The Bermuda Triangle for employers: Navigating ADA, FMLA and Workers’ Comp leave laws

This year, shipping giant UPS agreed to pay a total of $2 million to nearly 90 current and former UPS employees to resolve a disability discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC). 

Part of the suit alleged that the company maintained an inflexible leave policy that unfairly terminated disabled employees when they reached 12 months of leave without engaging in what is known as the “interactive process” required by law under the Americans with Disabilities Act (ADA).  

This case and others serve as a reminder to employers of the complex nature of leave laws. A company may be aware that it would be a violation of federal law to mandate that a disabled employee return to work without providing reasonable accommodations, or to restrict their medical leave to the 12 weeks required by the Family and Medical Leave Act (FMLA). What most employers fail to recognize is that they have a duty beyond the FMLA to provide unpaid leave as a reasonable accommodation under the ADA, unless the accommodation would cause “undue hardship” to the employer.

Further complicating leave issues, state workers’ compensation laws can also require leave after an employee has been injured while working. There is no uniform federal law for workers’ compensation, so each state administers its own set of rules. For employers located in multiple states, that means multiple workers’ compensation laws to consider.  

Sometimes an employee’s leave request is straightforward and requires the application of only one leave law, but not often. There is a good reason why the interaction of the FMLA, ADA, and workers' compensation laws is known as the Bermuda Triangle of employment law.

From a liabilities standpoint, it can be dangerous territory. An employer must know what is required under each of the three laws and when they apply. Violations can result in significant damages for lost wages, back pay, reinstatement, retroactive benefits, compensatory damages and punitive damages.  

Here are the basic steps for an employer to follow to help avoid potential legal pitfalls:

1. Establish which leave laws apply to you as the employer  

• If the employer has 15 or more employees, then the ADA will apply.  
• If the employer has 50 or more employees within a 75-mile radius, then the employer is subject to FMLA.  
• As a general rule, all employers are subject to workers’ compensation laws and each state enacts its own workers’ compensation laws.

2. Determine which laws cover the employee’s leave needs 

• If the employee has a condition that meets the definition of a disability under the ADA, then the ADA will apply.  
• If the employee has a serious health condition, then the FMLA will apply.  
• If the injury is work-related, then workers’ compensation will apply.

 The answers to these questions will determine if any or all three of the leave laws apply.  

3. If more than one law applies, establish which law will apply first  

• Look at the employee’s benefits and rights under the applicable law. Provide the leave under the law with the greatest rights and benefits for the employee.  
• If both the FMLA and ADA apply, then the FMLA will cover the employee’s leave first. Any requests for leave after FMLA has ended will be subject to the ADA as an accommodation request. For example, if an employee meets the requirements for leave for both the FMLA and the ADA, the employee may take the 12 weeks of unpaid leave under the FMLA, and when this leave has expired, depending upon the circumstances, the employee may be entitled to additional leave as an accommodation under the ADA. 

In this scenario, to determine whether the employee is entitled to additional leave, the employer must engage in the ADA interactive process. This requires employers to review job functions to establish the essential and nonessential job tasks, identify the barriers to job performance by consulting with the employee to learn about the employee’s limitations, and explore the types of accommodations that would be most effective. 

4. Address reinstatement rights  

• The employee will have rights upon return from FMLA leave. Under the FMLA, with certain exceptions for key employees, an employee returning to work must be given the same or an equivalent position.
• The ADA is similar in this requirement as well.  
• There are a few states that require reinstatement after workers’ compensation leave unless holding the job causes an “undue hardship” to the employer.

5. Assess whether the employee’s return to work will impose a direct threat to the health and safety of the employee or others in the workplace  

• If the employee poses a significant risk to him/herself or others that cannot be eliminated by a reasonable accommodation, then leave should be continued until the employer and employee complete the interactive process to determine if and when it is safe for the employee to return.

As always, it’s best to consult with an employment law expert or an experienced HR consultant to provide clear guidance on this intricate area of law.

