. It is very efficient in  cross-border payments, including international expenses and tax liabilities, with the potential for organizations to create their own corporate currencies.
  • Blockchain can trigger an increase in wages. Also, when an employee becomes eligible for health coverage, they could be used to initiate the benefit; when a probationary period is satisfied.
  • For international employees, Blockchain can process payroll faster and less expensively, skirting international currency trade fees. By cutting out the intermediary, payments could come within hours rather than days.
  • Blockchain also increases productivity, by automating and reducing the burden of routine on the employees, data-heavy processes like VAT administration and payroll.
  • It enhances fraud prevention and cyber security in HR, including both employees and contractors.
  • For aspirants/ candidates, Blockchain will act as a concept of “self-sovereign identity.” They will be able to store their identity data on their personal devices and share it with those who need to validate it. Through this technology, individuals will be able to have complete control over the data of their lives, providing access keys when they apply for jobs. They could include degrees, certifications, courses taken, grades, employment history, salary and more.

Finally, we can say that technology has surely come a long way and the journey of Blockchain has just begun. The relevance of blockchain will soon be required knowledge for all job seekers, regardless of industry or position. Knowing where to fill the gaps of knowledge is one area where a certified career coach, such as those offered by outplacement and career transition service providers, can help job seekers ensure they are the most qualified candidate for any new role.

For the HR professional, knowing how blockchain can be used to streamline processes, create higher levels of security, and innovate processes will ensure future personal success and further position you as a strategic partner in your organization.

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California Supreme Court Ruling Latest Blow to Independent Contractor Model

The California Supreme Court’s ruling in a case exploring how workers should be classified—either as independent contractors or as employees—means California businesses will have a tougher time justifying independent contractor classifications.

The court ruled on April 30 in the appeal of Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County.Dynamex, a package and document delivery company, had classified drivers as contractors instead of employees, meaning the company was relieved of its obligations under California Industrial Welfare Commission wage orders related to the wages, hours, and other working conditions of the drivers.

The court’s ruling significantly toughens the test used to determine whether a worker can be classified as a contractor. The change is expected to have a big impact on gig economy workers.

“The big takeaway is that even if you exercise no control over a worker, and even if that worker has other clients in an independent business, [she is] still an employee if [she] perform[s] work that is part of your usual business,” says Mark Schickman, the editor of California Employment Law Letter and an attorney with Freeland Cooper & Foreman LLPin San Francisco. “I don’t see how driving businesses like Uber or Lyft could designate a driver as anything but an employee.”

Schickman says other businesses also will be affected, such as retail stores hiring gig workers to sell merchandise and law and accountancy firms that hire independent contract lawyers and accountants. “Independent contract arrangements were always tough to justify and now it is even tougher,” he says.

ABC Test

Todd R. Wulffson, an attorney in the Irvine office of Carothers DiSante & Freudenberger LLP, explains that the Dynamex ruling is significant for California employers because it adopts the “ABC test” to make the determination. Previously, the state used a multifactor test focusing on the level of control the hiring entity had over the worker’s performance of the work.

The ABC test presumes a worker is an employee unless the hiring entity proves the following:

(A)       The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B)       The worker performs work that is outside the usual course of the hiring entity’s business; and

(C)       The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

“Under this new test, the majority, if not the vast majority, of current independent contractors should be reclassified as employees—particularly people driving in the gig economy,” Wulffson says, adding that if a California employer has more than a few independent contractors, it should conduct an audit—with the assistance of counsel to keep it privileged—to determine liability.

Misclassifying independent contractors is a common class action issue, Wulffson says, “and those are very expensive, time-consuming, and painful lawsuits that are almost never covered by insurance.”

In its decision, the court noted that the ABC test is used in other jurisdictions to determine worker status, but Wulffson says it isn’t very prevalent, “most likely because it is so strict.” Thus, the ruling will be a blow to both businesses and contractors.

“California, unfortunately, has proven yet again that but for the weather, no one would want to start a business here,” Wulffson says.

Impact Beyond California

Wulffson doesn’t expect the ruling to have a major impact beyond California since most states don’t follow California’s example on employment laws. He points out that California is one of just three states with daily overtime, plus the state “has a panoply of employment regulations and laws found almost nowhere else.”

The independent contractor test used at the federal level also differs from California’s new test. Wulffson says the U.S. Department of Labor (DOL) uses the economic reality test, which looks primarily at seven factors focused on the level of control the hiring entity has over the contractor.

