Tag Archives: Federal Employment Law

Employers Targeted by ICE

Documentation

While the whole nation has been focused on our country’s economic woes, Iranian protests and the death of Michael Jackson, ad nauseum, the issue of illegal immigration has been pushed to the cobwebby recesses of most of our minds. However, if you are an employer, you need to refocus on the employment eligibility of your workforce.

U.S. Immigration and Customs Enforcement (ICE) announced on July 1 that it issued notices of inspection to 652 businesses nationwide, beginning the involuntary inspection and auditing of those companies’ hiring records. The purpose is to determine whether the businesses are complying with the immigration laws, particularly the requirement that companies have an I-9 employment eligibility form completed on each employee and that the documentation used by the employee reasonably appears genuine.

The 652 notices that ICE issued on the first day of this month exceeded the number of similar notices (503) issued by ICE during all of fiscal year 2008. ICE has been warning employers since April 30 that it is going to concentrate less on the business raids like the one at the Swift plant in Cactus two years ago that separated young children from their families. Instead, ICE is going to be focused on investigating and prosecuting employers who employ illegal workers.

Ten percent of the 1100 criminal arrests ICE made last year resulted in charges against owners, managers, supervisors or human resources directors, not the illegal workers who may have stolen identities, faked social security numbers or forged papers. Do you want to go to jail for harboring illegal immigrants for financial gain?

Just for having your I-9s out of order, even if your workers are all eligible to work in the United States, you can be fined up to $1100 per worker. If you have “constructive knowledge” from circumstantial evidence that you are employing illegal workers, you can face both civil and criminal penalties of up to $2200 for a first offense, $11000 for two offenses and six months imprisonment. If ICE can show that you knowingly employed at least 10 illegal workers for 12 months, you face imprisonment for up to five years.

Let’s say that you don’t believe that you employ any illegal workers. You may still have documentation problems. Go through your personnel files just to check for these issues:

  • Does every file contain a completed I-9 form filled out when the employee first started working for you? I can’t tell you how many of the forms I have seen don’t have both sections 1 and 2 filled out and signed.
  • Did you photocopy the documentation the employee produced that you are relying on? Copies are the best way to show why you believed the documents were valid. Double-check these. Upon a closer look, you will see slight irregularities that should have caused you concern at the time. Compare the documents you received to the genuine articles in the Employer’s Handbook provided by ICE on its website (click here).
  • If you have hired an employee since Spring 2009, have you been using the updated I-9 form, revised on February 2, 2009? (Click here for a pdf copy).
  • Have you calendared the dates necessary for reverification if your employee has work verification documents that will be expiring? Upon reverification, did you fill out Section 3 of the I-9 form?

Chances are high that your review uncovered some problems with your I-9 forms. The time to correct those is before ICE serves you with a notice of inspection, particularly if your company is engaged in one of the businesses ICE checks frequently because of past violations in these industries: agriculture, cleaning services, factories, slaughterhouses, construction companies, or other blue collar industries.

Although you will often hear about ICE targeting big employers like Wal-mart and Tyson Foods, they also inspect local small businesses if they receive any kind of tip (from disgruntled employees, competitors, the public or other law enforcement agencies) that a company is employing illegal workers.

It is clear from conversations that I have had with other federal law enforcement officers that the days during the Bush administration of the federal government being “nice” to businesses is over. If ICE or any other federal inspector shows up at your business, you will breathe a sigh of relief if you have gotten your record-keeping, such as your I-9s, into shape before the feds came knocking.

Recordkeeping Tips for Employers

Documentation

This may not be the most exciting topic in employment law, but it is one of the most important: AS AN EMPLOYER, YOU HAVE TO KEEP GOOD RECORDS. Virtually every employment law requires the employer to do some recordkeeping, and anytime the employer fails to do so, the employer is the one that gets burned.

For example, the Fair Labor Standards Act, which regulates overtime and minimum wage payments, makes it imperative for an employer to keep the following records on each employee for three years:

  • Identifying information such as full name and address;
  • job title and duties if claiming exempt status for employee;
  • rate of pay;
  • hours worked each day and each workweek (by time card or time sheet if nonexempt);
  • payment of wages, including overtime adjustments;
  • all bonuses or other additions to wages;
  • amounts and types of all deductions taken from each paycheck;
  • total wages paid in each pay period;
  • dates of payment and the pay period covered;
  • commission agreements or other compensation related agreements.

These records need to be organized and accessible enough that they could be produced to a Department of Labor wage and hour investigator within 72 hours.

