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Self-Insured Health Plan Sponsors, Health Insurers Brace To Pay New ACA-Imposed Fees

January 10, 2013

Employers and other self-insured group health plan sponsors and health insurers, adjust your budgets and prepare to open up your wallets to pay additional fees mandated by the Patient Protection and Affordable Care Act (“PPACA”).

Self-insured employers and health insurers generally must begin paying a new fee imposed as part of PPACA. PPACA generally requires that health insurance policy issuers and plan sponsors of self-insured health plans pay the new fee for policy and plan years ending on or after October 1, 2012, and before October 1, 2019 or policy and plan years ending on or after October 1, 2012, and before October 1, 2019. July 31, 2013 is the deadline for reporting and payment of the first fee payment required by these provisions.

The Internal Revenue Service (IRS) and Department of Treasury published final regulations (“Regulations”) implementing these new rules on December 6, 2012. These Regulations include many provisions that are likely to come as a surprise to many employer and other health plan sponsors. Health insurers, employers and other sponsors of self-insured health plans and others responsible for their funding and administration need to review these regulations and make other arrangements to budget for and timely report and pay this required fee.

New Fees Help Fund New Patient-Centered Outcomes Research Institute

PPACA amended the Internal Revenue Code (“Code”) to require the new fee to help fund the establishment and operation of the new Patient-Centered Outcomes Research Institute (the ‘‘Institute’’) to be created by PPACA. Congress intends that the Institute will be a private, nonprofit corporation charged with conducting research to help assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings.

PPACA added new Sections 4375, 4376, and 4377 to the Code to provide a funding source for the Trust Fund. These new Code Sections impose require issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to pay the new fee by July 31, 2012 for each plan year beginning after September 30, 2012 and before October 1, 2019 to fund the Patient-Centered Outcomes Research Trust Fund (the “Trust Fund”), which in turn will help pay the costs of the Institute.

Code Section 4377(c) provides that the fees imposed by sections 4375 and 4376 are treated as taxes for purposes of subtitle F of the Code (sections 6001 through 7874 that set forth the rules of federal tax procedure and administration).

Fee Amount Calculation & Payment

As amended by PPACA, the Code requires that employers sponsoring self-insured group health plans and most health insurers file a return and pay a fee equal to $1 multiplied by the average number of lives covered under the plan or policy by July 31, 2012. The amount of this fee will increase to $2 multiplied by the average number of lives for post-September 30, 2013 plan years. For post-September 30, 2014 plan years, the Code provides for further adjustments in the fee based on increases in the projected per capita amount of National Health Expenditures.

To meet this requirement, health insurers and plan sponsors must file a Form 720, Quarterly Federal Excise Tax Return along with the required payment once a year on or before July 31 of the calendar year following the last day of the policy year or plan year for which the fee is required to report and pay the fee.

Overview of ACA Rules Requiring Payment of Fee

The Code now separately assesses a fee on issuers of health insurance policies and on plan sponsors of self-insured health plans for each policy year ending on or after October 1, 2012 and before October 1, 2019. Code Section 4375 requires payment of a fee by “issuers” of “specified health insurance policies.” Code Section 4376 requires “sponsors” of self-insured health plans to pay a fee.

Each of these Code Sections basically uses the same formula to calculate the required fee owing by a health insurance issuer or a self-insured plan sponsor. The amount of the required fee due on July 31, 2013 for plan years beginning on or before October 1, 2013 will be one dollar multiplied by the average number of lives covered by the policy or plan. The fee due on July 31, 2014 for plan years beginning between October 2, 2013 and October 1, 2014 is set to increase to two dollars multiplied by the average number of lives covered under the policy. For policy or plan years ending on or after October 1, 2014, PPACA provides for additional increases in the required fee based on increases in the projected per capita amount of National Health Expenditures. See Treas. Reg. §§ 46.4375–1; Rejecting arguments that Congress only intended to require that either the insurer or the plan sponsor pay a fee annually, the Regulations construe these requirements as obligating both a self-insured health plans sponsor and an insurer to pay a separate fee annually, even if the fee is assessed upon the same lives.

The Preamble to the Regulations states that a self-insured plan sponsor must pay the fee with respect to arrangements where the plan design layers a self-insured portion of the plan with an insured portion, even though the insurer also must pay the fee with respect to the insured portion.