Wulffson says the DOL also has focused on misclassification in recent years because of concern that businesses are wrongfully avoiding payroll taxes. “It has not, however, gone anywhere near the ABC test,” he says.

California Employment Law Update

The State of California has been very busy with employment law changes.  See below all of the laws that passed in May with various effective dates.

FEHA and National Origin Discrimination

On May 17, 2018, the California Office of Administrative Law approved the California Fair Employment and Housing Council’s new amendments to the state’s Fair Employment and Housing Act regarding national origin discrimination and employment. The new amendments:

  • Clarify the definitions of national origin and national origin groups.
  • Clarify permissible and prohibited types of employer policies governing English proficiency, accent, and language spoken in the workplace.
  • Clarify permissible and prohibited inquiries regarding immigration status.
  • Detail prohibited forms of harassment in the context of national origin.

The new amendments are effective July 1, 2018.

Read the law

San Francisco Paid Sick Leave Rules

On May 7, 2018, the San Francisco Office of Labor Standards published new rules reinterpreting the city’s Paid Sick Leave Ordinance (PSLO) with the following changes:

  • Setting the standard for coverage as applicable to employees working 56 hours in the city and removing a reference to working in the city “on an occasional basis.”
  • Joint employment terms are defined in relation to PSLO applicability.
  • Verification or documentation disclosure protections for employees are modified by requiring no more than is necessary for an employer to determine if the absence is lawful.
  • The notice requirements are modified to require what is presumptively reasonable for pre-scheduled or foreseeable absences.
  • An employee’s regular rate of pay is calculated according to state law (Cal. Labor Code § 510) where previously the calculation was undefined.
  • The basis of an employee’s exempt status is confirmed; however, the rule provides that if an exempt employee was not provided any other paid leave, and sick leave is taken, then his or her salary continues without deduction for the sick time taken, but the leave balance is reduced.
  • The waiting period requirement was modified for employees who are rehired within one year by permitting their original employment period to apply to its fulfillment.
  • Clarifications as to how the PSLO applies to a unionized workforce and collective-bargaining agreements.
  • Modification of remedy calculations and issue resolution timeframes for noncompliant employers.

The new rules are effective June 7, 2018.

Read the rules

Los Angeles Minimum Wage

The City of Los Angeles released its updated local minimum wage poster. Effective July 1, 2018, and under the city’s minimum wage ordinance, Los Angeles employees must be compensated as follows:

  • $12 per hour for employers with 25 or fewer employees.
  • $13.25 per hour for employers with 26 or more employees.

This notice also provides information about the city’s paid sick leave provisions and must be posted in a conspicuous place at any workplace or jobsite. Violators are subject to penalties.

See the poster

San Leandro Minimum Wage

Effective July 1, 2018, the City of San Leandro’s minimum wage increases to $13 per hour. The city released a new poster reflecting this new rate along with the other rate increases that take effect each July 1st through year 2020.

See the poster

Santa Monica Minimum Wage

The City of Santa Monica released its updated local minimum wage poster. Effective July 1, 2018, and under the city’s minimum wage ordinance, every Santa Monica employee (part time or full time) who works at least two hours in a particular work week within the geographic limits of the city must be paid no less than:

  • $12 per hour for employers with 25 or fewer employees.
  • $13.25 per hour for employers with 26 or more employees.

The city’s hotel worker living wage also increased, as listed in the poster, to $16.10 per hour effective July 1, 2018.

See the poster

San Francisco Minimum Wage

On July 1, 2018, the San Francisco minimum wage will increase to $15 per hour. The city released an updated minimum wage poster reflecting the 2018 rate, which must posted by San Francisco employers at each workplace or jobsite.

See the poster

Redwood City Minimum Wage

On April 10, 2018, Redwood City Mayor Ian Bain signed a city minimum wage ordinance (No. 2443) requiring Redwood City employers to pay the following minimum wages:

  • $13.50 per hour effective January 1, 2019.
  • $15 per hour effective January 1, 2020.

Under the ordinance, learner employees must be paid no less than 85 percent of the applicable minimum wage for the first 160 hours of employment and then must be paid the applicable minimum wage. Additionally, employers may not deduct any tip or gratuity (or credit any tip or gratuity) to offset an employee’s wages.

