BoardConverting Serving the North American Corrugated and Folding Carton Industries for 37 years May 17, 2021 VOL. 37, NO. 20
Gene Achieves High Marks For AICC Presentation In FL BY REBECCA RENDON AICC, the Independent Packaging Association, successfully execut- ed its long-awaited 2021 Spring Meeting in Amelia Island, Florida, last month. As it has done at each of its past gatherings, the Association and its staff provided an information-packed agenda of workshops, networking opportunities and as always, a stellar program of keynote presentations of greatest interest and importance to AICC members.
Paper Excellence Acquires Domtar
Richmond, British Colombia, Canada based Paper Excellence, a global diversified manu- facturer of pulp and specialty packaging pa- pers, and Domtar recently announced that they have entered into a strategic business combination under which the Paper Excel- lence group of companies will acquire all of the issued and outstanding shares of Domtar common stock for $55.50 per share, in cash. The purchase price represents a premi- um of approximately 37 percent to Domtar’s closing share price on May 3, 2021, the last trading day prior to the Domtar’s statement responding to media reports regarding a po- tential business combination between Dom- tar and Paper Excellence, and a premium of approximately 44 percent to the 30-day vol- ume-weighted average price as of May 3, 2021. The all-cash transaction represents an enterprise value of approximately $3.0 billion. After the transaction closes, Paper Ex- cellence intends to continue the operations of Domtar as a stand-alone business entity. Domtar will continue to be led by its manage- ment team and Paper Excellence plans to re- tain its corporate and production locations.
An informal survey of meeting attendees revealed that one of the speakers — Gene Marks, columnist, author, small business owner, and CPA at his firm, The Marks Group — delivered a particularly relevant and entertaining presentation on “Post-COVID Opportunities and the Biden Administration: Issues, Challenges and Actions to Grow Your Business Over the Next Two Years” Among his many accomplishments, Marks writes weekly on the economy, business and technology for publications that include The Guardian , The Hill, The Washington Times , The Philadelphia Inquir- er , Forbes , and Entrepreneur.com. He is also the author of five books on business management and provides commentaries for Fox News, Fox Business, ABC Radio’s John Batchelor Show and for the Wharton School’s Business Channel on Sirius XM. In his “spare time,” Marks is the host of two popular business podcasts for The Hartford and Pay- chex. CONTINUED ON PAGE 24 Gene Marks, popular columnist, author and small business owner, delivered a compelling presentation at AICC’s Spring Meeting in Amelia Island, FL.
CONTINUED ON PAGE 5
WHAT’S INSIDE 6 Brunton’s Second ConneXion Virtual Expo Slated For June 1-8 8 AICC Recognizes Milestones, Safe Shop Award Winners 14 Dealing With W&H Regulations: Avoiding Overtime Penalties 36 FTA Announces Flexography Excellence Award Winners
T H A C K E R I N D U S T R I A L S E R V I C E C O M P A N Y
O P E R A T O R T R A I N I N G T A I L O R E D T O Y O U R G O A L S Before any training star ts, we need to know your goals. We’ l l help you identi f y them, customize them, measure them and help achieve the expectations set by your team. Our intensive training wi l l encompass two ful l days at your faci l ity for al l par ticipants, during the week or on a weekend. Al l you need is a room for training your group and the machine you want to train on.
O U R T E A M
Our Training team consists of three corrugated industry exper ts with nearly 100 years of combined experience. Their backgrounds are in both integrated and independent companies with roles ranging from Machine Operator to Director of Operations. Making them more than qual i f ied to tackle any machine and training issue. Cal l today to learn how your team can benef it from the industry ’s premier training program.
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May 17, 2021
C u r r e n t O p e r a t o r E x p e r i e n c e
S T E P 1
M a c h i n e t y p e G o a l s / E x p e c t a t i o n s
I s s u e s
Q U E S T I O N N A I R E
P l a n 2 d a y s w i t h i n y o u r s c h e d u l e
S T E P 2
1 d a y c l a s s r o o m a n d 1 d a y a t m a c h i n e
S C H E D U L E
1 - B o x S e t u p C a l i b r a t i o n T o o l i n g
S T E P 3
T R A I N I N G
T r o u b l e s h o o t i n g
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May 17, 2021
AVERAGE CONTAINERBOARD PRICES The average prices reported are tabulated from prices PAID by various sources throughout the United States the week previous to issue. Prices in some areas of the country may be higher or lower than the tabulated average. The prices tabulated here are intended only for purposes of reference. They do not connote any commitment to sell any material at the indicated average. Transactions may be completed at any time at a price agreed upon by seller and purchaser.