The fee calculation differs slightly for purposes of determining the fee a self-insured plan sponsor owes versus the fee owed by an insurer. Regardless, however, the Regulations state that for purposes of calculating these numbers, retirees and beneficiaries continuing coverage under the group medical coverage continuation rules generally count. The Preamble to the Regulations states that the IRS views retiree-only plans and COBRA coverage subject to the tax imposed under Code § 4375 and plan sponsors may be required to pay the tax under Code § 4376. Concerning retiree-only coverage, the Preamble states:

Although group health plans that have fewer than two participants who are current employees (such as retiree-only plans) are excluded from the requirements of Code chapter 100 (setting forth requirements applicable to group health plans such as portability, nondiscrimination, and market reform requirements), this exclusion does not apply to Code §§ 4375 and 4376 because these sections are in chapter 34; and
For self-insured arrangements, Code § 4376(c)(2)(A) states explicitly that an applicable self-insured health plan includes a plan established or maintained by one or more employers for the benefit of their employees or former employees.

Section 4376 Fee For Self-Insured Plan Sponsors

Applicability of Code Section 4376 Fee To Self-Insured Health Plans. The fee under Code Section 4376 applies to the plan sponsor of an applicable self-insured health plan.

Section 4376(c) defines an applicable self-insured health plan as any plan for providing accident or health coverage if any portion of the coverage is provided other than through an insurance policy, and the plan is established or maintained by either:

One or more employers for the benefit of their employees or former employees;
One or more employee organizations for the benefit of their members or former members;
Jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees;
By a voluntary employees’ beneficiary association described in Code Section 501(c)(9); or
By any organization described in section 501(c)(6), or (6) if not previously described, by a multiple employer welfare arrangement (as defined in section 3(40) of the Employee Retirement Income Security Act (“ERISA”), a rural electric cooperative under ERISA Section 3(40)(B)(iv), or a rural telephone cooperative association under ERISA Section 3(40)(B)(v). See Code § 4376; Regulation §46.4376–1(a), (b)(1).

Code Section 4376(b)(1) requires that the plan sponsor of a self-insured health plan pay the required fee for self-insured health plans imposed by Section 4376(a). For this purpose, Code Section 4376(b)(2) defines a plan sponsor as:

The employer in the case of a plan established or maintained by a single employer;
The employee organization in the case of a plan established or maintained by an employee organization;
The association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan in the case of: (1) a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations; (2) a multiple employer welfare arrangement; or (3) a voluntary employees’ beneficiary association described in Code Section 501(c)(9); or
The cooperative or association that establishes the plan in the case of a plan established or maintained by a rural electric cooperative or rural telephone cooperative association within the meaning of ERISA.

Regulation § 46.4376-2(b)(2) defines plan sponsor to mean the following:

The employer for a self-insured health plan established or maintained by a single employer;
The employee organization for a self-insured health plan established or maintained by an employee organization;
The joint board of trustees for a multiemployer plan within the meaning of Code §414(f));
The committee, in the case of a multiple employer welfare arrangement within the meaning of Section 3(40) of the Employee Retirement Income Security Act (“ERISA”);
The cooperative or association that establishes or maintains an applicable self-insured health plan established or maintained by a rural electric cooperative under ERISA § 3(40)(B)(iv) or rural cooperative association under ERISA 3(40)(B)(v);
The trustee, in the case of an applicable self-insured health plan established or maintained by a voluntary employees’ beneficiary association under Code § 501(c)(9) not merely serving as a funding vehicle for a plan that is established or maintained by an employer or other person;
In the case of an applicable self-insured health plan the plan sponsor of which is not previously described, the person identified by the terms of the document under which the plan is operated as the plan sponsor, or the person designated by the terms of the document under which the plan is operated as the plan sponsor for Code § 4376 purposes, provided that designation is made in writing, and that person has consented to the designation in writing, by no later than the date by which the return paying the fee under section 4376 for that plan year is required to be filed, after which date that designation for that plan year may not be changed or revoked, and provided further that a person may be designated as the plan sponsor only if the person is one of the persons establishing or maintaining the plan (for example, one of the employers that establishes or maintains the plan with one or more other employers or employee organizations); or
Where an applicable self-insured health plan sponsor is not previously and for which no identification or designation of a plan sponsor has been made under the prior paragraph the plan sponsor means, each employer that establishes or maintains the plan with respect to employees of that employer, each employee organization that establishes or maintains the plan with respect to members of that employee organization, and each board of trustees, cooperative, or association that establishes or maintains the plan.

