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.

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Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance

  1. 1. Avoiding Workplace Pitfalls Domestic and Foreign Employee Compliance Session I - Current Trends in Government Investigations & Audits
  2. 2. 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
  3. 3. Legal Trends in North Texas Mark Hill Shareholder, Cowles & Thompson, P.C.
  4. 4. 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.
  5. 5. Hot Spots Top Filers Top Targets Top Case Types
  6. 6. Top Filers
  7. 7. Top Filers (Plaintiffs) Businesses
  8. 8. What are Businesses Filing? Business Contract actions Fiduciary Duty & Fraud actions Trade Secret actions
  9. 9. Top Filers (Plaintiffs) Individuals
  10. 10. What are Individuals Filing? Employment and PI & Negligence actions
  11. 11. Top Targets
  12. 12. Top Targets (Defendants) Contractors
  13. 13. How are Contractors being targeted? Breach of Contract actions Warranty & DTPA actions Employment actions
  14. 14. Top Targets (Defendants) Businesses
  15. 15. How are Businesses being targeted? Business Contract actions Negligence actions Fraud actions Employment related actions
  16. 16. For the local area business owner and employer, what does this tell us?
  17. 17. Top Case Types
  18. 18. Recent Hot Spots Fiduciary cases Trade Secret cases Employment cases
  19. 19. Employment Cases Discrimination Non-Compete Confidentiality & Trade Secret FLSA
  20. 20. The Importance of Worker Classification Regulatory Compliance Civil Liability
  21. 21. 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.
  22. 22. 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.
  23. 23. 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.
  24. 24. 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.
  25. 25. Wage and Hour Enforcement Brian Farrington Shareholder, Cowles & Thompson, P.C
  26. 26. 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
  27. 27. 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
  28. 28. 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!
  29. 29. Misclassification of Exempt and Nonexempt Employees Exemption generally requires two things: 1. Payment on a salary basis 2. Meeting various “Duties Tests”
  30. 30. 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 work General Rule No. 2: Need not pay exempt employees in any week in which they do no work, regardless of the reason
  31. 31. 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
  32. 32. 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
  33. 33. 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
  34. 34. 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
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. 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.
  39. 39. 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
  40. 40. Overtime Compensation Overtime is time and a half of the employees’ regular rate for hours worked over 40 in a workweek.
  41. 41. 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
  42. 42. 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 S 8-H 8 8 8 8 8 X Employee may be paid for 48, but no OT due, because only worked 40 hours.
  43. 43. Overtime Compensation 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:
  44. 44. 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.
  45. 45. 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.
  46. 46. 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)
  47. 47. 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
  48. 48. 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
  49. 49. Top 12 Mistakes to Avoid in I-9, E-Verify, and Work Visa Compliance Ann Massey Badmus Shareholder, Cowles & Thompson, P.C
  50. 50. 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
  51. 51. Department of Homeland Security Immigration and Customs Enforcement Investigates employers for compliance with employment employer verification rules and removes undocumented aliens from the United States www.ice.gov
  52. 52. U.S. Department of Labor Investigates employer verification compliance, visa compliance, violation of worker rules www.foreignlaborcert.doleta.gov
  53. 53. U.S. Department of Justice Office of Special Counsel (OSC) Investigates and prosecutes charges of immigration-related unfair employment practices www.usdoj.gov/crt/osc
  54. 54. Mistake # 1 Failure 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).
  55. 55. Mistake # 1 Failure to Use the Correct I-9 Form Correct outdated forms Give new hires full expanded I-9 instructions Optional fields- SSN, telephone number, e- mail address Leave no blanks – use “N/A”
  56. 56. Mistake # 2 Failure 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)
  57. 57. Mistake # 3 Failure 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)
  58. 58. Mistake # 3 Failure to Properly Complete Form Department of Justice Order United 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.
  59. 59. Mistake # 4 Failure 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.
  60. 60. Mistake # 4 Failure 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
  61. 61. Mistake # 4 Failure 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
  62. 62. Mistake # 5 Demanding 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.
  63. 63. 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.
  64. 64. 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
  65. 65. Mistake # 6 Failure to Verify Employee in 3 days Employer must complete I-9 form AND run E-Verify check within 3 business days of start date.
  66. 66. Mistake # 7 Premature Termination of Employment Tentative Non-Confirmation Employers must give employee 8 days to contest non-confirmation and continue employment during this period.
  67. 67. Foreign Workers
  68. 68. Mistake # 8 Failure 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.
  69. 69. Mistake # 9 Failure 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.
  70. 70. Mistake # 10 Benching 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.
  71. 71. Mistake # 11 Failure 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
  72. 72. Mistake # 12 Failure 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
  73. 73. Best Practice to Avoid These Mistakes Immigration Compliance Plan •Self-Audits •Annual Training •Written Procedures
  74. 74. Questions?
  75. 75. 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.
  76. 76. 901 Main Street Suite 3900 Dallas, Texas 75202 214-672-2000 info@cowlesthompson.com www.cowlesthompson.com How to connect with us