REGION E. Coast Midwest Southeast Southwest
42# Kraft liner
26# Semi-Chem. Medium
$1005.00-1010.00 $1020.00-1030.00 $1020.00-1030.00 $1020.00-1030.00 $1050.00-1060.00 $1023.00-1032.00
Short Ton Del. Short Ton Del. Short Ton Del. Short Ton Del. Short Ton Del. Short Ton Del.
$940.00-990.00 $955.00-975.00 $955.00-975.00 $955.00-975.00 $975.00-995.00 $958.00-978.00
West Coast U.S. Average
SHEET PRICES BY REGION (AVERAGE) Per 1MSF, local delivery included, 50MSF single item order, truckload delivery. Sheets
E. Coast Midwest South-SW S. CA N.CA/WA-OR US Aver.
OYSTER UP-CHARGE 8.34
275# DBL-WALL 350# DBL-WALL
116.54 137.25 117.82 145.56
CANADIAN SHEET PRICES (AVERAGE) In Canadian Dollars, per 1MSF, local delivery included, under 50MSF single item order, truckload delivery. 200# 275# Oyster UC 275#DW 350#DW $78.56 $99.18 $9.00 $96.32 $105.83 CANADIAN LINERBOARD & MEDIUM The average prices reported are tabulated from prices PAID by various sources throughout Canada. Prices may be higher or lower in various areas of the country. The prices tabulated here are intended only for purposes of reference. They do not connote any commitment to sell any material at the indicated average. Transactions may be completed at any time at a price agreed upon by seller and purchaser. Prices are Canadian $ and per metric ton.
42# Kraft Liner 26#
Paper Excellence Acquires (CONT’D FROM PAGE 1 )
“We are excited to add Domtar and its employees to the Paper Excellence global family,” said Joe Ragan, Glob- al Chief Financial Officer of Paper Excellence. “This marks a major step in our global strategy of identifying well-posi- tioned assets and positioning them for growth. Domtar is a natural fit for our culture of operational excellence. We are enthusiastic about entering the American market as we continually improve Paper Excellence’s ability to serve its expanding blue-chip customer base. We have long ad- mired Domtar’s expansive global footprint and believe that it will be a valuable addition to Paper Excellence. We look forward to investing in Domtar’s assets and people for long-term growth.” “This agreement enables our shareholders to realize certain and immediate cash value at a significant premi- um for their shares,” said John D. Williams, President and Chief Executive Officer of Domtar. “This transaction vali- dates our long-term strategic plan for our leading paper and pulp businesses, and for our continued expansion into packaging.” Domtar is the largest integrated manufacturer and mar- keter of uncoated freesheet paper in North America, and one of the largest manufacturers of pulp in the world. Its network of 13 pulp and paper mills and 10 manufacturing and converting facilities gives it approximately 2.7 million tons of papermaking capacity.
May 17, 2021
Brunton’s Second ConneXion Virtual Expo Slated For June 1-8 Brunton Business Publications is reprising its first award-winning virtual event with the second ConneXion Virtual Expo, which is set to run from June 1-8, 2021. The event is being supported by AICC, The Independent Pack- aging Association; the European Carton Makers Associa- tion, the Paperboard Packaging Council; and the UK Sheet Plant Association. The event is free and is open to converters from all over the world. It runs 24/7 via a standard web browser, tablet or mobile device. Visitors can connect with some of the industry’s leading OEMs, software and service suppli- ers and watch video content, view brochures and even en- gage in text, voice or video chats with exhibitors. Thanks to the easy-to-use navigation, attendees can also interact with other visitors and catch up with their news too. Exhibitors include Absolute, Avanti, Bahmüller, Baldwin Technologies, Baysek Machines, BOBST, CITO, Corr24, Domino, Dücker Group, EFI, E+L, Elitron, EMBA Machinery, Fosber, Friese, Helios, Highcon, Hybrid Software, ISRA Vi- sion, JB Machinery, JKSP Services, Koenig & Bauer, Koenig & Bauer Durst, Lamina System AB, Manroland, Marbach, Pamarco, Swanline Print, SUN Automation Group, TCY, Til- ia Labs, WH Leary, and Xeikon. Visit thepackagingportal.com to register.