Source: https://www.bizjournals.com/

Accounting method change procedures under the new revenue recognition standards

On March 28, 2017, the IRS issued Notice 2017-17 providing proposed procedures that, if finalized, may be used in certain circumstances to request consent to change a method of accounting for recognizing income related to the adoption of the new financial accounting revenue recognition standards. In addition, the notice requested comments on the proposed procedures plus various issues, including several raised previously in Notice 2015-40 published on June 15, 2015. The comment period closed July 24, 2017.

New accounting standard

On May 28, 2014, new financial accounting standards were issued for recognizing revenue from contracts with customers. The new standards are effective for annual reporting periods beginning after Dec. 15, 2018, for most taxpayers. However, publicly traded entities, certain not-for-profit entities, and certain employee benefit plans must implement the standards one year earlier (i.e., for annual reporting periods beginning after Dec. 15, 2017). FASB Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers (Topic 606), applies a five-step analysis to all contracts with customers to transfer goods and services (other than leases, insurance, financial instruments, guarantees, and non-monetary exchanges between entities in the same line of business, as described in ASC Paragraph 606-10-15-2. (For more on the five steps required to determine the amount of revenue to recognize under the new standard, see Bocchino, et al., "Evolving Revenue Recognition Issues: Manufacturers," The Tax Adviser (June 2016).)

Revenue recognition principles and accounting method change procedures

Under federal tax principles, revenue is generally recognized using the "all-events" test under Sec. 451 when the taxpayer has (1) a fixed right to receive the revenue (usually the earliest of when the revenue is due, received, or earned) and (2) the amount can be determined with reasonable accuracy. In some circumstances, certain advance payments received from the provision of goods, services, and other eligible sources may be deferred for one to two tax years.Changing how revenue and/or advance payments are recognized for tax purposes often constitutes a change in accounting method that requires IRS consent to implement (i.e., by filing Form 3115, Application for Change in Accounting Method). In general, IRS consent is requested under the advance consent procedures described in Rev. Proc. 2015-13, which require Form 3115 to be filed with the IRS National Office by the last day of the year of change, along with the user fee payment outlined in Rev. Proc. 2017-1. However, changes the IRS designated as "automatic" (currently, in Rev. Proc. 2017-30) must be requested using the "automatic" consent procedures, which do not require a user fee and are filed in duplicate with the timely filed (including extensions) federal income tax return for the year of change and with the IRS Service Center in Covington, Ky.

Potential tax implications

Software, entertainment, manufacturing, and construction taxpayers may be particularly affected by the new revenue recognition standards due to the prevalence in those industries of certain business practices and accounting methods such as:

• The percentage-of-completion method;
• Income from services;
• Revenue from bill-and-hold sale transactions;
• Sales and returns of goods; and
• Income from the sale of warranties.In addition to the impact on the timing of recognizing revenue, the new standards may have implications for other tax and business areas such as:
• Tax payments and cash flow planning due to the expected acceleration of taxable income under the new rules;
• Income tax provisions, which may need to reflect additional temporary differences and deferred taxes (e.g., if the timing of revenue recognition differs for book and tax purposes under the new standards);
• State apportionment, which may require additional analysis to determine sales data by state;
• Indirect taxes, especially for states that tax gross receipts and net worth;
• Foreign subsidiaries' earnings-and-profits calculations and foreign tax credits;
• Transfer-pricing agreements, especially those based on revenue or profit measures reported in financial statements; and
• Compensation agreements tied to revenue.

IRS guidance and proposed automatic accounting method change procedures

In Notice 2015-40 the IRS requested comments on federal tax accounting issues related to the adoption of the new standards, including:

• Whether the new standards are permissible methods of accounting for federal income tax purposes;
• The types of accounting method change requests likely to result from adopting the new standards; and
• If the current accounting method change procedures adequately accommodate such requests.

Notice 2017-17 provides proposed procedures to request consent to change a method of accounting for recognizing income related to the adoption of the new financial accounting revenue recognition standards. In addition, noting that very few comments had been received in response to Notice 2015-40, the notice once again requested comments on various technical and implementation issues, and on the proposed accounting method change procedures.