While the fee will impact most health insurance policies and self-insured plans, the Code does exempt a few arrangements. See Code § 4376. Regulation § 46.4376-1(b)(2) construes these exemptions to include the following categories of programs:

A plan that provides benefits substantially all of which are excepted benefits for purposes of the HIPAA Portability Rules under Code § 9832(c). Pursuant to this provision, for instance, the Regulations state that a health flexible spending arrangement (health FSA) under Code § 106(c)(2)) that satisfies the requirements to be treated as an excepted benefit under Code § 9832(c) and Regulation § 54.9831–1(c)(3)(v) is not an applicable self-insured health plan. However, a health FSA that is not treated as an excepted benefit under Code § 9832(c) and Regulation § 54.9831–1(c)(3)(v) is an applicable self-insured health plan.
An employee assistance program, disease management program, or wellness program if the program does not provide significant benefits in the nature of medical care or treatment.
A plan that, as demonstrated by the facts and circumstances surrounding the adoption and operation of the plan, was designed specifically to cover primarily employees who are working and residing outside the United States (as defined in § 46.4377–1(a)(3)). See Regulation § 46.4376–1(b)(ii).

Where the same plan sponsor maintains multiple self-insured arrangements Regulation § 46.4376(b)(iii) specifies that the employer may treat two or more arrangements established or maintained by the same plan sponsor that provide accident and health coverage other than through an insurance policy and that have the same plan year as a single applicable self-insured health plan for purposes of reporting and calculating the Code § 4376 fee.

Calculation Of Self-Insured Plan Fee Under Code § 4376

Regulation § 46.4376-1 requires that a self-insured plan sponsor determine the number of covered lives for purposes of calculating the fee using on of the following methods:

The actual count method where the plan sponsor adds the totals of lives covered for each day of the plan year and divides that total by the number of days in the plan year;
The snapshot method, the plan sponsor adds the totals of lives covered on a date during the first, second, or third month of each quarter of the plan year (or more dates in each quarter if an equal number of dates is used in each quarter), and divides that total by the number of dates on which a count was made in accordance with rules set forth in the Regulations. For instance, Each date used for the second, third and fourth quarter must be within three days of the date in that quarter that corresponds to the date used for the first quarter, and all dates used must fall within the same plan year. If a plan sponsor uses multiple dates for the first quarter, the plan sponsor must use dates in the second, third, and fourth quarters that correspond to each of the dates used for the first quarter or are within three days of such corresponding dates, and all dates used must fall within the same plan year. The 30th and 31st day of a month are treated as the last day of the month for purposes of determining the corresponding date for any month that has fewer than 31 days. The number of lives covered on a designated date using this method may be determined using either the snapshot factor method or the snapshot count method set forth in the Regulations. In the snapshot factor method, the number of lives covered on a date is equal to the sum of: (1) the number of participants with self-only coverage on that date; plus (2) the number of participants with coverage other than self-only coverage on the date multiplied by 2.35. In the snapshot count method, the number of lives covered on a date equals the actual number of lives covered on the designated date. The plan sponsor must use the same method of calculating the average number of lives covered under the plan consistently for the duration of the plan year. However, a plan sponsor may use a different method from one plan year to the next.
The Form 5500 method, where the plan sponsor determines the average number of lives covered under a plan for a plan year as the result of the sum of the total participants covered at the beginning and the end of the plan year, as reported on the Form 5500 or Form 5500–SF for the applicable self-insured health plan, divided by 2. This method is only available if the Form 5500 is filed by the due date for payment of the fee. This means where a plan administrator extends filing beyond July 31, the plan sponsor cannot use this method.

The Regulations establish a special rule for lives covered solely by the fully-insured options under an applicable self-insured health plan. Under this special rule, when an applicable self-insured health plan provides accident and health coverage through fully insured options and self-insured options, the plan sponsor is permitted to disregard the lives that are covered solely under the fully-insured options in determining the lives covered taken into account for the actual count method, the snapshot method, and the Form 5500 method.

As for insured plans, the Regulations also provide special rules for determining the fee the first year the fee is in effect. Under this rule, for a plan year beginning before July 11, 2012, and ending on or after October 1, 2012, a plan sponsor may determine the average number of lives covered under the plan for the plan year using any reasonable method.

Section 4375 Fee For Insurers

The fee under Code Section 4375 generally applies to issuers of a “specified health insurance policy.” Code Section 4375(c) generally defines a specified health insurance policy as any accident or health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States. Code Section 4377(a)(1) defines accident and health coverage as any coverage that, if provided by an insurance policy, would cause the policy to be a specified health insurance policy under Code Section 4375. See Treas. Reg. § 46.4375–1.