The foregoing list is only for that one law (FLSA). To battle payroll tax questions, discrimination accusations, immigration complaints and the myriad other employment law investigations and civil claims with which your company could be involved, you need to have an organized and deliberate system for keeping records about all of your employees.

This usually involves at least three kinds of files. First, you should have detailed and voluminous personnel file on each employee. I have many clients who are requested to bring me the employee’s personnel file when I am asked to defend the company in a discrimination case, for example, and all the business owner brings me is a thin folder containing an employment application and a W-4. I can usually predict the bad outcome of the case for the company right then, just based on poor recordkeeping.

This first set of personnel files ought to contain the application, W-4, I-9 form regarding eligibility for employment in the United States, a report to the Texas Attorney General of a new hire, interview notes, background investigations, training records, performance appraisals, disciplinary actions and warnings, signed acknowledgments of company policies, and termination documentation.

Second, you need a separate set of confidential personnel files with highly restricted access that are kept in a locked cabinet and contain medically sensitive information, such as insurance applications, drug or alcohol tests, physical exams (if you require them for physically-intense jobs), requests for Americans with Disabilities Act accommodations, documents related to use of sick leave or Family and Medical Leave, doctor’s notes and worker’s compensation history.

Third, you should keep payroll records like those set forth above, which are necessary to comply with the Fair Labor Standards Act. This file should also include attendance records, vacation requests, holidays off, records of raises, and other records that completely document the reasons and amount of the employee’s pay. Many employers keep all of these records electronically, which is fine, as long as you regularly back up your system so that no records will be lost.

Are You Making Compensation Mistakes?

Compensation

I frequently work with clients who are being investigated by the Department of Labor for violations of the Fair Labor Standards Act, the federal law that regulates the payment of the minimum wage and overtime compensation. I was recently reminded by a client that the FLSA requires many things that may be legal but certainly aren’t fair. This may be one of the reasons that the FLSA is so often violated: it sometimes makes no rational sense.

For example, the FLSA requires most bonuses to be included in an employee’s regular rate of pay for purposes of calculating overtime pay. So if you give your employees a performance bonus, an attendance incentive, a monetary gift every Christmas or almost any other kind of bonus, you will be required to pay those employees more in overtime pay because the bonus will increase their rate of pay in the pay period in which you provide the bonus. What this often means to an employer is that the regulations act as a disincentive to use bonuses to increase productivity or performance. This makes no sense from a business perspective, but it makes sense to the Department of Labor, which is charged with enforcing the FLSA.

These types of paradoxes of the FLSA mean that many employers violate the FLSA without knowing it and without any malice simply because the rational business brain cannot imagine that this law is as illogical as it really is. Here are some of the pitfalls that businesspersons often fall into with the FLSA:

  1. Failure to keep daily time records for “exempt” employees. If you are paying an employee a set salary regardless of how many hours they work, you may believe that requiring that employee to keep a time sheet is unnecessary. However, salaried employees are not automatically exempt employees. They may still be due overtime or minimum wage and once it is determined that they are due those wages, the number of hours actually worked becomes a huge issue. It is the employer’s responsibility to keep accurate track of the hours the employees work and if the employer fails to do this, any number of hours worked that an employee makes up may be enforced by the DOL.
  2. Believing that many employees are exempt from overtime or minimum wage laws. I use a very generalized, unscientific rule of thumb in many types of small businesses (less than 50 employees). If more than 10% of your employees are considered exempt, you have a problem. It doesn’t take that many executives, administrators, or professionals to run a company and classifying a lot of your employees as exempt means that you have waived a red flag in front of the DOL. Obviously, every business is different and the only way to be sure if you have classified your employees correctly is to have a knowledgeable HR person or employment lawyer review every job description as well as the duties actually performed by your workers.
  3. Meal break deductions. Many employers get tripped up by this one. In general, you have to pay your employees if their lunch break is less than 30 minutes long. You also have to pay them if they are not completely relieved of all duties during the break and free to leave their work area. If you assistant stays at her desk, eats her sack lunch and still answers your phone, you have to pay her for that “break”, even if she spends most of it reading a romance novel.
  4. Deducting items from an employee’s pay that take the employee below minimum wage for that pay period. Required uniform expenses, deductions to cover damaged or lost tools, deductions for poor performance, such as chargebacks for dissatisfied customers who return items, are all types of deductions that become illegal if they take the employee’s pay below minimum wage before taxes and other legal deductions are subtracted.
  5. Docking or withholding wages for hours actually worked. Anytime you determine as an employer that you are going to withhold an employees’ earned wages, STOP. You are making a mistake. For example, some employers refuse to pay an employee who routinely fails to clock in or out. This is illegal. You still have to pay the employee for the hours you reasonably think he worked that day. Then you can discipline him by written warning, suspension, or even termination for failing to follow the company rule about clocking in and out. But you cannot use his pay as a club with which to beat him. Same rule applies to an employee who works “unauthorized overtime”. Whether it was authorized or not, you still owe her pay for the hours she actually worked and time and one-half for the overtime hours. You may discipline her for failing to get authorization, but you can’t withhold the pay actually due to her.