Beginning on January 1, 2021, and each year thereafter, the city’s minimum wage will increase by an amount corresponding to the prior year’s increase in the cost of living, if applicable. The cost of living increase will be measured by the percentage increase in the Consumer Price Index (CPI) for San Francisco-Oakland-San Jose. The increase will be calculated by using the August-to-August change in CPI; however, a decrease in the CPI will not result in a decrease in the minimum wage.

The ordinance also provides the following:

  • Posting requirements.
  • Retention of payroll records for three years.
  • Retaliation prohibition.
  • Exceptions.
  • Violations, enforcement, and penalties.

The ordinance became effective May 10, 2018.

Read the ordinance

Belmont Minimum Wage

The City of Belmont updated its minimum wage rate official notice to reflect the city’s minimum wage increase to $12.50 (tips not included) per hour for employers who are subject to the Belmont Business License Tax, or who maintain a facility in Belmont, and have an employee who works at least two hours per week in the city.

The rate is effective July 1, 2018.

See the notice

Pasadena Minimum Wage

The City of Pasadena updated its minimum wage rate official notice to reflect the city’s minimum wage increase to $13.25 (in addition to any tips received) per hour for employers with 26 or more employees.

The rate is effective July 1, 2018.

See the notice

Independent Contractors, IWC Wage Order Claims, and the ABC Test

On April 30, 2018, the California Supreme Court filed its decision in Dynamex Operations West, Inc. v. Superior Court regarding the proper classification of workers under the California Industrial Welfare Commission’s (IWC) wage order claims. As opposed to employees, independent contractors are not covered by IWC wage orders.

In Dynamex, the court held that there is a presumption that a worker is an employee, and covered under the IWC wage orders, unless a business (hiring entity) can establish that all of the following factors of the “ABC test” are applicable:

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of such work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

If the business can establish that all parts (A, B, and C) of the test are met then the worker is an independent contractor for IWC wage order claim purposes. The court’s ruling in specifically applies to the analysis of the “suffer or permit to work” definition of “employ” contained in the wage orders when evaluating worker status. The court did not address which test is applicable to claims of misclassification under other California statutes, only to claims under the IWC wage orders.

The decision is effective as of April 30, 2018.

Read the decision

Current FMLA Forms Now Expire June 30

The Family and Medical Leave Act (FMLA) forms expire June 30—not on their original expiration date of May 31—but aren’t likely to change when they’re replaced with new forms, experts say.

Employers who customize their own forms aren’t too concerned with the imminent replacement of the current forms, while employment law attorneys disagree on how much the DOL forms might be tweaked.

The FMLA forms are used to certify that an employee is eligible to take FMLA leave and to notify him or her of leave rights under the law. The forms expire under the Paperwork Reduction Act of 1995, which requires the Department of Labor (DOL) to submit its forms at least every three years to the Office of Management and Budget (OMB) for approval, so the OMB can ensure processes aren’t too bureaucratic.

The DOL is renewing the current FMLA forms on a month-to-month basis until it replaces them with new forms. But the new forms may be virtually identical to the current ones and have a different expiration date, according to Jeff Nowak, an attorney with Franczek Radelet in Chicago.

In 2015, the DOL made a few minor tweaks to the FMLA forms so they would conform with the Genetic Information Nondiscrimination Act.

This cycle, the DOL did not request any changes to the forms, Nowak said.

There have not been substantive changes to FMLA or its regulations in the past three years that would require changing any of the information provided or sought on the current forms, noted Tina Bengs, an attorney with Ogletree Deakins in Indianapolis and Valparaiso, Ind., and Chicago. So it seems likely that the new forms, once issued, will be approved for the maximum three-year period, she predicted.

Customization of Forms

Some employers customize the DOL-recommended forms for their own use, observed Steven Bernstein, an attorney with Fisher Phillips in Tampa, Fla. For example, some employers are covered by state and federal FMLAs and adjust the federal forms to reflect state law requirements. Others make minor changes, such as referring to workers as “associates” rather than “employees.”

On occasion, employers incorporate reference to their accrued leave policies, while others adopt robust language disclaiming liability under the FMLA, he said.

He cautioned, however, that an employer can be held liable for using a form that harms the employee by misleading him or her about FMLA rights, and recommended that any changes be reviewed by an outside expert to ensure that added language does not inadvertently conflict with the FMLA.

