The Wage and Hour Division (WHD) launched their new program, the Payroll Audit Independent Determination (PAID) program on Tuesday, April 3, 2018. As I wrote about previously, PAID is the WHD’s 6-month pilot program that allows employers to self-audit their payroll practices. If an employer discovers an overtime or minimum wage violation under the Fair Labor Standards Act (FLSA), PAID allows them to voluntarily report it to the WHD. The goal behind PAID is to encourage resolution of claims promptly without litigation.  The catch to the program is employees are not required to accept the back wages from the employer or release any private right of action against the employer. Thus, an employer could still be subjected to a lawsuit. Additionally, the DOL can reject participation in the program and conduct a full investigation after the employer voluntarily reported a violation. As I said in my last post, participating in the program is more like playing a game of Risk than a get out of jail free card…

Employers – don’t forget your 2017 EEO-1 report is due by March 31, 2018! Remember this is required to be filed with the EEOC every year, and the preferred method is online here. Also recall, W-2 pay and hours worked data is NOT being collected as the Office of Management and Budget has stayed the EEOC’s collection of that information. If you are a private employer with 100 employees or more, or a federal contractor with 50 employees or more and $50,000 in federal contracts, you should have gotten an email regarding this, and should be filing your EEO-1.

 

 

On March 6, 2018, the U.S. Department of Labor announced a new nationwide pilot program called “PAID” – Payroll Audit Independent Determination. For an initial 6 month trial period, employers can self-audit their wage and hour practices.  If violations are found, an employer can voluntarily report it to the DOL’s Wage and Hour Division (WHD), in hopes of resolving the potential violations without liquidated damages penalties (usually an amount equal to the back wages due) and with a release of claims (as to the violations only).

Why? The DOL is hopeful that employers who discover violations will come forward and pay the employee 100% due promptly, in exchange for a settlement waiver and no liquidated damages, lawsuit, attorneys’ fees, etc. In turn, employees are paid faster than in a lawsuit or DOL investigation, and 100% of what is allegedly due.

Who is eligible? All employers subject to the FLSA. The program cannot be used for any pending investigation, arbitration, lawsuit, or threatened lawsuit (with an attorney involved). Also repeat offenders are ineligible.

What’s the catch? The DOL notes that it is an employee’s right to not accept the back wages, and not release any private right of action against the employer (and they cannot be retaliated against for such refusal). Further, unlike a typical litigation settlement release, the release must be narrowly tailored to only the identified violations (i.e. overtime, minimum wage, off-the-clock, misclassification, recordkeeping (for every violation)), and time period for which the back wages are paid. The WHD can still conduct future investigations of the employer, and employers cannot use the program to repeatedly resolve the same violations. So, in reality, an employer could notify 100 employees that they were paid incorrectly, and 90 accept and 10 reject and file a lawsuit seeking liquidated damages and attorneys’ fees (since they were just told by the employer that they “stole” their wages).

That being said, an employer could, as always, pay the employee the alleged back wages due in a supplemental check, and thus cut off their alleged damages as to that portion (which makes it a lot less attractive as a case to a plaintiff’s attorney), but they will not get a release. Sure, the employee cannot be forced to cash the check, but that would be a remote occurrence. Of course, the employee could still sue, stating they are entitled to interest or liquidated damages, etc., but such suit would likely not sit as well before a court without additional claims (i.e. you were paid what you were due, why are you taking up our limited judicial resources…).

How does the process work? Employers wanting to participate must review the program information and compliance assistance materials that will be available on the PAID website.  The employer then conducts the audit and identifies the potential violations, affected employees, time frame, and back wages. Next, the employer contacts WHD to discuss the issues, and the WHD determines if it will allow the employer to participate in the program. If allowed, the employer must then submit information such as the backup calculations, scope of violations for release, certification that this is all in good faith and the materials have been reviewed, and that practices will be adjusted to avoid the same violation in the future. The WHD finally issues a summary of unpaid wages (this is likely the same form they use today except no liquidated damages will be assessed).  KEY – once this process has been completed, the employer must issue the back wages by the end of the next full pay period.  Thus, employers should be careful to not begin/end the process until ready and able to pay.