The Price is Right More readers rely on Board Converting News’ containerboard pricing to negotiate their contracts. SUBSCRIBE TODAY.
Robyn Smith at 910-553-4055 /firstname.lastname@example.org Len Prazych at 518-366-9017 / email@example.com
May 17, 2021
40 ft of paper travel from preheater to hot plates 3 seconds of heat, glue and bonding 1 chance to get it right! the ZONE
Design & Production
Chicago Electric offers 10 technology solutions to control ‘the Zone’ CORRUGATOR Sectoral preheating plate
Our sectoral preheating plates provide direct heat by means of a double steam circuit, allowing for efficient heating in hard-to-access locations, as well as to act as a steam shower to open the paper’s fibre, making it receptive to absorbing the heat and the glue.
This translates into increased speed and improved quality of the cardboard sheet finish.
The system’s main advantages are as follows:
• The plate may only be used to heat, only to humidify, or both options at the same time. • The plate is sectored, which allows for applying humidity to the sections. • It provides temperature in previously inaccessible locations and near the location needed. • It compensates the loss of temperature dissipated due to distance, speed or limitations of the exiting preheaters. • Quick transferring of heat to the paper. • The combination of the hot plate and steam shower allows for providing heat even to the hardest papers to heat. • Does not dry out the paper. • Possibility of operating as a humidifier and pre-conditioner. • Maintains and improves the fibre’s elasticity. • Acts according to the operator’s needs. • Facilitates the paper’s hygroscopy to absorb the glue and improve rubberising.
1. Wrap Arm - Position & Temperature 2. Preheater Direct Drive
3. Steam Plate 4. Contact Roll 5. Glue Machine Direct Drive Touch Productivity Issue—Glue Unit Many glue units run with a rider roll or a guiding bar system. The rider roll with paper gap allows a precise glue application, but requires frequent Contact Roll
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calibrations and settings. Bar systems avoid this, but compensate this with the risk of exces- sive glue application. The system contains many wearing parts. Solution The contact roll combines the ad antage of both systems and ensures minimum contact between board and applicator roll. The system uses small pneumatic cylinders in order to achieve a “soft touch.”
6. Gap Control 7. Curved Plate 8. Roller Shoe Press When it comes to a short-term increas of web tension, spring loaded systems with shoes or airpressure activated system have problems in compensating these. The system is lifted for a short time. This may result in de-lamination and in the ‘double kiss’ effect. Solution For a defined and exact bonding point of the web fiv weight rollers will be installed usually over the first flat hotplate of the heating section. The rolls are mounted into a frame, which is actuated by means of two pneumatic cylinders. P oductivity Issu —Double Kiss Bonding
9. Thin Wall Hot Plates 10. Pressure System Benefits —Exact glue application due to defined contact of applicator roll to web. Web is in contact to less flute tips compared to bar systems. • High precision glue application • Less moisture applied to web —No wear of shoes and springs —No adjustment of shoes or paper gap —Uniform glue application over entire w orking width for all flutes by use of pneumatic cylinders instead of springs — Less contamination by paper dust and glue remains —No jam of board because of web breaks caused by splice joints going through 630-784-0800 Benefits —Rollers secure exact defined first point of contact of liner and single-faced board - No double kiss —Frame design avoids unintended lifting of roller shoe (compared to spring or air loaded systems) - No double kiss —Pressure can be increased or released for special grades or products 490 Tower Blvd., Carol Stream, IL Contact Chicago Electric to GET IT RIGHT 630-784-0800 email@example.com chicagoelectric.com Solution The ProPress system ensures an optimum heat transfer to the board. It offers a wide range of set- tings. The loadi g pressure can be varied, the number of shoes can be lifted in accordance t the line speed. The outer shoes can be lifted in accordance to the paper width. The shoe bars will be delivered pre-assembled for a short installation time. —Liftable for easy paper infeed and for cleaning of the machine —Position adjustable in paper direction to avoid grooves in hotplate Press Productivity Issue—Poor Heat Transfer Rollers are usually limiting the heat transfer, since they often have contact mainly on the edges of the plates due to wear or bent plates. They also cause often loss of caliper and bearing need to be replaced frequently. Airpressure actuated systems can only supply a limited pressure and have com- pared to shoe systems a closed surface. Pressure Shoe
Plate vity Issue—Poor Heat Control l hotplates are slow to react to pressure due to high steam volume and massive y also have high heat radiation and heat profile. Worn plates can damage crease edge crush.
