On December 30, 2019, the Office of Federal Contract Compliance (OFCCP) issued a Notice of Proposed Rulemaking that aims to clarify the process for its two formal notices – the Predetermination Notice (PDN) and Notice of Violation (NOV). In addition, the new regulations will allow contractors in violation to enter into a conciliation agreement prior to a PDN or NOV being issued. The new procedure will be called the Expedited Conciliation Option (ECO).

Why an Expedited Conciliation Option?

Contractors who have been through an OFCCP compliance audit know that it can be a long a tedious process. This new ECO allows a contractor who has been preliminary found to have either a discrimination violation(s) or material violation(s) to bypass the PDN and NOV process and resolve the matter sooner than later. It’s akin to the decision to tearing off a band-aid and getting it over with when the findings are not worth disputing. Federal contractors with multi-establishments have had the unwritten option for early resolution in the past, but this rule would codify the procedure for all.

What Evidence the OFCCP Must Find to Support a Violation is Clarified

Further – and much needed – the proposed rule clarifies exactly what the OFCCP must find before issuing a PDN or NOV. Historically, the OFCCP has been tight-lipped with respect to how it came up with the decision that there is a statistically significant disparity caused by an employment action. Gone will be the days where the OFCCP can refuse to provide its methodology and share its calculations. Specifically, the OFCCP has proposed the following definitions:

Nonstatistical evidence may include testimony about biased statements, remarks, attitudes, or acts based upon membership in a protected class; differential treatment through review of comparators, cohorts, or summary data reflecting differential selections, compensation and/or qualifications; testimony about individuals denied or given misleading or contradictory information about employment or compensation practices; testimony about the extent of discretion or subjectivity involved in making employment decision; or other anecdotal or supporting evidence.”

Statistical evidence means hypothesis testing, controlling for the major, measurable parameters and variables used by employers (including, as appropriate, other demographic variables, test scores, geographic variables, performance evaluations, years of experience, quality of experience, years of service, quality and reputation of previous employers, years of education, years of training, quality and reputation of credentialing institutions, etc.), related to the probability of outcomes occurring by change and/or analyses reflecting statements concluding that a difference in employment selection rates or compensation decisions is statistically significant by reference to any one of these statements:

(1) The disparity is two or more times larger than its standard error (i.e. a standard deviation of two or more);

(2) The Z statistic has a value greater than two; or

(3) The probability value is less than 0.05″

For those contractors who have already been involved in an OFCCP compliance audit, you can appreciate the above. For those that have not yet been audited, this information will be useful both now and later. For example, when you are making compensation decisions, you can see from the above what the OFCCP will look at. Be sure that there is no nonstatistical or statistical evidence that would support a violation of your affirmative action obligation as a federal contractor. Finally, OFCCP has updated its Federal Contract Compliance Manual, which you can view here.

As I have blogged about previously, the City of Minneapolis’ Wage Theft Prevention Ordinance went into effect January 1, 2020. While Minneapolis adopted some of the State of Minnesota’s Wage Theft Act, it also added additional requirements, summarized below compliments of the City of Minneapolis:

Under the ordinance, employers must:

  • Provide employees with written pre-hire notices of certain employment terms. It must be signed by employees. (Download at minneapolismn.gov/laborenforcement.) (This example may be used to comply with both city and state wage theft laws.)
  • Follow a regularly scheduled payday.
  • Provide earnings statements at the end of each pay period.
  • Provide sick and safe time accrual and use balances on all earnings statements.
  • Distribute a Minneapolis labor poster to all new hires. (Download at minneapolismn.gov/laborenforcement).

Resources for businesses:

Example pre-hire notices, FAQs, and Minneapolis labor posters downloadable now at minneapolismn.gov/laborenforcement.

I greatly suspect that everyone reading my blog is aware by now that Minnesota’s minimum wage increased January 1, 2020 ($10 for large employers; $8.15 small employers). However, for those employers who use minimum wage for certain activities (i.e. travel time) –  be sure to change that rate in your payroll system as well! Also, if you have a minimum wage guarantee for salespersons, same concept – be sure you have updated those records as well. Remember, with the passage of the Minnesota Wage Theft Law, this is not something you want to let slip through the proverbial cracks!