In reality…while some are calling it a “get out of jail free card” for employers, I really don’t see it. An employer who discovers an error after a good faith internal investigation can chose to report itself to the DOL. Now, they are on the DOL’s radar with an admission that they believe they have paid their employees in error. The DOL can reject participation in the program and conduct a full investigation. If the DOL allows participation, all affected employees will be notified of the error (who may not have otherwise known), and can chose to opt-out and file a private lawsuit against the employer that just came clean. Further, neither relieves the employer of a future DOL investigation. Get out of jail free card? I think not. More like playing a game of Risk.

Being the wage and hour geek that I am, which I have fully embraced, I subscribe to the Minnesota Department of Labor and Industry Bulletin. Today’s bulletin speaks directly to employers, so I thought, why not pass it along. Besides, now I have completed No. 10 (keep reading), and feel like I have accomplished something today after I made my bed this morning (watch at 4:45: Naval Adm. William H. McRaven, Ninth Commander of U.S.Special Operations Command 2014 Commencement Address to the University of Texas at Austin).

So, here you go, courtesy of MnDOLI, 10 tips to not steal from employees:

Ten tips to help employers avoid committing wage theft

  1. Pay your employees at least the state minimum wage. New rates became effective Jan. 1, 2018 (see current requirements at www.dli.mn.gov/LS/MinWage.asp).  Employers operating in the city of Minneapolis need to be aware of the Minneapolis Minimum Wage Ordinance (see http://minimumwage.minneapolismn.gov).
  2. Pay your employees for all hours worked. Employees must be paid for employer-required training and for time needed to prepare to perform work, such as restocking supplies and performing safety checks. If you require employees to meet at a centralized location before driving to a worksite, pay the employee for the drive-time from the location to the worksite. Employers cannot require employees to remain at work and “punch in” only when it gets busy, “punching out” when business gets slow.
  3. Pay your hourly employees for overtime when their work hours exceed 48 hours in a work week. Federal law requires some hourly employees to receive overtime after working 40 hours in a work week. Some employees are exempt from this requirement. More information about federal and state overtime requirements is online at www.dli.mn.gov/LS/Overtime.asp.
  4. Pay your employees at least every 31 days.
  5. Do not misclassify employees as independent contractors. Such misclassification not only adversely impacts the employees, it also creates a competitive disadvantage for employers that comply with state laws related to workers’ compensation, unemployment insurance and tax withholding.
  6. Do not take unlawful deductions from your employees’ paychecks. Deductions for lost or damaged property, cash shortages, tools or uniform expenses generally cannot be made.
  7. Do not require your employees to pool or share tips.
  8. If you have a question, call us. We are available by phone at (651) 284-5070, Monday through Friday, 7:30 a.m. to 6 p.m.
  9. Get more information online. Visit www.dli.mn.gov/LaborLaw.asp for information about all Minnesota labor standards laws.
  10. Share these tips. Encourage other employers and associations to subscribe to our Wage and Hour Bulletin at www.dli.mn.gov/LS/Bulletin.asp.

That about sums it up (though we know it is never that easy), and I have accomplished making my bed and No. 10.

Minnesota employers of drivers take note – the Minnesota District Court in Farah v. Alpha & Omega USA, Inc. dba Travelon Transportation held that drivers’ trip logs provide constructive notice of unpaid overtime. The employer, a transportation service company for elderly and disabled individuals, employed Plaintiffs under an independent contractor agreement as drivers. As a part of their job, the drivers were required to track, for each individual trip, the mileage traveled, the customer’s name, the addresses of each customer’s pick up and drop off location, as well as when the driver began and ended driving.

The drivers brought a lawsuit claiming the company misclassified them as independent contractors, and as a result denied them minimum wage and overtime in violation of the FLSA. The court dismissed the company’s claim that it was unaware the drivers were working overtime hours because the pay system was based on number of jobs, not on hours worked. The Court found the trip logs provided the company with constructive notice the drivers were working overtime because “the trip logs were the very records used to document the work Plaintiffs performed and which formed the basis for their compensation.”