Key provisions in the proposed procedures include:

• Qualifying same-year method changes: The proposed automatic method change procedures apply only to a "qualifying same-year method change," which is defined as "a change of method of accounting for recognizing income that is made for the same year as the year the taxpayer adopts the new standards and made as a result of, or directly related to, the adoption of those standards.
• Existing automatic change: A qualifying same-year method change that is included in the list of automatic changes under Rev. Proc. 2017-30, and otherwise meets the automatic change eligibility requirements in Rev. Proc. 2015-13, must be implemented using the existing automatic change procedures.
• No existing automatic change: Alternatively, a taxpayer making a qualifying same-year method change that is not included in the list of automatic changes but that complies with Sec. 451 or other guidance, and meets the automatic change eligibility provisions in Rev. Proc. 2015-13, must file Form 3115 under the automatic change procedures, write "Rev. Proc. [and its number, when finalized]" followed by the applicable citation to Sec. 451 or other relevant legal authority on line 1(b) of Form 3115, and attach a brief description of the change and why it satisfies the authorities referenced in line 1(b).
• Cutoff method for small taxpayers: In an effort to reduce the administrative burden of implementing accounting method changes related to the new revenue recognition standards, certain small taxpayers are permitted to make the change on a cutoff basis (i.e., without a Sec. 481(a) adjustment). An eligible small taxpayer is a taxpayer with one or more separate trade(s) or business(es) that individually have (1) total assets of less than $10 million as of the first day of the tax year of change, or (2) average annual gross receipts of $10 million or less for the three tax years preceding the change year. For purposes of applying the small taxpayer exception, separate and distinct trades or businesses and average annual gross receipts are determined under Regs. Secs. 1.446-1(d) and 1.263(a)-3(h)(3) (substituting "separate and distinct trade or business" for "taxpayer").
• A Sec. 481(a) adjustment must be computed for the year of change for all separate and distinct trades or businesses other than those meeting the small taxpayer thresholds described above.
• Multiple requests to make qualifying same-year method changes may be made in one request.

Implications

Although the proposed guidance is not effective until finalized, it provides helpful insight into the approach the IRS intends to take with respect to granting tax accounting method changes related to the new revenue recognition standards. In particular, the ability to make changes using the more favorable automatic change procedures (which allow additional time to file Form 3115 and do not require payment of a user fee) and to permit small taxpayers to reduce the compliance burden using a cutoff method are welcome developments. Moreover, allowing the small taxpayer thresholds to be applied at the trade or business level, rather than in aggregate, should enable more taxpayers to qualify for the simplified cutoff approach. Note, however, that if finalized in their current form, these favorable procedures will be available only for a limited time (i.e., tax method changes must be implemented in the same year the new standards are adopted).

Presumably, taxpayers that fail to file otherwise nonautomatic method changes within the prescribed time frame would be required to apply for consent under the more onerous and costlier advance consent procedures. Therefore, taxpayers are advised to begin the process of assessing the impact of the new revenue standards on their current revenue recognition tax accounting methods so they are prepared to implement any necessary accounting method changes within the time specified in the final procedures. While the effective dates of the new revenue recognition standard may appear far off, the transition process is expected to require significant time to complete, given the broad scope and complexity of the newrules.

Therefore, taxpayers and their tax advisers should act now to evaluate and plan for the tax implications of the new financial revenue recognition standards, starting with identifying which revenue streams are affected by the new standards. Once the affected revenues are identified, taxpayers should then evaluate whether tax accounting method changes are necessary or desired to change to compliant methods or to follow the new book accounting method. At the same time, taxpayers can evaluate their systems and books and records to determine whether they currently track the necessary data to continue using the current revenue recognition methods.

Source: https://www.thetaxadviser.com

The Hottest Executive Coaches These Days? Millennials. Here Are 11 Things You Can Learn From Them

The world of mentorship poses many questions.  Like how do you find the right mentor?  Or how can you be an outstanding mentor? Or even how can you be the kind of mentee that mentors love to work with?