Also, keep in mind that both Minneapolis and St. Paul have higher minimum wage rates then the State wage, so if you are conducting business in those cities, be aware of those wages as well. Minneapolis’ minimum wage increases every July 1, while St. Paul increases its minimum wage every July 1 (with the exception of macro businesses – 10,000+ employees went up January 1, 2020).

On December 16, 2019, the U.S. Department of Labor published a Final Rule clarifying whether certain benefits and other payments must be included in the “regular rate” for purposes of overtime pay. I’ve posted about this numerous times (one recently). Recall, a “discretionary bonus” must truly be discretionary in order for an employer to not have to include that pay as a part of the employee’s regular rate (which the increases amount due for overtime). If you’ve heard of the company that recently gave its employees a cut of a $10 million holiday bonus – THAT is a discretionary bonus (did you seek the surprised look on their faces?!).

However, there are other types of pay and bonuses and perks that the DOL has clarified do not need to be included into the “regular rate,” similar to a discretionary bonus:

  • Parking benefits, wellness programs, onsite specialist treatment, gym and fitness access/classes, employee discounts on goods and services, tuition benefits and adoption assistance.
  • Payments for unused paid leave such as PTO, vacation, sick & safe time.
  • Payments for certain penalties under state and local scheduling laws.
  • Reimbursed expenses such as cell phones, exam fees, membership dues.
  • Sign-on bonuses and longevity bonuses.
  • Office coffee and snacks to employees as gifts.
  • Discretionary bonus (which is not new), but clarifies that the label given a bonus does not determine whether its discretionary (which I know you already know because you’ve been reading my blog!).
  • Contributions to benefit plans for accident, unemployment legal services or other events that could cause future financial hardship or expenses.
  • Call-back pay no longer needs to be “infrequent and sporadic” to be excluded (but yet can’t be prearranged and regular).

Of course, this is just a summary, and there are always exceptions to the rule (and exceptions to the exceptions), and nuances. The actual Final Rule provides many examples. Accordingly, before attempting to exclude pay from the regular rate, you should always check the law first! Happy Holidays!

On December 16, 2019, the Minnesota Department of Labor & Industry certified the prevailing wage rates for all 87 Minnesota counties. These rates are effective December 16, 2019 and can be found here. Non-union contractors should be reminded that these rates are set by the responses received to the annual voluntary survey sent out by MNDOLI. If you don’t respond, your wage rates will not be included and thus what is “prevailing” may be a lot higher (union rates). What does this mean? Until they are amended, new state prevailing wage projects will use these hourly wage rates and fringes.

And I’m not talking Minnesota ice! 2019 was unquestionably a busy year for the Department of Homeland Security Immigration and Customs Enforcement (“ICE”). No doubt you heard on the news about one of Homeland Security Investigations’ workplace warrants over the past year. Less newsworthy, the I-9 audits spiked as well, with no signs of slowing down.  For example, in FY2017, there were 1,360 I-9 audits, in FY2018, there were 5,981 – a 340% increase. What does this have to do with wage and hour laws? Admittedly, it is a stretch, however, I write this article for our firm’s Employer Advisor, so I figured I might as well reprint it here as well. It’s like a Wednesday bonus blog!

So What? 

It is easy think that of all the employers in the United States “only” 5,981 I-9 audits took place – thus, your overall chance of being audited are low, right? Perhaps, but like anything else, if you are audited (and we have had several employers in the past year that were), there is about a 75% chance that you do in fact have Form I-9 violations, all of which are avoidable.  In fact, when we assist employers with internal audits, we spot audit about every 10th Form I-9. Of those, we find a technical violation on almost every form, which the employer can proactively correct. As detailed below, the potential penalties, for what seems like a simple form, can be staggering.  The largest fine that has been levied against an employer to date is $95 million.

Potential Penalties

If your business is audited, here is what you are looking at for possible penalties:

  • Monetary civil fines
    • Knowingly hire and continue to employ violations of $573-$4,586 per violation for first time violators (up to $22,972 for repeat offenders).
    • Substantive and uncorrected technical violations, or failure to produce an I-9, ranges from $230-$2,292 per violation. For example, if you have 100 I-9s and 75 of those are in error, you are looking at fines from $17,250-$171,900.
    • Fines may be enhanced up to 25% based on business size, good faith, seriousness, unauthorized aliens and history. This puts the above example at $21,562-$214,875.
  • Monitoring, suspension or debarment from government contracts.
  • Criminal arrest of employers.
  • Administrative arrest of unauthorized workers.