Policies Subject To Fee. Regulation § 46.4377–1(a) defines a “specified health insurance policy” as “any accident and health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States” other than those recognized as exempt by the Regulation. The Regulation makes clear that this includes any policy that provides accident and health coverage to an active employee, former employee, or qualifying beneficiary, as continuation coverage required under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or similar continuation coverage under other Federal law or state law.

However Regulation § 46.4377-1(a)(ii) exempts the following arrangements from the definition of a specified health insurance policy.

Any insurance policy if substantially all of its coverage is of excepted benefits described in Code Section 9832(c);
Any group policy issued to an employer where the facts and circumstances show that the group policy was designed and issued specifically to cover primarily employees who are working and residing outside of the United States for purposes of Regulation § 46.4377–1(a)(3);
Any stop loss or indemnity reinsurance policy; or
Any insurance policy to the extent it provides an employee assistance program, disease management program, or wellness program if the program does not provide significant benefits in the nature of medical care or treatment.

Fee Calculation. The amount of the fee an insurer must pay for a policy for a policy year under Code § 4375 is equal to the product of the average number of lives covered under the policy for the policy year, multiplied by the applicable dollar amount for that policy year.

The applicable dollar amount multiplier is $1 for the fee due on October 1, 2013; $2 for the fee due on October 1, 2014, and the adjusted amount for fees due after October 1, 2014.

Determination Of The Average Number Of Lives Covered. To determine the average number of lives covered under a specified health insurance policy during a policy year, the Regulation requires an issuer to use one of the following methods:

The actual count method, where the issuer determines the average number of lives covered under a policy for a policy year under the actual count method by adding the total number of lives covered for each day of the policy year and dividing that total by the number of days in the policy year;
The snapshot method, where the issuer determines the average number of lives covered under a policy for a policy year by adding the totals of lives covered on a date during the first, second, or third month of each quarter (or more dates in each quarter if an equal number of dates is used for each quarter), and dividing that total by the number of dates on which a count is made. Each date used for the second, third and fourth quarters must be within three days of the date in that quarter that corresponds to the date used for the first quarter, and all dates used must be within the same policy year. If an issuer uses multiple dates for the first quarter, the issuer must use dates in the second, third, and fourth quarters that correspond to each of the dates used for the first quarter or are within three days of such corresponding dates, and all dates used must be within the same policy year. The 30th and 31st day of a month are treated as the last day of the month for purposes of determining the corresponding date for any month that has fewer than 31 days (for example, if either March 30 or March 31 is used as a counting date for a calendar year policy, June 30 is the corresponding date for the second quarter);
The member months method, where the issuer determines the average number of lives covered under all policies in effect for a calendar year based on the member months (an amount that equals the sum of the totals of lives covered on prespecified days in each month of the reporting period) reported on the National Association of Insurance Commissioners (“NAIC”) Supplemental Health Care Exhibit filed for that calendar year. Under this method, the average number of lives covered under the policies in effect for the calendar year equals the member months divided by 12; or
The state form method, where an insurer not required to file NAIC annual financial statements may determine the number of lives covered under all policies in effect for the calendar year using a form filed with the issuer’s state of domicile and a method similar to the member months method if the form reports the number of lives covered in the same manner as member months are reported on the NAIC Supplemental Health Care Exhibit. See Regulation § 46.4375–1(c)(2)(i).

Issuers must use the same method of calculating the average number of lives covered under a policy consistently for the duration of the year and must use the same method of computing lives for all policies for which a liability is reported on a Form 720, “Quarterly Federal Excise Tax Return,” for a particular year. Regulation § 46.4375–1(c)(2)(ii). However, the Regulation allows an issuer that determines the average number of lives covered by using the actual count method or the snapshot method to change its method of computing the average lives covered to the snapshot method or actual count method, respectively, provided that the issuer uses the same method for computing the average lives covered for all policies for which a liability is reported on the Form 720 for that year. Regulation § 46.4375–1(c)(2).

The Regulations also impose various other special rules. For instance, the Regulations state that if the issuer elects to determine the average number of lives covered for all policies in effect during a calendar year using the member months method or the state form method, the applicable dollar amount with respect to such issuer’s policies for such calendar year is the applicable dollar amount for policy years ending on December 31 of such calendar year, except that the applicable dollar amount with respect to such an issuer’s policies for calendar year 2019 is the applicable dollar amount for policy years ending on September 30, 2019. The Regulations provide various examples of these calculations to illustrate the rules.

