Employer concerns with the Affordable Care Act’s employer mandate (and other provisions) are starting to pick up as the requirements of the act become very real. There are large changes coming in 2015 with which every car wash owner would be wise to become familiar. If you take nothing else away from this article, take this: while the law is complex, it is manageable with the right advice. A robust discussion of all of the intricacies of the Affordable Care Act (ACA) goes beyond the scope of this article, but what follows should help you start managing your car wash in the right direction.
If you own separate car wash locations, under different legal entities, they will probably be grouped together for the purposes of counting whether you employ 50 or more full-time employees or their equivalent.
This is undoubtedly one of the largest mistakes car wash owners are making. Separate EINs does not mean separate “employers” under the ACA. For example, let’s assume that Bob owns four car washes, Car Wash #1 GP, Car Wash #2 LP, Car Wash #3 LLC, and Car Wash #4 Inc. If Bob owns four car washes with no more than four other people, Bob’s car washes will be added together to see if, all together, all four car washes add up to 50 full-time, or full-time-equivalent, employees. That is also the case if Bob owns not only car wash locations, but other businesses as well. Let’s say that Bob owns a dry cleaner (in addition to the four car wash locations above), the dry cleaner employees, too, will probably be added into the equation.
The ACA has a very expansive, inclusive definition of what constitutes an employer. Make sure you inform yourself about exactly who constitutes “the employer” as the term relates to your business specifically.
It is now more important than ever to avoid misclassifying employees. By now we have all heard that employers should begin to worry about the employer mandate penalties when the employee count reaches 50 or more full-time employees or their equivalent. This incentivizes car wash owners to try to label employees as independent contractors (in trying to avoid reaching that 50 full-time or full-time equivalent employee threshold) because independent contractors don’t count toward that 50 mark, whereas employees do. Resist the urge to do this. Not only will you cause yourself the traditional Department of Labor problems (e.g., overtime and minimum wage problems), but you will have a whole new set of problems to deal with under the ACA. For example, suppose that you misclassify one of your full-time employees as an independent contractor.
A year or so later that employee (whom you mislabeled as an independent contractor) goes to a healthcare exchange and qualifies for government help. Now regulators will come to your business and make inquiries. As we all know governmental inquiries are very expensive. If you are on the fence about a particular employee it is better to be safe than sorry and label that employee as an employee and treat him or her accordingly.
If you have both part-time and full-time labor, you are going to have to work a bit harder.
The ACA defines a full-time employee as an employee with 30 or more hours of service a week. Everyone who works below that threshold is considered part-time labor. Because regulators were concerned that some employees would be shifting in and out of coverage (depending on, for example, car wash seasons), they devised a very complex way keeping track of who is, and is not, a full-time employee. Car wash owners who only employ full-time employees will be able to circumvent this entire mechanism, but will probably have higher exposure to employer mandate penalties (because only full-time employees trigger the employer mandate penalties).
HOURS OF SERVICE
“Hours of service” are not the same as “hours worked.” The phrase, “hours of service,” is specifically defined by the ACA. “Hours of service” includes hours worked (in the traditional sense) as well as hours where an employee does not work but you have to pay the employee anyway.
Hours of service are used in determining whether an employee is a full-time or part-time employee. Hours of service are also used to identify full-time equivalent employees. You will underestimate your employees’ hours of service if you only consider the hours they actually worked. In assessing hours of service, include:
• All hours for which your employees are paid or entitled to be paid by your business
• All hours for which your employees are entitled to pay even though they may not be working. These periods include vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, maternity or paternity leave, or other leave of absence where you have agreed to pay them.
The provision that should be especially relevant to the car wash industry is the first one, “All hours for which your employees are paid or entitled to be paid by your business . . .” For example, let’s assume that you have instituted a “waiting period” where employees are compelled to clock out, but not leave your business, when business is slow or there are no vehicles. The FLSA makes it clear that such an employee is entitled to be paid during that “waiting period.” So, under the ACA, those hours would count toward the minimum 30 hours we talked about earlier.
None of this applies if you employ fewer than 50 human beings. If you are a small-car-wash owner who has one or two locations you probably do not employ more than 50 human beings. If that is the case, there is no situation under which the employer mandate penalties can be assessed against you (provided that you have accurately defined the size of “the employer” as covered at the beginning of this article).
The above information is intended as an introductory primer to get you going in the correct direction. For more information, you should contact your legal or accounting counsel.
Jacob M. Monty is managing partner of Houston TX-based Monty & Ramirez LLP. Monty is board certified in labor and employment law by the Texas Board of Legal Specialization. He regularly advises employers on immigration compliance and often represents employers faced with Immigration and Customs Enforcement raids and I-9 audits. Monty Partners LLP is an employment, labor, and business immigration law firm.
Please visit www.montyramirezlaw.com for more information.