Pennsylvania Employment Lawyer & Attorney : Russell Krafft & Gruber Law Firm : Lancaster, York, Harrisburg

Yes, I am one of the 60 percent of Americans who bring their laptop on vacation.  But this time, two good things happened.  First, I eventually got my computer to work.  Second, I was able to read a very nice article about our blog written by Judy Strausbaugh entitled "The paperless chase" that appeared in the Lancaster Sunday News on June 24, 2007.  I was also able to update the blog.  I must confess that it has become rather addictive.

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It starts out as a normal workday in the HR department of XYZ company…You just deleted 54 spam e-mails, listened to 27 inane voice messages, and refilled the empty coffee pot (again). You look out the window to the parking lot (because those are the types of scenic views HR managers get in the corporate hierarchy). You notice several buses surrounded by black clad, gun wielding figures with the letters "INS" on their jackets. This can't be good. You look over to the file cabinet with the drawer labeled "I-9 Forms". Your next thought… "I hope I'm not Paris Hilton's cell mate?"

This may have been how it went down at Iridium Industries' Artube Division in East Stroudsburg, Pennsylvania when 81 employees were arrested in an immigration raid. Fortunately for them, the target was a temporary agency operating in the area. The subject of immigration compliance for temporary agencies has been covered by me in a previous post.

The immigration raids are conducted by the U.S. Immigration and Customs Enforcement (ICE) as part of its "Worksite Enforcement Initiative". These raids target "egregious employers involved in criminal activity or worker exploitation." However, the scope of ICE operations might suggest more as it operates 17 teams making 15,049 immigration arrests.

The INS has several mechanism to discover the employment of illegal workers including the following:

• Social Security Mismatch Letters: Coordination between the IRS and the SSA began in 2002 with the issuance of "mismatch letters" that require an employer to check and report on discrepancies between SSN# and W-2 forms. The SSA process and ramifications are summarized in a posting by Linda S. Husar.
• DOL and OFCCP Audits: Several government agencies conduct random audits of employer's I-9 forms as a part of their other audit activities.
• Proposed Electronic Employment Verification System (EEVS): The White proposal for an electronic verification system under the Immigration Reform Bill is likely to succeed. Under this system, employers will be required to verify the work eligibility of ALL employees.

The consequences to a business and individuals for noncompliance with immigration laws including correct I-9 reporting are significant. The following is a partial list of penalties:

• For employers who fail to properly complete, retain, or make I-9 Forms available for inspection, fines range from $100 to $1,100 per individual I-9.
• For employers who knowingly hire or knowingly continue to employ unauthorized workers, civil penalties range from $250 to $11,000 per violation.
• For employers engaging in a pattern or practice of knowingly hiring or continuing to employ unauthorized workers, fines can be as much as $3,000 per employee and/or 6 months in imprisonment.

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1. The Fair Labor Standards Act is Archaic.

The FLSA was enacted in 1938 with only minor amendments since then. It doesn't fit into today's economy. For example, Overtime is still described and viewed as a "penalty". It is designed to discourage employers from working employees for more than 40 hours per week and instead encourage them to hire more employees.

2. Understand the Mindset of a Wage and Hour Investigator.

The investigator is examining your business with the goal of finding areas of "noncompliance". The DOL publishes a Field Operations Handbook that instructs investigators on FLSA interpretations and how to conduct an audit. Remember, auditors are typically focused on certain compliance areas, industries or are investigating a complaint, but they won't tell you how you were chosen for an investigation, so don't waste time asking. They know a lot about the FLSA, just ask them. They generally don't know much about running a business. They know nothing about employee relations.

3. Assess Your Weaknesses.

Businesses should conduct a self-audit to determine areas of risk like those identified in my previous post. Your audit likelihood increases based on two factors:

• if you are in an industry or subject matter area targeted for a compliance initiative by the DOL. Current DOL initiatives are in the following areas:

1. Off the Clock Compliance,
2. Workers with Disabilities,
3. Healthcare, and
4. Garment Workers.

• if you have recently undergone a messy human resources issue like a termination or organizing campaign and you have an employee who may seek vengeance through a DOL complaint.      

3. Records are a Business' only True Defense

The DOL mandates certain recordkeeping and an employer's failure to keep adequate records of hours worked, wages paid and overtime is a violation of the FLSA. It is also very helpful to have job descriptions that attempt to establish any exemptions from overtime that my be applicable. An absence of documentation seriously undermines a business' ability to get through an investigation. Absent records, the investigator will interview employees about their hours worked and job duties.

5. Control Your Supervisors

Meet with and educate your supervisors in advance of any DOL interview. You also have a right to sit in on any DOL interview of a supervisor so exercise that right. You are not able to sit in on employee interviews, but if the DOL identifies a larger group of employees try suggesting that they use a written survey rather than an interview. This takes the ambiguity out of both the question and the answer.

6. Don’t be a Jerk.

As best I can tell, the Wage and Hour Division's compliance budget is almost $190 million dollars. Don't make them spend it all on you. If you tell them to get a subpoena, they will. And instead of one investigator, they'll send five. There are ways to be firm and courteous. Manage the investigation as best you can while still running your business. Here are a few simple tips:

• Establish a point person for dealing with the investigator and have all requests for information go through that person
• Give the investigator a place to work that is out of contact with employees but reasonably comfortable
• Try to get a summary of the audit and the document needs of the auditor, so that you can manage his or her expectations about providing them
• Make employees available for interview during work hours so they are not contacted at home
• Try to wrap up the audit in one or two days, if possible. Don't let the investigator think up more questions and come back again.

