Nominee for Labor Secretary and Macy’s Audit Surprising, PA Penalty for Tip Withholding

Hey, everybody, it's Gene Marks, and welcome to this week's episode of the Paychex THRIVE Week and Review Podcast. This is where we take a couple items in the news that impact your business and mine, talk about it just a little bit. So, let's get right to it, right? 

President-elect Trump is making a lot of cabinet appointments, putting them up for nomination that will be needed to be confirmed by the Senate. One of the more interesting ones that will impact us as business owners is his nomination of Lori Chavez-DeRemer, the pick for Labor secretary. 

This report comes from AP News. President-elect Donald Trump named Oregon Rep. Lori Chavez-DeRemer to lead the Department of Labor in his second administration, elevating a Republican Congresswoman who has strong support from unions in her district but lost re-election in November.

Chavez-DeRemer will have to be confirmed by the Senate, which will be under Republican control when Trump takes office on Jan. 20, 2025. She was an enthusiastic backer of the Pro act when she was in Congress. That was the legislation that would make it easier for, for unionize to, for unions to unionize on a federal level.

If you remember the Pro Act, that is an act that passed in California a few years ago that makes it more difficult for employers to use independent contractors in their businesses. Instead, strengthening up the definition of what an independent contractor is versus an employee, and therefore making more workers subject to be classified as employees, which would help unions unionize more people and obviously incur costs on behalf of businesses.

So, Chavez-DeRemer, a surprise pick by the president, picked to lead the Department of Labor, who again has, you know, strong ties to organized labor and is a union supporter, as well as a supporter of the Pro Act. That could have some interesting consequences for businesses during Trump's new presidential term. 

The second story comes from the Wall Street Journal, and it has to do with retail giant Macy's. Macy's says that accounting and an accounting employee hid up to $154 million in expenses. Listen to this story. 

They delayed reporting their quarterly results after the company discovered that employees had hidden $154 million in corporate delivery expenses over several years, prompting an investigation. The retailer said that a single employee responsible for small-package delivery expense accounting had intentionally made erroneous bookkeeping entities since late 2021. 

The question is why? No one seems to know yet. The individual didn't pocket the amounts in question, and the company declined to say how it uncovered the numerous entries or how it went undetected by the company's auditor, KPMG. Macy's said it would provide details on its investigation when it reports its quarterly results on Dec. 11. 

The takeaway here is this if you have employees that are in charge of your financial accounting, you have to make sure you've got internal controls in place, which means segregation of duties and proper supervision, and also requiring employees to take vacation, as well.

The other thing to keep in mind is that, Macy's is wondering how it went undetected by their auditors, KPMG. As a former auditor and a CPA, I could say that the amount which was incurred over a number of years was probably too small within the auditors scope and ultimately probably didn't impact Macy's earnings on a year-to-year basis, and that's why auditors don't pick that kind of stuff up. 

In other words, when you read audited financial statements, just read the opinion and make sure you understand what you're looking at. A financial statement for a company that's been blessed by outside auditors basically say that the finances are fairly staid and that there are no material discrepancies that they have found, and that this definition of material can be quite large.

Don't just think because you have auditors involved, that everything is completely kosher and that all the numbers are right. As Macy's has found out, that is certainly not the case. 

The third story that came up this week comes from Pennsylvania. A restaurant in Pennsylvania has been ordered to pay $184,000 for withholding tips to employees. Let me explain this further. This news comes from ABC 27.com.

A Pennsylvania restaurant was ordered to pay back a $184,000 in back wages, damages, and penalties after an investigation found they withheld tips. The U.S. Department of Labor found that the restaurant unlawfully kept a portion of the tips earned by workers, allowing managers to participate in the restaurant's tip pool. Allowing managers to participate in a tip pool is a violation of the Fair Labor Standards Act.

“Restaurant workers often make low wages and depend on every dollar earned, including tips to help support themselves and their families,” said Wage and Hour District Director John Dumont in Pittsburgh, Pennsylvania. “Restaurant employers must ensure that tipped employees receive their full pay in compliance with the federal law.”

If you're running a restaurant or a service business or any business that takes tips, just remember it is against the Fair Labor Standards Act – against the law – to allow your managers to participate in the tip pool that your hourly workers should be getting. 

If you are withholding tips from your workers because you want to be sure you're spreading them out among your managers, that could be a big problem for you. So, you need to make sure that you address that issue or you could hit the same consequences that this restaurant in Pennsylvania also have to endure with.

My name is Gene Marks, and you have been watching and listening to this week's episode of the Paychex THRIVE Week in Review. If you need any help or tips or advice on running your business, sign up for our Paychex THRIVE newsletter. You can go to paychex.com/thrive. You can sign up there. 

We'll be back with you next week with some more news that impacts your business. Thanks for watching and listening. We'll see you then.

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