avoiding workplace pitfalls - domestic and foreign employee compliance
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Avoiding Workplace Pitfalls: Domestic and Foreign Employee Compliance. Employment Law Breakfast Series Sponsored by Cowles & Thompson, PC & The International Business Council of the Frisco Chamber Employment lawsuits and government audits and investigations are at a record high. In 2013 the government settled the largest immigration fine in history with a Plano, TX based company in the amount of $34 million for charges of visa and I-9 non-compliance. Avoid the penalties, damages, and negative publicity for those who have been caught unaware. Regardless of size or industry, your company must be able to prove its observance of federal and state employment laws and regulations concerning both domestic and foreign workers. The Frisco Chamber of Commerce International Business Council and Cowles & Thompson, PC presented three educational events to help your organization meet regulatory challenges for your domestic and foreign employee workforce. This is the first event - Current Trends in Government Investigations - held on July 23, 2014 at the Frisco Chamber of Commerce, Frisco, Texas.TRANSCRIPT
Avoiding Workplace PitfallsDomestic and Foreign Employee Compliance
Session I - Current Trends in Government Investigations & Audits
Agenda
1
2
3
Legal Trends in North Texas
Wage and Hour Enforcement
Top 12 Mistakes to Avoid in I-9,E-Verify, and Work Visa Compliance
Legal Trends in North Texas
Mark HillShareholder, Cowles & Thompson, P.C.
Legal Landscape 100s of claims are filed in North Texas
State and Federal Courts everyday.
Employment related claims are an increasing part of the legal landscape in Collin, Dallas and surrounding counties.
Hot Spots
Top Filers Top Targets Top Case Types
Top Filers
Top Filers (Plaintiffs)
Businesses
What are Businesses Filing?
Business Contract actions
Fiduciary Duty & Fraud
actions
Trade Secret actions
Top Filers (Plaintiffs)
Individuals
What are Individuals Filing?
Employment and PI & Negligence actions
Top Targets
Top Targets (Defendants)
Contractors
How are Contractors being targeted?
Breach of Contract actionsWarranty & DTPA actionsEmployment actions
Top Targets (Defendants)
Businesses
How are Businesses being targeted?
Business Contract actions
Negligence actions
Fraud actions Employment related actions
For the local area business owner and employer,
what does this tell us?
Top Case Types
Recent Hot Spots
Fiduciary cases Trade Secret casesEmploymen
t cases
Employment Cases
Discrimination
Non-Compete
Confidentiality & Trade
SecretFLSA
The Importance of Worker Classification
Regulatory Compliance
Independent Contractor or Employee
This may surprise some, but having a worker sign an Independent Contractor agreement does not make that worker an independent contractor. …at least not by itself.
Several Factors to Consider
Court's in Texas have established a Framework to determine whether a worker is an Independent Contractor or an Employee.
There are several factors to consider – and no one factor controls.
Independent Contractor Framework
(1) the independent nature of the worker's business,(2) the worker's obligation to furnish necessary tools,
supplies, and materials to perform the job, (3) the degree to which the worker's opportunity for profit
or loss is determined by the employer, (4) the time for which the worker is employed, and (5) the method of payment, whether by unit of time or by
the job.
Misclassification is a Focus
The U.S. Department of Labor (DOL) is also making employer compliance with the FLSA a focus, and misclassification of employees as independent contractors is at the center of its scrutiny. A recent study by the University of Texas found that almost half of all construction workers were misclassified as independent contractors.
Wage and Hour Enforcement
Brian FarringtonShareholder, Cowles & Thompson, P.C
Misclassification of Exempt and Nonexempt Employees
Fair Labor Standards Act of 1938 is the basic
Federal Wage and Hour Law, regulating 4 areas
•Minimum Wage (“MW”)•Overtime (“OT”)•Child Labor•Recordkeeping
Misclassification of Exempt and Nonexempt Employees
There are many exemptions from the Act’s monetary requirements, but one applies to all kinds of businesses—complete MW and OT exemption for:
• Executive Employees• Administrative Employees• Professional Employees• Outside Salespersons
Misclassification of Exempt and Nonexempt Employees
One of the requirements for exemption is (usually) payment on a salary basis—BUT
• YOU CAN’T MAKE EMPLOYEES EXEMPT JUST BY PUTTING THEM ON SALARY AND GIVING THEM A GRAND TITLE!