A couple of takeaways here. First, recall that employers may require all employees – even salaried employees – to record their time.  In the event of a claim of misclassification, the parties can avoid usually the most costly part of the dispute – how many hours the employee allegedly worked (unless they allege off-the-clock work, of course).  Second, the employer can avoid a recordkeeping violation that almost always accompanies a misclassification claim because the salaried employee didn’t record hours worked (as required of an hourly employee). And finally, this goes to hourly (properly classified) workers – if there is a log of time driven (or worked) as here, it should be cross referenced against a time card so as to avoid an “off the clock” argument.  Nothing new here, just a reminder.

 

Not the most exciting news, but rumor has it, the EEOC recently (end of January) finished mailing the 2017 EEO-1 survey Notification Letters to applicable employers.  Who is an “applicable employer”?  Private employers with 100 or more employees and a federal government contractor or first-tier subcontractors with 50 or more employees and a sub/contract of $50,000 or more.

The Notification Letters contain information on how to file the EEO-1 report (of course its all online too www.eeoc.gov/eeo1survey). If your company filed an EEO-1 report in 2016 or meets the criteria for filing the report and have not received the Notification Letter you should immediately reach out to the EEO-1 Joint Reporting Committee at 1-877-392-4647 or e1.techassistance@eeoc.gov.  Don’t forget – the OMB stayed the revised EEO-1 report requiring employers to report employee’s compensation data. Accordingly, employers should continue using the previously approved EEO-1 form that requires employers to report data about employees’ ethnicity, race, and sex by job category, to comply with FY2017 reporting requirements. The deadline for submitting the EEO-1 report is March 31, 2018.

HR Generalists tasked with the EEO-1 report can celebrate.  On August 29, 2017, the White House’s Office of Management and Budget sent a memo to EEOC Acting Chair Victoria Lipnic, stating that it is reviewing the September 29, 2016 pay data collection revisions to the existing EEO-1, and while it does so, the pay data collection will be stayed. In other words, the new data requirement (aimed at determining equal pay issues) is on hold but employers need to be sure to continue to collect the normal data as usual, by March 2018.

In its memo, the OMB noted that the EEOC released data file specifications for employers to use in submitting EEO-1 data that were not contained in the Federal Register notice, and thus, could not obtain public comments: “As a result, the public did not receive an opportunity to provide comment on the method of data submission to EEOC.” Accordingly, “OMB has also decided to stay immediately the effectiveness of the revised aspects of the EEO-1 form for good cause, as we believe that continued collection of this information is contrary to the standards of the PRA (Paperwork Reduction Act). Among other things, OMB is concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”

In short, employers may continue using the previously approved EEO-1 form to comply with FY2017 reporting requirements!

 

 

Just when employers were embracing the (other) new Form I-9, the United States Customs and Immigration Services (USCIS) has once again updated Form I-9, with a new revision date of “07/17/17 N”. Employers may start to use the revised form immediately, but the revised I-9 does not need to be used exclusively until September 18, 2017. The revised I-9 can be found on the USCIS website: www.uscis.gov/i-9.

What is new and revised? A few revisions to the instructions and, more importantly, the list of acceptable employment authorization documents. Specifically, List C now allows a Consular Report of Birth Abroad (Form FS-240) as evidence.  In addition, USCIS has combined onto List C #2 all the certifications of report of birth issued by the Department of State (Form FS-545, Form DS-1350 and Form FS-240). Thus, the List C documents were renumbered (except the social security card).

Finally, the USCIS issued a revised Handbook for Employers: Guidance for Completing Form I-9 (M-247). While I’m not often “wooed” with government “guidance” documents such as this, this particular handbook is actually very helpful and useful for employers. For example, it addresses when certain documents can expire without re-verification, and when others need to be re-verified upon expiration (hint: all documents must be unexpired when first presented). However, given its content, it was extremely long; the revised handbook is indeed much easier to navigate and a great place for employers to start with I-9 questions.

checklistThe old adage is right on – prepare for the worst and hope for the best. In this case, my spring cleaning tip #3 is to review your policies, practices and records as if the U.S. Department of Labor (DOL) were to investigate your business practices tomorrow.  A few issues I’ve dealt with (a lot) this year are listed below:

  • Verify employees are properly classified as exempt/non-exempt.
    • Pay particular attention to sales employees, marketing, and office workers.
    • The DOL overtime regulations overhaul is still on hold pending the Trump administration’s decision whether to pursue the appeal. However, as I mentioned before, the DOL’s revised salary threshold was not all that far from what is usually reality for what an exempt person makes in many industries (excluding small business owners, small towns, etc.). Point is, just because it is on hold does not mean you shouldn’t ensure that salaried employees meet the duties test (and current salary threshold).
  • Ensure independent contractors are properly classified.
    • Have a contract with the entity, and keep records of payments made and Form 1099s.
    • Think twice before a former employee is made an independent contractors…no matter how badly the individual asks for it.
  • Be sure you are properly calculating travel time for non-exempt employees.  I’ve blogged about this in the past as this can get very tricky.
  • Ensure employees are provided “sufficient time” to eat a meal.  Record meal time on time cards for hourly employees.
  • Recordkeeping – these are the easiest violations to spot. You’ve either kept the required records or not.
    • Have a document retention policy and use it.
  • Have employee time cards accessible for three years.
  • Have payroll stubs/history and employee wages accessible for three years, including W-2s.

Keep in mind that, should you receive a visit, the DOL investigator is just there to address and audit compliance with federal wage and hour laws. I just sat in an audit where the DOL investigator instructed the employer as to a withholding issue that is inconsistent with Minnesota law. Accordingly, recall that just because the FLSA permits something, does not mean that Minnesota law allows it. If Minnesota laws are more strict (advantageous to employee), Minnesota law must be followed instead.

paperwork2In the second of my spring cleaning series, I wanted to provide some thoughts for those Minnesota government contractors who must maintain certain documents in order to continue to enter into contracts for State projects.  Below are some frequent violations/issues found by the MDHR when auditing contractors.  This is by no means an exhaustive list, however, these are issues I see time and time again…

  • Have an affirmative action plan for each year.
    • A four (4) year Minnesota compliance certificate does not mean you need an affirmative action plan every four (4) years.  Your affirmative action plan must be updated annually.
  • You should also have an annual training on the results of your affirmative action plan (both in the changes from year to year, and goals for following year).
    • Provide management training and have the hiring managers (and up) sign off that they were there.
  • Have a document retention policy.
    • The MDHR continues to insist (though I can find no legal support for it) that an employer must have a document retention policy, and that the policy should state that all documents related to administrative charges be retained until final disposition of the charge. That being said, it would be best practices to have such a policy, since you need to retain documents for specified periods of time in any event.
  • Review your employment application – especially if you’ve been using the same one for a long time.
    • The MDHR has objected to questions such as how a person was discharged from the military, whether the applicant knows anyone in the business, and any relation. Review your application and ask whether a question would elicit a response which would provide information that may screen out minority or other protected class applicants. If you are still asking for dates of birth, social security numbers, or date of graduation from schools, you should update your application.
  • Be sure to send – and save – the required letter to the Minnesota Department of Employment and Economic Development for each job posting.
    • The MDHR will require a copy of “all correspondence that the company has sent to the Minnesota Department of Employment and Economic Development during the last 12-month period requesting referrals for qualified individuals with disabilities.” Thus, for every job posted, a letter must be sent to DEED regarding the position and asking for such referrals. If you are not doing this, start.
  • Keep (or put in writing) training materials concerning the hiring process.
    • Since all individuals must be trained who are “involved in the recruiting, screening, selecting, promotion, disciplinary and related processes” to “ensure elimination of bias in all personnel action”, you should maintain proof of such training. This goes further than human resources! The MDHR will require documentation for managers. Management training with sign-off sheets would accomplish this.
  • Retain documents related to the use of referral sources for minority or female applicants (such as secondary schools, colleges and trade groups). Often clients do this, but don’t think the documentation is significant. For example, keep your emails to recruiters and schools, proof of sponsorship and career fairs.
  • Retain documents related to internship and apprenticeship programs. If you “promote from within”, they will want to see “good faith efforts” to develop and maintain “on-the-job training opportunities for females and minorities.”
  • Finally, an issue I just handled this morning…if you are a construction contractor, make sure your contractor registration is current (which is not the same thing as your licence). You can do that online here.

Of course, this list could go on and on. The key is to not become complacent. Review your policies, practices, and records at least yearly.