7. Investigators Don’t Always Play Fair

Employee interviews are the area where things can go horribly wrong. As every lawyer knows, a leading question is the best way to get the answer you want; particularly, if the witness is in an uncomfortable position of being quizzed by a government enforcement agent. Compare the following two questions and guess which one the investigator will ask your employees if you are a jerk to him:

• How many hours do you normally work in a week?
• You look like a really conscientious person, I bet you work one or two extra hours each week and don't even tell your employer?

8. Let’s Make a Deal

The field investigators have limited ability to compromise a claim when it is reduced to a specific dollar amount based on investigative findings. If things are going badly in an area, you still have the ability to strike a deal before the investigator leaves and does his or her final calculations. Even if the investigator comes up with a number, remember there is a chain of command that you can use for further negotiations. There are Area Administrators, Regional Administrators and the DOL's legal solicitors.

9. Expect Publicity for Noncompliance

As a means of justifying its enforcement activities, the DOL is much more likely use newspaper and website publicity that names the employer and the amount of a settlement.

    10.    Fix your Mistakes… They’ll be back.

Many settlements with the DOL involve follow up reporting and compliance agreements. In addition, the DOL does re-investigate businesses. Penalties for repeat violations are greater and lead to willful violation findings.

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The Fair Minimum Wage Act of 2007, signed into law by President Bush on May 25, 2007 increases the federal minimum wage for the first time in 10 years. In a three-step process, the Federal minimum wage will increase to $5.85 on July 24, 2007; $6.55 on July 24, 2008; and $7.25 on July 24, 2009. Employers must pay the higher of the Federal or Pennsylvania minimum wage. In all cases, the Pennsylvania minimum wage rate is equal to or higher than the Federal minimum wage rate:

	PA Minimum Wage	PA Small Business	Federal Minimum Wage
July 1, 2007	$7.15 /hour	$6.65/hour	$5.85/hour
July 24, 2008		$7.15/hour	$6.55/hour
July 24, 2009	$7.25/hour	$7.25/hour	$7.25/hour

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The second installment of Pennsylvania's minimum wage increase takes effect on July 1, 2007. For most employers, the Pennsylvania Minimum Wage Act increases Pennsylvania’s minimum wage as follows:

·         To $6.25 per hour effective January 1, 2007.

·         To $7.15 per hour effective July 1, 2007.

·         To $7.25 per hour effect July 24, 2009.

There is delayed effective date for small employers. A small employer is defined as one who has an employee complement composed of the equivalent of 10 or less full-time employees. Small employers may use the following minimum wage implementation schedule:

·         To $5.65 per hour effective January 1, 2007.

·         To $6.65 per hour effective July 1, 2007.

·         To $7.15 per hour (the regular Pennsylvania minimum wage) effective July 1, 2008.

·         To $7.25 per hour (the Federal mandated minimum wage) effective July 24, 2009.

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Last month the Department of Labor announced the addition of its "Overtime Calculator" to the five other previously published FLSA Advisors. Although it is unlikely that the Calculator will displace Spider Solitaire as my lunchtime dalliance, it was educational to run through the program which has links to a lot of the terminology used in the FLSA. The calculator operates with the same backwards logic of a tax return, but this shows you how mechanically the DOL applies the law to the facts.

Three of the five other FLSA Advisors are good resources for FLSA compliance. I recommend the "Hours worked", FLSA exemptions, and "Child Labor" Advisors:

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Having identified several of the most common Wage & Hour mistakes in the last post, I wanted to expound upon 5 of them that I see over and over again:

1.    Misclassifying nonexempt employees as exempt and the resulting failure to pay overtime.

The so called "White Collar Exemptions" were revamped in 2004 DOL regulations, but still remain a source of interpretive confusion or corporate intransigence. The exemptions to minimum wage and overtime requirements apply to executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations. In my experience, the three most frequent errors occur for the following jobs: Working Supervisors; Administrative Assistants; IT Help Desk Employees.

Corporate intransigence remains for job titles that have traditionally been treated by a company as exempt positions and paid a salary, but which don't really qualify for any exemption.  For example, there are many clerical positions for which an employer tries to recognize the significant contribution and responsibility by treating them as exempt, but these positions don't meet the "administrative" exemption. An employer's hesitancy to address the employee relations issue associated with an incorrect exemption is like a ticking time bomb.

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The Central Penn Business Journal's Morning Roundup featured an Associated Press article entitled "Small Business Owners shouldn't use interns as substitute employees". This is the same issue that I commented on in my last posting, but it reminded me that I missed a chance to describe the ramifications of getting it wrong.

There are significant consequences for violating the Fair Labor Standards Act (FLSA) by incorrectly paying minimum wage or overtime. Fixing a violation may involve more than just paying the compensation that was owed.

For FLSA violations, an employee may recover both back pay and liquidated damages (which is a penalty equal to the amount of the back pay). The double damages recoverable by an employee give the FLSA some real teeth.

The FLSA may be enforced by either the Department of Labor or by a private lawsuit by an employee. Listed below are methods which the FLSA provides for recovering unpaid minimum and/or overtime wages:

(1) The Wage and Hour Division may supervise payment of back pay.

(2) The Secretary of Labor may bring suit for back wages and an equal amount as liquidated damages.

(3) An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney's fees and court costs.

(4) The Secretary of Labor may obtain an injunction to restrain any person from violating the FLSA, including the unlawful withholding of proper minimum wage and overtime pay.

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