Many employers don’t understand what the big deal is about violating some little FLSA rules and therefore pay little attention to the overtime and minimum wage requirements. But the regulations of this act allow the employer to be sued for twice the amount owed, going two years back, and automatically awards attorneys’ fees to the employee if he/she wins. In addition, not just one employee will sue. The court will probably allow the employee’s attorney to contact all of your former employees during the last two years to get them to consent to be part of the suit against you also. These rules can turn an otherwise minor violation into a very expensive mistake.

The Next Protected Class: Caregivers

Discrimination

Since 1964, federal laws have made it illegal for an employer to discriminate in employment on the basis of race, national origin, color, ethnicity, religion and gender. These are known as “protected classes” of employees–the ones that you as an employer must carefully handle when it comes to hiring, promoting, compensating and firing.

Since the Civil Rights Act of 1964, the list of protected classes has increased to include age, pregnancy, disability, sexual and other harassment, veteran’s status, and even genetic information. Contrary to popular belief, sexual orientation is not a protected class under federal or Texas law. Also, there is no municipal ordinance in the Texas Panhandle protecting an employee on the basis of his sexual orientation.

The next category of protected employees that I expect to see is the category of “caregivers”. This no longer means just protecting women who have small children at home. The definition of caregiver includes those who also have to care for elderly parents or disabled adult children.

In April 2009, the Equal Employment Opportunity Commission (“EEOC”) released a set of guidelines to “help” employers eliminate possible discrimination against caregivers, under the guise of eliminating sexual discrimination, since caregivers are overwhelmingly likely to be women. A disability discrimination claim might also be used by a caregiving employee. The Family and Medical Leave Act has already been expanded to provide 26 weeks of unpaid leave to those employees who must care for a wounded military family member.

Understand that no law has been passed by Congress specifically prohibiting employers from discriminating against caregivers. There is no state law protecting caregivers. This is simply the EEOC’s way of coming in the back door to try to create a new protected class of employees who can sue their employers. The EEOC is urging employers to voluntarily adopt best practices for dealing with employees with caregiving responsiblities, such as flex-time policies or sick leave practices that cover not only the employee but those for whom the employee cares.

Since the EEOC’s guidelines are not statutory requirements, you don’t have to change anything in the way you are providing time off or flexibility to your employees right now. But keep a close eye on this legal area of caregivers as a protected class. I predict that in five years, you will have to reasonably accommodate caregivers just like you would the disabled.

Are there any proactive steps you can take now to prepare for this inevitable change? If you are updating your employment policies, I really like a “personal days” policy or “Paid Time Off” policy rather than days off labeled as vacation and sick leave. If you allow your employees to accrue 1-2 days per month in undesignated time off that can be used for vacations, sick leave, children’s school activities, elderly parent’s doctor’s appointments, funerals, and other personal issues, your employees already have the flexibility necessary to be caregivers and good employees.

Discrimination Filings Increase Dramatically

Discrimination, Documentation

You might think that by now all employers are careful and correct in their hiring and firing decisions, leading to a decrease in discrimination suits filed by employees and former employees, particularly since the Civil Rights Act has been around for 45 years. You would be wrong.

In 2007, the Equal Employment Opportunity Commission (“EEOC”) saw a 9% increase in the filing of discrimination claims based on race, gender, age, disability, etc. If that weren’t dramatic enough, in fiscal year 2008, the EEOC saw a 15.2% increase over 2007. And that was before the economy hit rock bottom and the  nationwide unemployment rate rose to its current rate of 8.5%. I think it is a safe bet to expect the charges filed with the EEOC in 2009 to increase even more.

What should these statistics say to you as a business owner or manager? They should tell you that you cannot afford to make mistakes in your employee hiring, compensation, evaluation, discipline and termination practices that could be interpreted as discriminatory. Don’t assume that you know what you are doing. Get an experienced HR expert or employment lawyer to help you review your policies and practices.