How to Best Avoid Potential Penalties

A few steps now can save a lot of headache (and fines) later:

  • Conduct an internal audit now – work with an attorney to do so, as you can actually create technical violations by improperly correcting I-9s or revivifying employees.
    • Ensure proper document retention for each terminated employee.
    • Be able to produce all I-9 records within 3 days (i.e. system of binders/files in one spot).
    • Make sure the most recent form is used (it is still the one with a 2017 expiration date).
  • Use E-Verify.
  • If you do get a Notice of Inspection (“NOI”), other audit documentation, or a raid, contact an attorney right away.
  • Make sure your business has a designated person for any ICE audit or raid and they know what attorney to call immediately.
  • Properly correct Form I-9s before you need to turn over documents to ICE.
  • Train managers (anyone who is going to fill it out on behalf of the employer and sign) on the proper completion of the I-9.

Employers with exempt (salaried) employees – do not forget that the Fair Labor Standards Act’s (FLSA) salary threshold increases January 1, 2020 to $684 per week ($35,568). This means, that if you have a salaried exempt employee making LESS than $684 per week, effective January 1, 2020, they will need to be reclassified as non-exempt and will be eligible for overtime pay. If you need more details about the revised so-called white collar regulations, you can view my earlier post here. Also, don’t forget that the rule changes do not change the duties tests. Just because someone meets the salary threshold does not necessarily mean they meet the duties test!

Employers with employees working 80 hours a year within Minneapolis should remember that the Minneapolis Wage Theft Prevention Ordinance goes into effect JANUARY 1, 2020. If you want more details about the ordinance and how it is different than the Minnesota Wage Theft Prevention Act, you can read my previous blog here.  In short, there are additional notice requirements and sick and safe time accrual and use balances must be put on the employee’s earnings statements.  All employees must be provided with the notice (not just new hires like the state law), and any changes to that notice must be signed by the employee.

To assist employers in compliance, the City of Minneapolis released an example prehire notice (though that name is somewhat misleading since it applies to current employees as well – don’t be tricked) in English and Spanish (that also complies with state law) and updated notice poster on its website yesterday.  It’s FAQs were previously released.

It’s that time of year where employers and employees alike get into the holiday spirit. Being the wage and hour blog that it is, I thought about sharing a few general holiday reminders (keep in mind I’m keeping this super simple just to toggle your brain):

  • Hourly employees who are provided a non-discretionary bonus must have that bonus layered back over their wages for the applicable period and included into the regular rate for overtime purposes (and thus, additional monies may be due the employee because of a bonus).
  • Think of a “discretionary” bonus as a “just because” bonus – there are no metrics, the employee does not know how to “earn” it, it is just something extra, typically unexpected.
  • A non-discretionary bonus is based on something (i.e. if the company does well, you will get 1% annual bonus; if you don’t go over on absences you will get $500, if x then y).
  • Employees cannot “volunteer” to perform their regular job whether it be for a company fundraiser, holiday party, etc. (well, they can, but they have to be paid at least minimum wage and overtime, if applicable).
  • Bonuses are “wages” – they should be paid like any other payroll (refrain from cash, gift cards, etc.).

Cheers!

The U.S. Department of Labor (DOL) certainly seems to mean well with it’s latest roll out. On November 13, 2019, it announced the issuance of the Office of Federal Contract Compliance Programs’ (OFCCP) Technical Assistance Guide – Construction Contractors. In its news release, the DOL noted this guide is meant as a “self-assessment tool” for federal project construction contractors to review their practices to “eliminate discrimination and achieve their equal employment opportunity goals”. Specifically, the guide contains an overview of obligations, steps to implement EEO construction contract specifications, and what to expect when preparing for an OFCCP audit. This includes guidance regarding equal pay, Pay Transparency Nondiscrimination Provision notice/requirements, compensation disparities and the like.

In reality (and this is why I say they mean well), the “guide” is a 157 page document that has even my head spinning….and the pictures of clean people in freshly laundered construction gear/clothing does not help…In short, pictures of women on a construction site in heels aside, I wanted to be sure to share this for our Minnesota construction companies that do federal projects, so that you know it is a resource. Beyond that, I see it as a reference tool and not something that 99.9% of contractors are actually going to sit down and read. Also recall – a guide is no substitution for the law. If the law changes, or the guide is wrong, an employer cannot point at this document/website as a defense. Happy reading!