Thin-Wall Hot Plates
t by peripheral drilled hot plates. anufactured out of special wear and nt steel, through which a continuous is drilled, with one inlet and one outlet. ecured by a massive steel frame.
ance from steam to paper surface results in fast heat flow
AICC Recognizes Milestones, Safe Shop Award Winners
Box Shipments ( U.S. Corrugated Product Shipments) Industry Shipments In Billions of Square Feet Month December 2020
AICC, through its Member Milestone Program, recently recognized member companies celebrating significant level anniversaries at the 2021 Spring Meeting on April 26- 28: Isowa, 100 years; Tiruna, 100 years; Jamestown Con- tainer Companies, 65 years; Progress Container & Display, 50 years; and The BoxMaker, 40 years. AICC also presented its Independent Safe Shop Awards, an annual recognition of AICC companies for out- standing performance in plant safety in 2020 and 2021. For 2020, awards were presented to Air Conveying Corp.; Akers Packaging Service Group (Middletown); Akers Packaging Solutions (Decatur), Akers-Webster West Pack- aging (Evansville); Akers-Webster West Packaging (North Vernon); Lawrence Paper Company, American Packaging Division; Hoosier Container Inc.; McElroy Contract Pack- aging; Tecumseh Packaging Solutions; Unicorr Packaging Group/Vermont Container; and Wunderlich Fibre Box Co. For 2021, awards were presented to Akers Packaging Solutions (Decatur); Akers Packaging Solutions (Hunting- ton); Akers-Webster West Packaging (Evansville); Law- rence Paper Company, American Packaging Division; Ar- row Box Company; Box-Board Products, Inc.; Wunderlich Fibre Box; Jamestown Container Rochester, HP Neun Divi- sion; and Jamestown Container Cleveland.
Percent Change Avg Week Percent Change
Percent Change Avg Week Percent Change
Containerboard Consumption (Thousands of Tons)
Percent Change Year-to-Date Percent Change
Container Board Inventory - Corrugator Plants (Thousands of Tons)
Corrugator Plants Only
Percent Change Weeks of Supply
SOURCE: Fibre Box Association
May 17, 2021
RELIABLE PERFORMANCE TO PROTECT YOUR ENTIRE SYSTEM
DEAERATORS MANUFACTURED TO SURPASS ASME STANDARDS COMPLETE SYSTEMS OR CUSTOM TAILORED TRIM PACKAGES LOWERS OXYGEN LEVELS TO .05 CCLITER OR BELOW VARIABLE CONTROL PACKAGES DURABLE COMPONENTS AND PROFESSIONAL FABRICATION
Whether you need to design and build a new corrugator steam system or a perfectly matched retrofit, turn to Boiler & Steam Performance for the most efficient process and reliable solution. We also offer specialized expertise to solve complex challenges and practical support to help you maintain peak performance. BACKED BY A 30 YEAR HERITAGE OF QUALITY AND PERFORMANCE.
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Manufacturing Employment Fell By 18,000 In April: NAM BY CHAD MOUTRAY
The unemployment rate edged up from 6.0 percent in March to 6.1 percent in April, with the number of unem- ployed workers rising from 9,710,000 to 9,812,000. The labor force participation rate rose for the second straight month, up from 61.5 percent to 61.7 percent, an eight- month high. Businesses continue to cite difficulties in finding enough talent, and manufacturers will need to identify 2.1 million more workers for the sector between now and 2030, according to new analysis from The Manufacturing Institute and Deloitte. Encouragingly, on the labor market front, initial unemployment claims fell to 498,000 for the week ending May 1, the lowest since the pandemic began. The ISM Manufacturing Purchasing Managers’ Index pulled back from 64.7 in March, the fastest pace since De- cember 1983, to 60.7 in April. New orders and production continued to expand very strongly, but supply chain dis- ruptions remained a significant challenge. Prices soared
Manufacturing employment fell by 18,000 in April, pulling back from solid gains in the prior two months, according to Chad Moutray, Ph.D. and Chief Economist at the National Asso- ciation of Manufacturers (NAM). The U.S. economy adding just 266,000 nonfarm payroll workers in April. This was a disappointing and somewhat unexpected re- port given the rebound in the U.S. economy, but it should not take away from the outlook for solid employment growth over the coming months. Chad Moutray
at the fastest rate since July 2008, and the backlog of orders was the highest on re- cord. New orders for manufactured goods rose 1.1 percent in March. Overall, factory orders continued to rebound strongly, ris- ing 3.3 percent since February 2020, or 5.7 percent with transportation equipment excluded. Durable goods orders increased even stronger, rising 4.3 percent over the past 13 months or 11.1 percent with transpor- tation equipment excluded. Likewise, new orders for core capital goods—a proxy for capital spending in the U.S. economy—increased 1.2 percent to $73.4 billion in March, a record high. As such, core capital goods orders have ris- en a robust 10.5 percent over the past 13 months, buoyed by confidence in the eco- nomic outlook. Manufacturing labor productivity edged up 0.1 percent at the annual rate in the first quarter, sustaining the 4.5 percent gain in the fourth quarter. Output in the sector rose a modest 2.4 percent in the first quarter, but these data likely reflect supply chain disrup- tions in the sector. Private manufacturing construction spending fell 1.3 percent from the six-month high of $70.10 billion in February to $69.16 billion in March, pulling back following two straight months of gains. The U.S. trade deficit rose to $74.45 billion in March, an all-time high. Trade vol- umes were higher overall, but growth in imports (which also hit a new record) out- paced the rise in exports. The service-sec- tor trade surplus hit the lowest level since August 2012.