What should you be reviewing to assure that you have reduced your exposure to an employee lawsuit:

  • Documentation: I can’t say it enough in this blog–if it isn’t written down, it didn’t happen as far as the EEOC or a jury is concerned. Do you discriminate on the basis of race, religion, disability, national origin, age, etc.? You do unless you have a written policy stating that you don’t and you have documents supporting each employment decision you have made and showing that it was made for nondiscriminatory reasons such as performance deficiencies.
  • Written Policies: I still get questions about whether you need to have an extensive written policy manual that you provide to your employees. My final answer: YES, you need written policies! Lots of them! Every governmental agency, whether it is the Texas Workforce Commission investigating an unemployment claim, OSHA investigating a workplace injury or the EEOC investigating a discrimination charge, will first ask for your relevant written policies. Without these, the odds that the governmental agency will make a finding beneficial to your business are pretty close to zero.
  • Layoffs: The decisions you make about which employees to lay off in poor economic times cannot be explained simply by the financial well-being of the business. You won’t be questioned about why you had to lay off 20 employees, you’ll be questioned about why you picked the specific 20 that you picked. If you let your poor performers go, you better have documentation supporting the poor performance of each member of that group, as well as documents showing the outstanding performance of those that you retained. Layoff time is not the time to cherry pick the employees with whom you have the most in common or feel most comfortable, because it is almost a given that you will be explaining your choices to a governmental investigator or a jury at a later time.
  • Retaliatory actions: If someone cooperates with a governmental investigation or files a discrimination claim, you should not fire that employee any time soon thereafter unless you have rock solid documentation of a serious disciplinary violation that employee committed after the claim or the cooperation. Why? Because every claim filed with the EEOC is subject to a retaliation claim. Frequently, an employee who says she was discriminated against can be proved wrong, but if you fired her soon after she made her complaint, you will probably will lose the retaliation claim even as you win the discrimination suit. This would be a very hollow and expensive discrimination “victory”.

Beware New ARRA Whistleblower Law

Management, Termination, Training

More than just Big Brother is watching you. Your employees are watching too, and can use the protections of a new whistleblower law to protect their jobs if they report any kind of wrongdoing by your business.

The new whistleblower law is included as a tiny piece of the massive American Recovery and Reinvestment Act (“ARRA”). Employees of any company that is a recipient of any stimulus money provided by ARRA are protected from job terminations if the employee discloses a problem involving stimulus funds to a supervisor or an enforcement agency. The protection applies when the employee reasonably believes he/she is disclosing a problem related to stimulus funds, such as:

  • Mismanagement or waste; or
  • Danger to public health or safety; or
  • Abuse of authority; or
  • Violation of a law or regulation governing a grant or contract relating to stimulus funds.

Companies that may receive stimulus funds include healthcare companies, especially technology providers in the healthcare field, airports, alternative energy companies, contractors rebuilding infrastructure, companies retrofitting closed industrial facilities, medical researchers, scientists, libraries, schools, shelters, and many other businesses. Therefore the employees of these companies may have a new and unprecedented level of employment protection from the ARRA whistleblower regulations.

What should a company expecting to or already receiving stimulus funds do in response to this whistleblower liability?

  • Hire and train a quality control expert or contract administrator to oversee the efficient and safe use of the stimulus funds.
  • Prepare ethics guidelines for the handling of funds and the work to be accomplished and have every employee sign off on them.
  • Train your managers and supervisors to immediately report any complaints about efficiency, public health, contractual violations, etc. from their employees to the quality control officer.
  • Be very careful about terminating employees. Document all reasons for terminations. If an employee has made complaints inside or outside of the company, talk to an employment lawyer about your company’s exposure to whistleblower liability before you terminate the employee.

COBRA Changes Affect Employers

Benefits
  • Do you provide group health, dental or vision insurance or a Health Reimbursement Account to your employees?
  • Do you have at least 20 employees, whether they are on the group health insurance or not?
  • Have you laid off or fired any employees since September 1, 2008?

If you answered these 3 questions “yes”, you are required to act immediately under the American Recovery and Reinvestment Act of 2009 (“ARRA”) to notify your former employees of subsidies available for their COBRA premiums (and those of their dependents). In addition, you as an employer have to advance that subsidy and then recoup it through payroll tax deductions.

If you have a knowledgeable group health insurance agent like my great friend, Julie Hulsey at Neely, Craig & Walton, LLP, in Amarillo (who supplied me with all of the information for this post), you probably have already been contacted about complying with these COBRA subsidy requirements.

If not, here is some very basic information that you need to digest quickly and an action plan for complying immediately (for example, Friday, April 18, 2009, is the deadline to mail notices to your former employees and their dependents).

Continue reading COBRA Changes Affect Employers →

Is There a Union in Your Future?

Employee Rights, Management

Across the country, approximately 8% of the workforce is unionized. Speculation is that if the Employee Free Choice Act (“EFCA”), the union-backed legislation making its way through the Democratic-controlled Congress, passes, that number could double.