Misclassification of Exempt and Nonexempt Employees
Exemption generally requires two things:
1. Payment on a salary basis2. Meeting various “Duties Tests”
Misclassification of Exempt and Nonexempt Employees
Salary Basis of Payment. Minimum Salary is $455/wk, or $23,660/yr
General Rule No. 1: Pay exempt employees their full salary in any week in which they
do any workGeneral Rule No. 2: Need not pay exempt
employees in any week in which they do no work, regardless of the reason
Misclassification of Exempt and Nonexempt Employees
EXCEPTIONS—Employers can reduce the salaries of exempt employees in
these situations:•Absences of employees for personal reasons, or if they are sick, but only for full day absences•Disciplinary suspensions, but only for full days•Violations of major safety rules
Misclassification of Exempt and Nonexempt Employees
•Primary Duty (i.e., most important) must be Management•Must supervise at least 2 FTE’s•Must be able to hire/fire, or at least recommend hiring/firing, promotions, raises, discipline, etc.
Executive
Employees
Duties Tests
Misclassification of Exempt and Nonexempt Employees
•Primary duty must be office or non-manual•Work must be administrative in nature (i.e., assist in running or servicing the business)•Must make decisions in MATTERS OF SIGNIFICANCE, and exercise DISCRETION AND INDEPENDENT JUDGMENT while doing so
Administrative
Employees
Duties Tests
Misclassification of Exempt and Nonexempt Employees
•Learned Professionals•Work requiring advanced knowledge in recognized learned profession—e.g., law, medicine, accounting, engineering, sciences•Work must be intellectual•Requires discretion and independent judgment
Professional
Employees
Duties Tests
Misclassification of Exempt and Nonexempt Employees
Creative Artists• Work requires invention,
originality, and talent• In a recognized field of
artistic endeavor
Teachers in educational institutions
Misclassification of Exempt and Nonexempt Employees
•Primary duty is making sales or obtaining contracts for services•Away from the employer’s place of business
Outside
Salespersons Duties Tests
Off-Clock Hours
Employers must accurately record, and properly pay for all HOURS WORKED.
HOURS WORKED includes:•All time employees are required to be on the premises•All time they are required to be at a prescribed work site•All time they spend in activities which benefit the employer
Off-Clock HoursIt is MANAGEMENT’S RESPONSIBILITY to see that time is accurately recorded and paid for. Employers can’t accept “free” or “voluntary” work from their employees. If they work it, the company must pay for it.
Off-Clock Hours
Employers often fail to pay for all hours
worked. Common problems include:
•Not paying for preparatory or concluding activities—e.g., call centers •Not paying for travel time•Employees working through lunch•Not paying for training time
Overtime Compensation
Overtime is time and a half of the employees’ regular rate for hours worked over 40 in a workweek.
Overtime Compensation
OT is enforced on a WORKWEEK basis. A workweek is a designated
period of 7 consecutive 24 hour days. OT is due after 40 hour in a single
workweek:
•No daily OT is required•Can’t average workweeks•No comp time for overtime
Overtime Compensation
Overtime is due only after 40 hours ACTUALLY WORKED—paid time off does not count toward OT. Take a paid holiday for example:
M T W T F S S8-H 8 8 8 8 8 X
Employee may be paid for 48, but no OT due, because only worked 40 hours.
Overtime CompensationOvertime is not paid just on base rate but on the “regular rate of pay.” The regular rate (“RR”) is computed by dividing all compensation attributed to a particular workweek by the hours worked in that workweek:
RR = Total $Total Hours
Overtime Compensation
This means employers pay OT on ALL compensation, including most bonuses, shift differentials, commissions, piece rates, etc., not just on the base rate.
Overtime Compensation
Regular Rate Exclusions - Employers don’t have to pay OT on the following (list is illustrative, not exhaustive):
Christmas bonuses
Discretionary bonuses
Expense reimburse-
ment
Employer contributions
to 401(k)
Payments to third parties
for group insurance,
etc.
Minimum Wage
• Enforced on a workweek basis, so employees paid on a contingent basis (e.g., piece work and commissions) may have to get advances to meet MW in each workweek.
• Deductions for the employer’s benefit (cash shortages, damage to property) cannot bring employees below MW in any workweek.
Current Rate is $7.25. Proposed
increase to $10.10
(unlikely to pass)
Tipped Employees
Minimum cash wage is $2.13. Employer may claim tip credit of up to $5.12
Tips are the property of the employees—employer may not take employees’ tips.
Tipped employees are by definition paid MW, so no deductions for employer’s benefit (e.g., uniforms, breakage, shortages, walkouts, etc.)
No tip credit without disclosures to employees
Tip Pools
No set limit on tip contributions
Contributing employees must retain at least $5.12
Receiving employees must make enough to make MW
Only serving employees can receive tips from the pool—not managers, back of house, etc.
