Hi-
I have seen agencies not raise their reimbursement for mileage if the federal rate increases. This usually results in a few cents of difference for the employee.
The agencies that I am aware of seemed to be paying higher wages though. That said, I think there could be a variety of practices out there and we should raise awareness on this issue.
Thanks!
From: Hespe, Linda J [mailto:Linda.Hespe@EssentiaHealth.org]
Sent: Wednesday, October 19, 2016 11:15 AM
To: mhcabod@list.mnhomecare.org
Subject: RE: [exec_list] DOL Kickback Rule
I don’t know the number of our membership that does this and it might be the privately owned but I have heard that they pay the employee as the example of the 28 cents a mile below and then tell the employee
to turn in the difference on their taxes as a work expense.
Linda
From:
list-manager@list.mnhomecare.org [mailto:list-manager@list.mnhomecare.org]
On Behalf Of Usset, Jan L
Sent: Wednesday, October 19, 2016 10:26 AM
To: mhcabod@list.mnhomecare.org
Cc: Tou Xiong
Subject: RE: [exec_list] DOL Kickback Rule
To my knowledge, most Health Systems with home care agencies pay the IRS rate not sure of the privately owned agencies.
Jan Usset, RN, BS
Director • Allina Health Home Health
Phone: 612-262-7286 • Pager: 612-654-8236 • Fax: 651-628-2999 •
jan.usset@allina.com
Mail Route 34100 • 1055 Westgate Drive, Suite 100 • St. Paul, MN 55114
From:
list-manager@list.mnhomecare.org [mailto:list-manager@list.mnhomecare.org]
On Behalf Of Kathy Messerli
Sent: Wednesday, October 19, 2016 10:11 AM
To: mhcabod@list.mnhomecare.org
Cc: Tou Xiong <txiong@mnhomecare.org>
Subject: FW: [exec_list] DOL Kickback Rule
Do you believe most home care agencies in MN pay mileage at the IRS rate to employees? If not, this could potentially be an issue – see email below. I’m wondering this should be shared with members. Thoughts?
Kathy Messerli
Executive Director | Minnesota HomeCare Association
2550 University Ave. W., Ste. 350 S | St. Paul, MN 55114-1900
Direct: 651.635.0038 | Main: 651.635.0607
Toll-free: 866.607.0607 | Fax: 651.635.0043
www.mnhomecare.org |
kmesserli@mnhomecare.org
Mission:
MHCA represents and supports Minnesota home care providers committed to high quality home care services.
Vision:
MHCA will shape the home care landscape to improve and sustain quality home care services.
MHCA supports the
Best
Life Alliance.
From:
exec_list@thehomecarecouncil.org [mailto:exec_list@thehomecarecouncil.org]
On Behalf Of Marcia Tetterton
Sent: Tuesday, October 18, 2016 3:38 PM
To: exec_list@thehomecarecouncil.org
Subject: [exec_list] DOL Kickback Rule
Hello All,
I wanted to share this client alert which I will be sending out to my members in the morning. If you decide to share please give SESCO credit for the article, they are available to answer questions.
Client Alert
The Department of Labor is Actively Enforcing the “Kickback” Rule
WHEN EMPLOYERS MUST REIMBURSE EMPLOYEES FOR MILEAGE AND EXPENSES
The Department of Labor is actively conducting compliance investigations in many “low-wage” businesses as they define them. Two (2) of these sectors are being hard hit which includes pizza/restaurant delivery and home care as both of these
sectors require employees to provide their own transportation to perform assigned duties. The question of whether employers must reimburse their employees for work related expenses is becoming a hot topic – a very expensive topic! Although the answer is not
cut and dry, the FLSA does not require employers to reimburse for mileage or other expenses -- unless it affects the employee’s minimum wage.
Even though mileage and expense reimbursement is not mandated by the FLSA, sometimes reimbursement is necessary in order to remain compliant with minimum wage as the regulations state,
“wages must be paid free and clear of impermissible deductions – such as the cost of operating the vehicle or traveling on the road – that would reduce pay below the federal minimum wage.”