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Study: Retail-Ready Boxes Fastest Growing Produce Packaging Type A new Freedonia Group analysis projects retail-ready box- es to be one of the fastest growing packaging types used in the fresh produce industry through 2024, with the stron- gest increases anticipated in the $3.5 billion fresh vegeta- ble and salad packaging market. Though traditional corrugated boxes will remain the dominant box types used in fresh vegetable and salad applications, retail-ready boxes continue to increase their share of demand based on their added convenience, pro- viding the benefits of prepackaged produce for retailers, along with the selection of bulk produce bins, which con- sumers often prefer. Here are four key produce applica- tions where use of these value-added boxes is growing: Tomatoes : Will remain by far the largest application for retail-ready boxes used in fresh vegetable applica- tions and comprise the largest single share of sales gains through 2024, growing 5.0 percent annually. Modular re- tail-ready boxes are often preferred because they show- case the tomatoes and feature attractive graphics. Salad : Though much smaller than the tomato market, salad will remain the second leading market for retail-ready boxes, with 5.5 percent annual growth anticipated through 2024, as use of retail-ready packaging increases with bagged salad mixes.
Potatoes : Though also from a small base compared to tomatoes, demand for retail-ready boxes in the sizable po- tato packaging market is forecast to rise 5.4 percent per year through 2024, as use of retail-ready boxes expands for both loose and bagged potatoes. Smaller Volume Vegetables : The fastest growth in retail-ready box demand is expected for carrots, mush- rooms, onions, and smaller volume vegetables such as sweet potatoes, bolstered by the increasing popularity of modular produce boxes in these applications due to their convenience. McLean Packaging Corp. In NJ Awarded EcoVadis Silver Rating Moorestown, New Jersey based McLean Packaging Corp. has been awarded an EcoVadis Silver rating, certifying the company’s commitment to social and environmentally re- sponsible business practices. With this rating, McLean is globally ranked among the top 25 percent of companies. “McLean understands the responsibility we hold when it comes to minimizing our ecological footprint,” said Stu- art Fenkel, President, Corrugated Division, McLean Pack- aging. “By sourcing sustainable materials, measuring our environmental impact through key performance indica- tors (KPIs), and creating solutions to help our customers achieve their targets, we are perfectly positioned to part- ner with our customers for the long term.”