Monica Velazquez, an attorney with Clark Hill in Collin County, Texas, prefers customized forms so that employers aren’t handing workers documents with the DOL logo. The logo makes the forms look more official than they are, she said, emphasizing that their use is optional.

Copy and paste the information from the DOL form into the employer’s own form, she recommended. If the employer plans to use its own language, use plain English and bullet points, she said. “Keep things as direct as possible.”

“I think the forms should have less space for health care providers to handwrite information,” said Megan Holstein, a senior vice president of absence and disability with Fineos in Denver. For example, instead of an open-ended question about the employee’s treatment schedule, a customized FMLA form might ask the doctor to choose a frequency of treatment—every week, month or year—and circle the response. This would reduce the challenge of reading doctors’ often illegible handwriting, she explained. Less space for handwritten information also would reduce the chances of doctors’ filling certification forms with confusing medical lingo, she added.

Many employers put the information about health conditions at the top of the medical certification forms, as it’s the first piece of information the employer wants—what ails the employee or family member—so the employer has a better sense of whether the employee is covered by the FMLA, Nowak noted. Nevertheless, he said he doesn’t have many concerns with the FMLA forms and encourages clients to use them.

FMLA Forms

The current DOL forms are:

ICE Planning Surge of I-9 Audits This Summer

Derek Benner, acting executive associate director for ICE’s Homeland Security Investigations (HSI) told The Associated Press that in addition to the plans for this summer, the agency will continue to focus on criminal cases against employers and deporting employees who are in the country illegally.

ICE has already opened more worksite investigations seven months into fiscal year (FY) 2018 than the agency completed in all of FY 2017. The federal fiscal year runs from Oct. 1 to Sept. 30. Enforcement investigations in FY 2018 have doubled last year’s total, and arrests related to worksite enforcement have nearly quadrupled.

Since October 2017, HSI has opened 3,510 worksite investigations, initiated 2,282 I-9 audits, and made 594 criminal and 610 administrative worksite-related arrests. That’s up from 1,716 investigations, 1,360 I-9 audits, 139 criminal arrests and 172 administrative arrests the previous fiscal year.

If anyone was wondering if the Trump administration was more bark than bite, these numbers indicate a significant increase in enforcement action, noted Muzaffar Chishti, an attorney and director of the Migration Policy Institute’s office at New York University School of Law. “What is not clear is whether any employers are included in the arrests,” he said. “Arrests—both criminal and civil—are almost always workers. For example, no one from management was charged in the high-profile Tennessee raid in April. That seems to be an imbalance.”

The ICE Toolkit

ICE said it uses a three-pronged approach to worksite enforcement:

  • Compliance, via Form I-9 audits, civil fines and debarment from federal contracts.
  • Enforcement, through the criminal arrests of employers and administrative arrests of unauthorized workers.
  • Outreach, by participating in the ICE Mutual Agreement between Government and Employers program, in which ICE certifies organizations for complying with the law. As part of the program, ICE and U.S. Citizenship and Immigration Services provide education and training on proper hiring procedures, fraudulent document detection and use of the E-Verify employment eligibility verification system.

Chishti believes pushing employers to enroll in E-Verify may be the aim of ICE’s more aggressive enforcement actions. “That strategy may work, but it only works for people who are on payroll,” he said.

E-Verify doesn’t enforce compliance for people paid as independent contractors, outsourced workers or those paid off the books, he said, adding that there’s a tendency for employers to explore these alternative hiring methods in response to increased enforcement.

Be Prepared for a New Normal.

Soon, ICE intends to conduct up to 15,000 Form I-9 audits per year, to be completed by electronically scanning documents in a not-yet-created national inspection center, Benner said.

“Investigations most often start with a notice of inspection alerting employers that ICE is going to audit their employment records for compliance with existing law,” said Michael H. Neifach, an attorney in the Washington, D.C., region office of Jackson Lewis. Enforcement actions can begin from a law enforcement tip or from an investigation into another type of violation, such as labor standards violations, and could result in civil penalties and/or criminal charges for employers.

ICE recently changed the way it calculates civil penalties to increase the fines imposed for I-9 violations. In FY 2017, employers were ordered to pay $97.6 million in judicial forfeitures, fines and restitution, and $7.8 million in civil fines.

“Unauthorized employees who are not legally in the U.S. may be detained and, ultimately, deported,” Neifach said. “Given the government’s focus on worksite inspections, preparing for possible inspections by auditing your employment verification processes and records is an essential precaution.”

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