What this means is that an employee must make minimum wage after any business related expenses are paid (provided) by the employee. For example, if an employee works full-time, making $7.25 per hour (minimum wage) but spends $20.00 per
week on gas, then the real wage is $6.75 per hour and thus a compliance violation is created.
When an employee spends his or her own money on work related expenses, it is called a
kickback (to the employer). Essentially, an employee is kicking back money from their own pocket to the employer. When you think about it like that, it seems a little absurd that an employee would, essentially, pay their employer. It should be the other
way around. But anyway, no one is fighting against the kickback per se, just when the kickback brings the employee’s total wage below the federal or state minimum.
Mileage Kickback (Employees Operating Their Personal Vehicle for Work)
The most common concern or issue in terms of compliance violations revolves around mileage and mileage kickbacks. As stated, an employer is not required to compensate an employee by the mile or other expenses. What the Fair Labor Standards
Act and the Department of Labor requires is that the employee receive at least minimum wage for all hours worked. The kickback rule basically says that there is a value placed on an employee’s personal vehicle (or other tools, equipment and supplies in some
cases) that must be considered in computing earnings and thus minimum wage. The value of one’s vehicle and transportation is typically based upon the IRS mileage rate which is $.54 an hour. Again, employers do not have to reimburse an employee a portion of
or all of the IRS mileage rate, but must consider each mile driven when computing minimum wage. Please consider the following examples:
Scenario 1 – Employee makes $7.50 per hour in delivering pizza. The employee works 40 hours for a total paycheck = $300 for the week. (This is normally where it ends for most employment relationships.) However, the DOL is now actively
pursuing the value of the employee’s personal vehicle and transportation at the current IRS rate at $.54 per mile. Thus, the employer must then consider the following:
221 miles driven during the week x $.54 per mile = $119.34 (value of transportation to the employer – kickback to employer)
$300 - $119.34 = net pay of $180.66
¸ 40 hours = $4.52 per hour – not minimum wage of $7.25 (federal basis). Back wages due for this week would be $109.34.
For the year (52 weeks) = $5,685.68
Scenario 2 – Employee makes $9.50 per hour in providing home care services. The employee works 40 hours for a total paycheck = $380 for the week.
Employer reimburses the employee at $.28 per mile x 211 miles driven for the week = $59.08 (mileage pay)
Total pay = $439.08
Value of car $.54 (IRS mileage rate) - $.28 mileage reimbursement = $.26 value of transportation (kickback) x 211 miles = $54.86
Total compensation $439.08 - $54.86 (kickback) = $384.22 (net compensation)
¸ 40 hours worked = $9.61 – no violation as minimum wage ($7.25) is met.
In summary, for mileage kickbacks, an employer must consider $.54 per mile or $.54 minus mileage reimbursement rate as the value or kickback per mile. The value or rate then is multiplied by total miles driven on behalf of the employer
for the week. This amount of kickback or value of the transportation then is subtracted from the employee’s gross earnings and the difference must yield minimum wage (federal $7.25) for each hour worked during that workweek.
Employers who require employees to operate their personal vehicles for work or may require employees to purchase their own tools, equipment or materials, must consider the cost of these expenses or the value thereof against the employee’s
compensation to ensure that these expenses and values do not cut across the required minimum wage for each hour worked.
As the Department of Labor has targeted low-wage sectors, SESCO strongly recommends that you conduct an assessment of your compensation practices to determine compliance. SESCO can conduct these assessments either through a monthly service
agreement starting at $40.00 per month or on a flat fee of $500 or greater based on size of employer. Please contact SESCO to schedule your compliance assessment.
P.O. Box 1848
Bristol, Tennessee 37621
(423) 764-4127
(423) 764-5869 (Fax)
web site:
www.sescomgt.com
e-mail:
sesco@sescomgt.com
Marcia Tetterton, MSG, CAE
Executive Director
Virginia Association for Home Care and Hospice
3761 Westerre Pkwy, Suite B
Henrico, VA 23233
804-285-8636
Fax 804-288-3303
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