Here's a new one: Who are the hottest coaches and mentors for boomer executives these days?

It's not the $500 per hour kind. It's the kind down the hall from your office with their AirPods in.

Millennials.

Before you spit out your Gen-Y approved fair-trade coffee, hold on a second.

In a delicious turn of events, boomer executives everywhere are scrambling to pair up with twenty-somethings that have plenty of something to offer (including helping them become tech-savvy, understand today's workforce, get into the now, and get out of the Van Halen era). Thus, millennials have become the hottest executive accessory.   

A New York Times report added credence to the trend, citing companies such as MasterCard, Cisco, Target, UnitedHealth Group, and Mars that have implemented reverse mentoring programs that match furrow-browed executives with bushy-tailed counterparts, some that are even fresh out of college. 

It's a low-priced alternative to companies that prey on our fear of what we don't know about those darned kids (companies that can make as much as $20,000 per hour according to the Times). Entrepreneurs and small businesses take note.

Here are 11 reasons to reach out to a Millennial mentor:

1. Get tech savvy.

It's no longer okay that you don't know what Snapchat is or how to use it.  Your younger co-workers use it--it's how they communicate. Your daughter uses it--it's how she fails to communicate. Your target audience uses it--it's how they're evolving to communicate.

It's good to learn new things, and it's good business.

2. Learn new markets and trends, innovate. Repeat.

The marketplace is littered with companies that let the evolving consumer pass them by.  Can't get out to that focus group to learn about the latest wants and needs? Hold one in the conference room. Just make sure it's an open floor plan conference room.

3. Improve retention.

This reason alone makes it worth finding a Millennial mentor.  How can you possibly know what your younger workforce wants if you don't know what your younger workforce wants? Don't read about it. Relate about it.

4. Better identify high-potentials.

Reverse mentorships mean Boomers are exposed to more young talent.  Such exposure increases the odds of an accurate assessment of talent and a building of the right bench for the executive suite.

5. Embrace purpose.

Odds are, when a Boomer meets up with a Millennial, the former gets a lesson in what really matters at work from the latter. It's well documented that Millennials aren't motivated as much by perks or pay; it's about the purpose behind their work. Finding out how they articulate theirs can help you define yours--and infuse more energy and fulfillment into your work days.

6. Fight obsolescence.

There, I said it. 

We have enough to worry about fighting off machines for jobs. Who wants to fight off a Millennial for one? Don't try to beat them, join them. Improve your skills by expanding your horizons.

7. Get hipper and younger.

The Times article reported on one bank managing partner who had "rediscovered his youth" via his Millennial mentor.  I'm not sure such a mentor could help me relive the joy of Happy Days episodes, but surely I'll feel a little more hip because of the relationship. 

8. Build a more connected workplace.

Learning to connect with Millennials means learning to connect with the workforce in general (Millennials are now the largest work cohort). Spending time bridging the generation gap means building a happier workplace for all.

9. Return the favor.

Many Boomers are reluctant to become mentors because of time constraints or a myriad of other reasons. The law of reciprocity says you probably should offer to mentor the Millennial right back. What a wonderful virtuous cycle.

10. Get inspired.

Exposure to different, energetic points of view can inspire all kinds of things.  Research indicates the number one thing that distinguishes entrepreneurial leaders from more conventional ones is an openness to new experiences. So go experience.  

11. Sharpen your listening skills.

That's right. You might not be in a situation quite as often anymore where you're the one taking notes. It's good for you, and for your listening aptitude. 

So Boomers, pick up a Millennial today, they're available in all colors, shapes, and sizes.  But move fast--not because quantities are limited, but because we'll all be looking to Gen Z'ers before you know it.

Fashion can be so cruel.

Source: https://www.inc.com/scott-mautz/hot-accessory-for-executives-isnt-a-mercedes-its-a-millennial-11-reasons-theyre-great-mentors.html