The Regulations also provide special rules for the first year and the last year the fee is in effect for an insurer. See Regulation § § 46.4375–1(c).

Plans, Insurers Should Evaluate Options, Plan To Pay Required Fees

The impending obligation provides yet another reason that employers and other self-insured plan sponsors, administrators, insurers, and vendors should re-evaluate their existing health plan designs and costs. Most health insurers and self-insured health plan sponsors will want not only to budget for the impending additional costs associated with these fees, but also evaluate options for mitigating their impact, as well as the costs and administrative burden of tracking and making the required filings. For instance, insurers and plan sponsors of programs subject to these new fees generally will want to evaluate which of the options for collecting the data and calculating the fees will most benefit them. Also, where plan designs used by particular employer or other plan sponsors include both insured and self-insured features, the insurer, plan sponsor and their advisors may want to consider the advisability of restructuring or redesigning plans to mitigate fees or administrative or other expenses. In all cases, parties should audit their programs to ensure that each program and its element is identified and properly taken into account to avoid inadvertent oversights resulting in penalties or other avoidable costs.

For Help With Compliance, Risk Management, Investigations, Policy Updates Or Other Needs

If you need help with these or other health benefit or other human resources, employee benefit, insurance, compensation or other compliance, risk management, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, a member of the Editorial Advisory Board and expert panels of HR.com, Employee Benefit News, InsuranceThoughtLeadership.com, and Solutions Law Press, Inc., management attorney and consultant Ms. Stamer has 25 years of leading edge experience helping employers; health and other employee benefit plans and their sponsors, administrators, fiduciaries; TPAs, insurers, governments, employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. Her experience includes extensive work representing advising these and other clients, governmental bodies, insurance and financial services organizations, third party administrators and others to develop, design, defend and administer creative health, disability, severance and other employee benefit and compensation arrangements, products and services. She also helps these and other clients monitor, address and respond to federal, state, and international health care and insurance and other regulatory, legislative, audit and enforcement developments. Ms. Stamer has worked, extensively on these and other workforce and performance related matters. In addition to her continuous day-to-day involvement helping businesses to manage employment and employee benefit plan concerns, she also has extensive public policy and regulatory experience with these and other matters domestically and internationally. A former member of the Executive Committee of the Texas Association of Business and past Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, Ms. Stamer served as a primary advisor to the Government of Bolivia on its pension privatization law, and has been intimately involved in federal, state, and international workforce, health care, pension and social security, tax, education, immigration, education and other legislative and regulatory reform in the US and abroad. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly. Ms. Stamer regularly works with agencies, publishes and speaks extensively on human resources and employee benefits, medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights on HIPAA and other data privacy and security concerns appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. You can get more information about her HIPAA and other experience here.

If you need help with these or other compliance concerns, wish to ask about arranging for compliance audit or training, or need legal representation on other matters please contact Ms. Stamer at (469) 767-8872 or via e-mail here.

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1st OCR Small HIPAA Breach Settlement Shows Plans, Other Covered Entities At Risk From Small Breach Reports Too

January 3, 2013

$50K Settlement Shows Small Breach Reports Carry Enforcement Risk

Properly encrypt and protected electronic protected health information (ePHI) on laptops and in other mediums! That’s the clear message of the Department of Health and Human Services (HHS) Office of Civil Rights (OCR) in its announcement of its first settlement under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule involving a breach of ePHI of fewer than 500 individuals by a HIPAA-covered entity, Hospice of North Idaho (HONI).

In announcing the settlement against HONI, OCR sent a clear message that OCR stands ready to penalize these health care providers, health plans, healthcare clearinghouses and their businesses associates (covered entities) when their failure to properly secure and protect ePHI on laptops or in other systems results in a breach of ePHI even when the breach affects fewer than 500 individuals.

OCR Director Leon Rodriguez reiterated OCR’s expectation that covered entities will properly encrypt ePHI on mobile or other devices in OCR’s announcement of the HONI settlement. “This action sends a strong message to the health care industry that, regardless of size, covered entities must take action and will be held accountable for safeguarding their patients’ health information.” said OCR Director Leon Rodriguez. “Encryption is an easy method for making lost information unusable, unreadable and undecipherable.”

In light of this latest clear warning, health plans and their fiduciaries, sponsors and administrators, health care providers, health care clearinghouses and their business associates should review plans, practices and data security as affecting ePHI and other protected health information on mobile and other devices.