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Dealing With Changing Wage & Hour Regulations: Avoiding Overtime Penalties BY PHILLIP M. PERRY Wage and hour law has long bedeviled employers. Who is exempt from overtime rules? How do you calculate time-and-a-half when employees
work off the clock and fail to record their hours? And how about those remote workers, spending a few minutes here and there tackling business emails? The wrong answers can spark costly penal- ties. “Employers who fail to correctly pay over- time must make up back wages plus ‘liquidated damages’ equal to an equivalent amount,” says Douglas E. Witte, who represents businesses in
labor and employment law matters at Madison, Wisconsin based Board- man & Clark ( boardmanclark.com ). “If the Department of Labor (DOL) thinks an employer willfully violated the law the statute of limitations gets bumped up from two to three years. And employers may also have to pay attorneys’ fees for those who have brought successful lawsuits.” Workplace observers expect compliance to get tougher as the feder- al government starts tightening regulations. “Part of the Biden platform was to empower workers,” says Ann F. Kiernan, an employment law at- torney and lead trainer at Fair Measures, a management practices con- sulting firm in Denver ( fairmeasures.com ). “I expect a lot of pro-employ- ee activity, to include increased enforcement by the DOL.” Among the likely regulatory steps over the coming months: boosting the overtime salary threshold and rewording exemption parameters. Many states are also passing legislation aimed to protect and expand overtime. The Exemption Puzzle Smaller businesses often believe they are exempt from overtime law, since the Fair Labor Standards Act (FLSA) covers enterprises engaged in interstate commerce. In reality, any local enterprise is considered so en- gaged if it performs seemingly innocuous tasks such as making phone calls or sending emails to customers or vendors in other states, trans- acting credit card payments with distant entities, or receiving goods or services from beyond state borders. “It’s the rare business that is not in- volved in some way with interstate commerce,” says Matthew C. Heerde, Principal at Heerde Law, New York City ( heerdelaw.com ). Businesses may also believe they are exempt from overtime law be- cause their revenues are under the $500,000 level at which the FLSA normally kicks in. Yet even the smallest operation will fall under the FLSA umbrella on a so-called “per-employee basis” if even a single worker spends a substantial amount of time performing the tasks enumerated in the previous paragraph. Finally, state and local overtime laws often mim- ic FLSA regulations and apply to the smallest of employers, regardless of interstate commerce status. It follows that all employers should make a point of correctly catego- rizing workers as either exempt or non-exempt from overtime. Errors are easily made. “Employers most often get into trouble for misclassifying employees as exempt,” says Witte. Ignorance of the law is no excuse, he adds, and wise businesses keep paperwork to support their decisions. “The burden of proving exempt status is on the employer.” Employers must be able to convince regulators that exempt person- nel fall into one of the so-called “white collar” categories labeled exec-
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CONTINUED ON PAGE 16
May 17, 2021
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Avoiding Penalties (CONT’D FROM PAGE 14)
The Perfect Combo Get Peak Performance From Your Equipment with Matched Component Sets
utive, professional or administrative. Exemptions may also be granted for some people who are computer profession- als, engage in outside sales, or are highly compensated. (Employers can review the complete duties tests by visit- ing dol.gov , then clicking on “Topics” and “Work Hours.”) Exempt individuals must earn at least $684 a week, which translates to $35,568 per year. Nondiscretionary bonuses and commissions, paid annually or more often, may be used to satisfy up to 10 percent of that level, which many believe is due for an increase. “I think you’re going to see the Biden administration raise the salary threshold, perhaps linking it to cost of living increases,” says Witte. Paycheck size alone, though, is not sufficient criteria. “Employers sometimes fail to understand that exemption from overtime requires not only meeting the salary thresh- old, but also passing the so-called ‘duties test,’” says Heerde. While the duties tests vary by exempt category, they boil down to one essential: The exempt person must exhibit sufficient independent authority to make essential
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decisions in their daily work. Just being assigned an im- pressive-sounding job title is not enough. Changes Are Coming Employers should brace for changes in these exemp- tion parameters. “The DOL is likely to take a strong look at the duties tests for white collar exemptions,” says Witte. “The language has not been tweaked in recent years to reflect the way people work today. It may become harder to prove that a certain individual exercises independent judgment and authority rather than just processes papers or follows a flow chart of actions.” As the above comments suggest, qualifying for exempt status often requires judgment calls—and that’s just where employers often get into trouble. There is a common temptation—conscious or otherwise—to classify people as exempt to avoid the costs of overtime. This is exactly the problem the Biden administration has stated it wants to address. State and local governments have also been tightening regulations and increasing inspections to en- sure that exempt personnel are really exercising manage- ment-level decision-making.
reconditioned) can help you achieve a more perfect union of production and prots.
