avoiding workplace pitfalls - domestic and foreign employee compliance

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Avoiding Workplace PitfallsDomestic and Foreign Employee Compliance

Session I - Current Trends in Government Investigations & Audits

Agenda

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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 Hill

Shareholder, Cowles & Thompson, P.C.

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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

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Top Filers (Plaintiffs)

Businesses

What are Businesses Filing?

Business Contract actions

Fiduciary Duty & Fraud actions

Trade Secret actions

Top Filers (Plaintiffs)

Individuals

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What are Individuals Filing?

Employment and PI & Negligence

actions

Top Targets

Top Targets (Defendants)

Contractors

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How are Contractors being targeted?

Breach of Contract actionsWarranty & DTPA actions

Employment actions

Top Targets (Defendants)

Businesses

How are Businesses being targeted?

Business Contract actions Negligence actions

Fraud actionsEmployment

related actions

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For the local area business owner and employer, what does this tell us?

Top Case Types

Recent Hot Spots

Fiduciary cases

Trade Secret cases

Employment cases

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Employment Cases

Discrimination Non-Compete

Confidentiality & Trade Secret

FLSA

The Importance of Worker Classification

Regulatory Compliance

Civil Liability

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.

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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.

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Wage and Hour Enforcement

Brian Farrington

Shareholder, 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


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

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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!


Exemption generally requires

two things:

1. Payment on a salary basis

2. Meeting various “Duties Tests”


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 work

General Rule No. 2: Need not pay exempt employees in any week in which they do

no work, regardless of the reason

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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


• 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


• 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

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• 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


Creative Artists

• Work requires invention, originality, and talent

• In a recognized field of artistic endeavor

Teachers in educational institutions


• Primary duty is making sales or obtaining contracts for services

• Away from the employer’s place of business

Outside Salespersons Duties Tests

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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 Hours

It 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

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Overtime Compensation

Overtime is time and a half of the employees’ regular rate for hours worked over 40 in a workweek.


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 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 S

8-H 8 8 8 8 8 X

Employee may be paid for 48, but no OT due, because only worked 40 hours.

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Overtime 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:


This means employers pay OT on ALL compensation, including most bonuses, shift differentials, commissions, piece rates, etc., not just on the base rate.


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.

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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

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Top 12 Mistakes to Avoid in I-9,E-Verify, and Work Visa Compliance

Ann Massey Badmus

Shareholder, 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

Department of Homeland SecurityImmigration and Customs Enforcement

Investigates employers for compliance with employment employer verification rules and removes undocumented aliens from the United States www.ice.gov

http://www.uscis.gov/

http://www.cbp.gov/

http://www.ice.gov/

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U.S. Department of Labor

Investigates employer verification compliance, visa compliance, violation of worker rules www.foreignlaborcert.doleta.gov

U.S. Department of JusticeOffice of Special Counsel (OSC)

Investigates and prosecutes charges of immigration-related unfair employment practices www.usdoj.gov/crt/osc

Mistake # 1Failure to Use the Correct I-9 Form

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).

http://www.foreignlaborcert.doleta.gov/

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Mistake # 1Failure to Use the Correct I-9 Form

Correct outdated forms

Give new hires full expanded I-9 instructionsOptional fields- SSN, telephone number, e-mail address

Leave no blanks – use “N/A”

Mistake # 2Failure to Comply with 3-day Rule

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)

Mistake # 3Failure to Properly Complete Form

• 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)

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Mistake # 3Failure to Properly Complete Form

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.


I-9 Retention Form

Date of Hire__________+ 3 years =____________

Date of Separation ________+ 1 year = _____________

Take the later date and enter it here:

_____________________________________Retention Date

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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.

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E-Verify Required

Federal agencies

Federal contractors

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.

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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.

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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

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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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Dallas, Texas 75202

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