This is causing concern for many employers, who fear that a unionized workforce makes the company less flexible, innovative and responsive to a rapidly-changing global economy, in which customers only care if your product is feature-packed and low-priced. Union contracts and the rigid rules they impose can possibly turn a company into a slow-moving and out-of-date giant like GM or Chrysler.

How would the EFCA increase your chances that your workers would be unionized? The bill would allow workers to sign cards with a check-off box saying that they want to be represented by a union. If 51% check off the “yes” box, then you will have a union in your workplace. This method is currently allowed, but employers don’t have to recognize the check-cards and can demand a secret ballot election, which provides the employer time to counter the unionization attempt. Requiring an employer to recognize the check-card election alone as controlling does increase the chance that a union will start representing your workers in negotiating all terms and conditions of employment.

The EFCA would also require the company and the union to submit to binding arbitration if a union contract could not be negotiated in 90 days. This provision could increase the chance that a National Labor Relations Board arbitrator will be determining your wages, vacation policies, attendance policies, etc., instead of you as the owner or manager of the business.

The chance of passage of the EFCA in the Senate decreased in late March when moderate Republican Sen. Arlan Spector announced that he would not support the legislation with his swing vote in these difficult economic times. However, there will probably be some sort of compromise bill that passes, so you can’t totally ignore the possibility that a union may soon be coming to a workforce near you.

If you want to decrease your chances of ever facing a union election in your business, here are some proactive steps that you can and should take right now:

Continue reading Is There a Union in Your Future? →

Paying for Employee Training Time

Compensation, Training

Dow Chemical’s plant in Freeport, Texas recently had to pay a $861,647 settlement for back wages to 648 operating engineers who claimed they were not compensated for hours spent studying during mandatory training. The Department of Labor (“DOL”)investigated and found that the engineers should have been paid for the time spent in training required by the company.

If you want to make sure that you don’t get hit with penalties for the way in which you pay your employees for training and meeting times, here a few guidelines for paying your employees correctly :

  • The basic regulation states “”Attendance at lectures, meetings, training programs and similar activities need not be counted as working time if the following four criteria are met: (1) attendance is outside of the employee’s regular working hours; (2) attendance is in fact voluntary; (3) the course, lecture or meeting is not directly related to the employee’s job; and (4) the employee does not perform any productive work during such attendance.”
  • Unless you can prove that the meeting or training course that your employee attends meets all four of these criteria, you must compensate the employee for the time in the meeting or the training. Most business meetings and trainings will not meet these criteria, so you will have to compensate your employees for them.
  • An example of meetings that would not have to be compensated would be nonprofit board meetings, which could benefit your employee’s career in the long run, but are usually voluntary on the employee’s part and not directly related to your business. Also “meetings” such as happy hours after work or playing on the company softball team, while indirectly involving working relationships, fit these criteria so do not have to be compensated.
  • On the other hand, a lunch time meeting to talk about staff assignments, a Saturday session for employees to pack up to move the business to a new location, or a nighttime cocktail hour to entertain prospective clients of the company are all the types of meetings that would require you to compensate your employees.
  • The DOL takes the position that training that is required by law to allow the employee to work for you, such as the 15 hours of annual training required of child care workers every year in Texas, is compensable because the training is directly related to the job and is not voluntary because the employee cannot work in that job without it. Interestingly, it is the DOL’s position that mandatory annual continuing education for professionals, such as accountants and lawyers, is of general applicability and is “portable” in that profession. Therefore, the employer doesn’t have to compensate the professional for that training time. Of course, the professional is probably exempt from the overtime requirements and paid on a salary, so no extra compensation would be due anyway.
  • If an employee decides to go back to college or trade school on his own initiative, the employer does not have to pay the employee for that time even if the courses are related to the employee’s work because the employer did not require the employee to go back to school or otherwise make going back to school a job requirement. The employer can even agree to reimburse those college courses that apply to the employee’s job, as long as the employee is voluntarily attending school on his own accord.

Time to Change I-9 Forms (Again!)

Documentation, Hiring

As if employers didn’t have enough to keep up with, it is time to throw out your old blank I-9 employee eligibility forms (for immigration compliance) and adopt the new form as of Friday, April 3, 2009.

Click here to download a copy of the new required form. The form is available on the United States Citizenship and Immigration Services website.

Don’t blame this one on the Obama administration. The regulation for the new form was written during the waning days of President Bush’s term. President Obama delayed its enactment for 60 days, as he did with all of Bush’s pending regulations, but unless something changes this week, you must make the switch to the new form for anyone whom you hire on Friday or thereafter.