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Avoiding Penalties (CONT’D FROM PAGE 16)
Off The Clock While misclassification is the most common error in wage and hour law, employers can also be penalized for allowing work time to go unrecorded. “Employees often fail to report off-the-clock hours,” says Witte. “Maybe they work through their lunch hour, or they come in early or stay late and don’t record it because they’re afraid of getting into trouble with their boss for working overtime. This is an area that the DOL continually receives complaints about.” While one might suspect that some misguided employ- ers overlook or even encourage off the clock labor, the fact is that workers can also be to blame, says Vicki Lam- bert, director of ThePayrollAdvisor.com . “Sometimes em- ployees will get enthusiastic and think, ‘Well, I’ll just do this job off the clock real quick, and then my boss will be really happy.’ And they end up getting the employer in trouble.” Other times, employers will allow record-keeping to fall through the cracks. “Problems can arise when an hourly recording system is not sufficiently detailed, or not con- temporaneous,” says Heerde. “Later, when an issue arises, the employer has to track down evidence of work hours by sorting through old emails and other records to prove an employee was paid correctly.” The record-keeping challenge has increased as more people work from home. “One of the most common mis- takes is failing to correctly track remote workers’ time,” says Lambert. “Sometimes people will work off the clock
Up for special attention, say workplace observers, is the administrative exemption. “Many times, employees do not really qualify because they do not have sufficient authority or enough qualifiable duties,” says Witte. “This problem has been on the DOL radar for some time. Em- ployees have filed complaints, and there have been class action lawsuits.” Misclassifications can be costly for employers, espe- cially when an exempt individual’s salary has steadily in- creased over time. Should a DOL inspector issue a viola- tion the employee’s elevated salary is first broken down into an hourly rate, which is then utilized as the basis for calculating past overtime and penalties. “Sometimes an employer will react to a steadily rising paycheck by saying something like, ‘This person has been starting to work too much overtime—let’s just make them salaried,’” says Bob McKenzie, President of McKenzieHR ( mckenziehr.com ). “That’s not allowable unless the individual really qualifies for exemption.” The lesson is clear: Employers should assume non-ex- emption when classification is ambiguous. “The law is deferential to workers in wage and hour actions,” says Heerde. “The consequences can be costly for an employ- er who does not have sufficient records to refute an em- ployee’s wage and hour claims before an administrative agency or court.”
CONTINUED ON PAGE 20
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Avoiding Penalties (CONT’D FROM PAGE 18)
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for a few minutes—maybe they check their emails over dinner or make a phone call or two—and the employer thinks that’s okay.” In fact, employees must be compensated for all time worked, even if off the clock labor violates company pol- icy, says Lambert. Employers who wish to discipline em- ployees who put in extra time without permission must use nonfinancial procedures such as verbal and written warnings, personnel file notations, or terminations if ap- propriate. Independent Contractors Employers are not obligated to pay overtime to inde- pendent contractors. Just who qualifies for that status, however, is not always clear. “Distinguishing between em- ployee and independent contractor status is an ongoing challenge,” says Heerde. “Because states have different standards from the federal government about where to draw the line, compliance and enforcement issues arise.” Individuals classified as independent contractors will sometimes later file complaints claiming that they were actually employees and are due back overtime. This can lead to costly litigation. Wage and hour attorneys expect the federal and state governments to tighten the standards which determine who is in business for themselves. “I think the Biden admin-
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Avoiding Penalties (CONT’D FROM PAGE 20)
off the following week as compensation. This violates the law requiring overtime for any labor of over 40 hours in any single week. • Paycheck deductions: A business deducts employ- ees’ wages for such things as uniform costs or shrink- age. Such deductions can’t be made if the individual’s compensation would fall below the minimum wage or would reduce their overtime pay. Many state laws also restrict such deductions. Staying Current If payroll has become more complicated in recent years, employers are expected to encounter even greater chal- lenges as regulators at the federal, state and local levels retool wage and hour regulations to reflect a greater sen- sitivity to employee rights. Businesses must skillfully nav- igate this shifting terrain to avoid errors that spark costly financial penalties. “Employers are responsible for making sure payroll is done correctly,” says Lambert. “They must keep up to date with changing laws.” Flying without an adequate legal radar can result in a crash landing. “Many employers don’t understand wage and hour law and make things up as they go along,” says McKenzie. “They think everything will be okay, but sooner or later they get caught.” Award-winning journalist Phillip M. Perry has been pub- lished in the fields of business management, workplace psychology and employment law. His byline has appeared more than 3,000 times. Reach him at email@example.com.
