|Zero Tolerance Policies expose employers to liability, including reverse discrimination claims, when they are not consistently enforced.On October 28, 2014, the Michigan Court of Appeals (in Hecht v. National Heritage Academies, Inc.) affirmed a $535,120.00 jury verdict in favor of a teacher (Caucasian) that was terminated for making racial comments/jokes (such as expressing a preference for a white table over a brown table and stating that the brown needed to go).
According to the evidence presented at trial, several African American employees were not disciplined for engaging in racial “banter”. The evidence revealed that the following actions did not result in any discipline:
Since it was undisputed that no African American employee had ever been disciplined for engaging in racial “bantering”, the jury found that reverse discrimination occurred.
The foregoing is a lesson that a Zero Tolerance Policy violation should always result in disciplinary action up to and including discharge. Even if the parties involved are not offended, it is a good practice to at least issue a warning so the employer has a defense to a disparate treatment claim if the policy is enforced in the future.
This article was written by JAMES M. REID, a member of the Legal Affairs Committee of Detroit SHRM, a Resource Partner of Detroit SHRM, and a shareholder of the law firm of Maddin, Hauser, Roth & Heller, P.C. located in Southfield, Michigan. He can be reached at (248) 351-7060 or firstname.lastname@example.org.
By: Victor H. Hicks II, CFP®, AIF®
Owner, Managing Principal
Lumin Financial, LLC
An Independent Registered Investment Adviser
As a small business owner, you should consider the advantages of establishing an employer-sponsored retirement plan. Generally, you are entitled to a tax deduction for plan contributions. You are required, however, to include certain employees in the plan and to give a portion of the contributions your business makes to participating employees. Nevertheless, a plan can provide you with a tax-advantaged method to save for your own retirement, while providing your employees with a powerful benefit. Here’s a look at several retirement programs appropriate for a small business:
Payroll Deduction IRA
This is a simple way for you and your employees to save for retirement without having to formally adopt a plan. Each participant can make contributions of up to $5,500 for 2014, while participants age 50 and older can make an additional $1,000 of catch-up contributions. There are no annual reporting requirements. Withdrawals can be made at any time, subject to income taxes. (Early withdrawals generally are subject to an additional 10% penalty.)
Also set up with IRAs, a Simplified Employee Pension (SEP) can accept much larger contributions — all made by the employer. A SEP must be offered to all employees who (1) are at least 21 years old, (2) have been employed by you for three of the last five years, and (3) earn compensation of at least $550 (in 2014). A uniform percentage of pay must be contributed for each employee in any given year, although you can vary the percentage — across the board — and even choose not to contribute in a given year.
Annual contributions per participant are capped at $52,000 or 25% of compensation for 2014. This plan has modest start-up and operating costs. Contributions are 100% vested, and withdrawals are permitted at any time, subject to taxation and a potential early withdrawal penalty.
SIMPLE IRA Plan
Available to employers with 100 or fewer employees, a SIMPLE IRA allows employees to contribute through payroll deductions and requires employer contributions. The maximum amount an employee can defer is generally $12,000 for 2014. Employers must either match employee contributions dollar for dollar — up to 3% of compensation — or make a fixed contribution of 2% of compensation for all eligible employees. Eligible employees can make catch-up contributions of up to $2,500 (in 2014).
A SIMPLE IRA must be offered to all employees who have earned $5,000 in any prior two years and are reasonably expected to earn $5,000 in the current year. Plan set-up is relatively easy.
401(k) plans allow employees to contribute salary on a pretax basis and, if desired, can also allow after-tax Roth contributions. You can choose a traditional, safe harbor, or automatic enrollment safe harbor plan design.
The safe harbor design eliminates the discrimination testing required in traditional 401(k)s and encourages participation by requiring employer contributions of 3% of pay or based on a specified matching schedule. The plan must be offered to all employees at least age 21 who worked at least 1,000 hours in a previous year. Some employer matching funds may vest over time, per plan terms.
Automatic enrollment safe harbor 401(k)s are also available. Like the basic safe harbor design, the automatic enrollment variety generally eliminates the need for discrimination testing. Employees can opt out after receiving notice from the plan.
If your small business is ready to implement a retirement plan, contact a Lumin Financial adviser for help deciding which type is right for your organization and its employees.
ABOUT LUMIN FINANCIAL
Lumin Financial is a fee-only independent Registered Investment Adviser, specializing in 401(k) plans for small- to mid-sized employers. Lumin Financial advisors serve plan sponsors throughout the Midwest with a disciplined approach to managing plan investments, counseling on fiduciary risk matters, and reducing excessive plan fees. In addition to managing investments and risk, Lumin delivers personalized financial education to plan participants. Let them help you plan a clear direction for a bright future.
Lumin Financial, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.