Disclosures to employees required
Top 12 Mistakes to Avoid in I-9,E-Verify, and Work Visa Compliance
Ann Massey BadmusShareholder, Cowles & Thompson, P.C
Department of Homeland Security
U.S. Citizenship and Immigration Service (USCIS) www.uscis.gov - immigration benefits and services
U.S. Customs and Border Protection (CBP) – www.cbp.gov – border patrol and international travel facilitation
Investigates employers for compliance with employment employer verification rules and removes undocumented aliens from the United States www.ice.gov
U.S. Department of Labor
Investigates employer verification compliance, visa compliance, violation of worker rules www.foreignlaborcert.doleta.gov
Investigates and prosecutes charges of immigration-related unfair employment practices www.usdoj.gov/crt/osc
After May 7, 2013, employers must use the two page I-9 form, version date March 8, 2013. Applies to new employees and re-verification of existing employees (if applicable).
Correct outdated forms
Give new hires full expanded I-9 instructionsOptional fields- SSN, telephone number, e-mail address
Leave no blanks – use “N/A”
Employee must fill out I-9 form on first day of employment and provide employment eligibility documents for Section 2 by the 3rd business day of employment.
Business day = any day the business is open or operational (holidays and weekends included)
• Not listing date employment began (Section 2)
• Missing information, signatures and dates (Sections 1 and 2)
• Not listing document title, issuing authority, expiration date, or document number (Section 2)
Department of Justice OrderUnited States of America v. Golf International d/b/a Desert Canyon Gold, OCAHO Case No. 13A00074, June 13, 2014
Golf International ordered to pay $57,650 (reduced from initial assessment of $136,697) for paperwork violations, including failure to sign section 2 for 110 employees.
Mistake # 4Failure to Properly Retain I-9 Forms
I-9 Retention Rule
Keep the I-9 form for each employee either (1) three years after the date of hire OR (2) one year after the employee’s last date of employment, whichever is later.
Mistake # 4Failure to Properly Retain I-9 Forms
I-9 Retention Form
Date of Hire__________+ 3 years =____________
Date of Separation ________+ 1 year = _____________
Take the later date and enter it here:
_____________________________________Retention Date
Mistake # 4Failure to Properly Retain I-9 Forms
Quick Tips
Keep I-9 forms separate from personnel files
Keep retention date spreadsheet
Destroy I-9 forms once retention date is
reached
Mistake # 5Demanding Specific Documents
Employee may produce any List A or List B and C documents listed on the I-9 form.
A demand for specific documents, e.g. green card or social security card, can violate anti-discrimination rules.
E-Verify
E-Verify is an Internet-based system that compares information from an employee's Form I-9, Employment Eligibility Verification, to data from
U.S. Department of Homeland Security and Social Security
Administration records to confirm employment eligibility.
E-Verify Required
Federal agencies
Federal contractor
s
Certain State
agencies and
private employers
Companies located in states
that require E-
Verify
Employers of STEM F-1 students
seeking OPT
extension
Mistake # 6Failure to Verify Employee in 3 days
Employer must complete I-9 form AND run E-Verify check within 3 business days of start date.
Mistake # 7Premature Termination of Employment
Tentative Non-Confirmation Employers must give employee 8 days to contest non-confirmation and continue employment during this period.
Foreign Workers
Mistake # 8Failure to Maintain Public Access
File
Employers of H-1B workers must maintain a public access file containing specific information about work conditions, e.g. labor condition application, prevailing wage determinations, for public inspection.
Mistake # 9Failure to Pay the Required Wage
All employers must pay the H-1B employee the prevailing wage or the actual wage for the position,
whichever is higher. The approved wage cannot be lowered without
DOL and USCIS approval.
Mistake # 10Benching
Employer must pay H-1B and H-2B employees the required wage for the full number of approved hours even if the employee has no assigned work or client contracts.
• H-1B employees must be paid within 30 to 60 days of H-1B status.
Mistake # 11Failure to Properly Terminate
Employment
Letter of termination
Offer of return transportation
(air fare) to home country
Notification to the USCIS
Three step process for early termination of H-1B employment
Mistake # 12Failure to Obtain Deemed Export
License
Foreign National employees with access to controlled technologies may require an export license pursuant to “deemed export” rule.
• Dual use technologies• Country of last citizenship • Release of information to foreign
national
Best Practice to Avoid These Mistakes
Immigration Compliance Plan
• Self-Audits• Annual Training• Written Procedures
Questions?
What to Do Next?
Facts of each case are different. The general information provided here should not be relied and is not legal advice.
Consult with an experienced attorney to get the right advice for your specific circumstances.
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