istration will make it much more difficult to classify some- one as an independent contractor,” says Witte. “Things will probably head the way of California which has a very restrictive test.” In early May the DOL withdrew a regula- tion that had been introduced by the prior administration to which would have made it easier to classify someone as an independent contractor. Further moves are expected. Until the new regulations are firmed up, attorneys advise employers to play it safe. “I always recommend that employers make sure indepen- dent contractors are operating their own businesses and are in positions to make profits or losses based on their own actions,” says McKenzie. “They should also submit invoices for work done—and their payments should go through the business’s accounts payable department rath- er than the payroll account.” Common Pitfalls Employers can be penalized for errors in these other scenarios: • Stand-by time: Employees arrive at a workplace in response to a manager’s directive, only to be told to stand by because they are not needed for a while. The manager incorrectly fails to record their waiting time as compensable hours. • Substitute hours: Instead of paying time-and-a-half to an individual due overtime, the employer grants a day
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Gene Achieves (CONT’D FROM PAGE 1 )
Locking in long-term agreements with suppliers now is another way to save money down the road, Marks ad- vised. “Commit to purchases over the next two to three years to lock in prices and get a handle on any potential price increases before they arise.” Lastly, when preparing for price increases, many com- panies are taking a look at their existing employees and are locking in employment agreements for the next few years to avoid annual haggling and negotiations. Other companies are also speaking to their bankers about converting their short-term debts and working cap- ital into long-term financing at fixed interest rates. Shop- ping around with banks should be considered. He also noted that locking into long-term lease agreements or purchasing property may be good decisions. Marks said the best advice he can provide is to lever- age forgivable loans from Small Business Administration programs like the 7A or 504 loans to purchase inventory or property and prepare for inflation. “If you get these loans by September of this year, your first three months of prin- cipal and interest are completely forgiven up to $9,000 per month,” said Marks. “If you’re looking for any financing, talk to an SBA lender about a 7A or a 504 loan, because it’s a cheap way to get some money from the government.” Supply Chain Issues Marks next discussed supply chain issues plaguing manufacturing across the U.S. and the world. Marks re-
“There are three big things that are really going to be driving us this year: the economy and inflation, supply chain issues, and labor,” said Marks by way of beginning a deeper dive as to why these issues are affecting compa- nies and how some successful companies are overcom- ing the challenges that have been handed them over the course of the past year, largely sparked by the pandemic. Marks addressed the first major concern: Inflation. “The main question that everyone has about inflation is, ‘Will the oversupply of money drive the price of the dollar down?’” No one has the right answer, Marks admitted, adding that many economists see inflation rising due to the dramatic increase in the national debt and deficit. “We’re not going to see 10 to 15 percent inflation like we saw in the 80s, but three to five percent inflation is not far off. You already see it in the price of paper, wood and labor. That is all having So what actions should the business owner take? Marks provided AICC members with guidance on how compa- nies should be preparing and operating in an inflationary environment. He said his business clients are preparing for price increases over the next couple of years by revis- iting and revising all of their pricing, particularly for their top customers. “Customers know that price increases are coming and they should be expecting this,” he said. an impact on rising prices.” Revisit And Revise Pricing
CONTINUED ON PAGE 26
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Gene Achieves (CONT’D FROM PAGE 24)
ported that supply chain problems are caused by a variety of issues, including COVID-19, cyberattacks, commodity prices, tariffs, the conflict with China, and logistic issues.. “This will be over at some point. It’s a temporary issue that will go on for much of this year, but this too will pass,” he said optimistically.
Marks noted that manufacturing demand is up signifi- cantly. The Institute of Supply Managers (ISM) surveyed purchasing managers who reported that purchasing growth is where it was in the late 1970s and 1980s. Man- ufacturing is up dramatically, which has caused significant supply chain issues. In order to deal with these challenges, Marks listed eight ways companies are combatting supply chain issues: 1. Evaluate inventory – take a physical count 2. Conduct weekly counts of top moving inventory. 3. Utilize demand-planning technology. 4. Maximize warehouse space and machine time. 5. Invest in technology like RFID chips and tracking 6. Create a “wonder team” of employees who go into different parts of the company to evaluate, audit and rec- ommend process changes for increased efficiency. 7. Communicate with top customers. 8. Find alternative suppliers. Marks identified India is the number one alternative to China. The Cost Of Labor Finally, Marks addressed increased labor costs, which he clearly defined as a separate problem aside from the lack of labor. He identified several issues affecting labor costs, including increased minimum wages, overtime wag- es, PRO Act union activity, reclassifying 1099 contractors as employees, and significant changes to OSHA laws. Marks noted there is bipartisan support to increase the minimum wage to $11-12 per hour, and expects to see a strong push for this before the mid-term elections. The in- crease in the minimum wage is also driving up the cost of more skilled laborers,” said Marks. “If another employee finds out he’s only making $5-6 more per hour than an entry level employee with zero experience, he’s going to want a raise, too!”
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