HONI Settlement For Small Breach Notification

On January 2, 2013, OCR announced HONI will pay OCR $50,000 to settle potential HIPAA violations that occurred in connection with the theft of an unencrypted laptop computer containing ePHI. The HONI settlement is the first settlement involving a breach of ePHI affecting fewer than 500 individuals. Read the full HONI Resolution Agreement here.

OCR opened an investigation after HONI reported to HHS that an unencrypted laptop computer containing ePHI of 441 patients had been stolen in June 2010. HONI team members regularly use Laptops containing ePHI their field work. Over the course of the investigation, OCR discovered that HONI had not conducted a risk analysis to safeguard ePHI or have in place policies or procedures to address mobile device security as required by the HIPAA Security Rule. Since the June 2010 theft, HONI has taken extensive additional steps to improve their HIPAA Privacy and Security compliance program.

HIPAA Security & Breach Notification For ePHI

The HONI settlement is notable because it marks the first time OCR has sanctioned a covered entity as a result of an OCR investigation stemming from the covered entity’s report of a breach of unsecured protected health information involving fewer than 500 individuals under new breach notification rules added to HIPAA in 2009.

Under the originally enacted requirements of HIPAA, covered entities and their business associates are required to restrict the use, access and disclosure of protected health information and establish and administer various other policies and safeguards in relation to protected health information. Additionally, the Security Rules require specific encryption and other safeguards when covered entities collect, create, use, access, retain or disclose ePHI.

The Health Information Technology for Economic and Clinical Health (HITECH) Act amended HIPAA, among other things to tighten certain HIPAA requirements, expand its provisions to directly apply to business associates, as well as covered entities and to impose specific breach notification requirements. The HITECH Act Breach Notification Rule requires covered entities to report an impermissible use or disclosure of protected health information, or a “breach,” of 500 individuals or more (Large Breach) to the Secretary of HHS and the media within 60 days after the discovery of the breach. Smaller breaches affecting less than 500 individuals (Small Breach) must be reported to the Secretary on an annual basis. Since the Breach Notification Rule took effect, OCR’s announced policy has been to investigate all Large Breaches and such investigations have resulted in settlements or other corrective action in relation to various Large Breaches. Until now, however, OCR has not made public any resolution agreements requiring settlement payments involving any Small Breaches.

Enforcement Actions Highlight Growing HIPAA Exposures For Covered Entities

While the HONI settlement marks the first settlement on a small breach, this is not the first time OCR has sought sanctions against a covered entity for data breaches involving the loss or theft of unencrypted data on a Laptop, storage device or other computer device. In fact, OCR’s first resolution agreement – reached before Congress added the HIPAA Breach Notification Rules to HIPAA – stemmed from such a breach. Providence To Pay $100000 & Implement Other Safeguards. Breaches resulting from the loss or theft of unencrypted ePHI on mobile or other computer devices or systems has been a common basis of investigation and sanctions since that time, particularly since the Breach Notification rules took effect including breaches of ePHI involving compromised health plan information. See, e.g., OCR Hits Alaska Medicaid For $1.7M+ For HIPAA Security Breach. Coupled with statements by OCR about its intolerance, the HONI and other settlements provide a strong warning to covered entities to properly encrypt ePHI on mobile and other devices.

Furthermore, the HONI settlement also adds to growing evidence of the growing exposures that health care providers, health plans, health care clearinghouses and their business associates need to carefully and appropriately manage their HIPAA encryption and other Privacy and Security responsibilities. See OCR Audit Program Kickoff Further Heats HIPAA Privacy Risks; $1.5 Million HIPAA Settlement Reached To Resolve 1st OCR Enforcement Action Prompted By HITECH Act Breach Report; HIPAA Heats Up: HITECH Act Changes Take Effect & OCR Begins Posting Names, Other Details Of Unsecured PHI Breach Reports On Website. Covered entities are urged to heed these warning by strengthening their HIPAA compliance and adopting other suitable safeguards to minimize HIPAA exposures.

In the face of rising enforcement and fines, OCR’s initiation of HIPAA audits and other recent developments, covered entities and their business associates should tighten privacy policies, breach and other monitoring, training and other practices to reduce potential HIPAA exposures in light of recently tightened requirements and new enforcement risks.

In response to these expanding exposures, all covered entities and their business associates should review critically and carefully the adequacy of their current HIPAA Privacy and Security compliance policies, monitoring, training, breach notification and other practices taking into consideration OCR’s investigation and enforcement actions, emerging litigation and other enforcement data; their own and reports of other security and privacy breaches and near misses, and other developments to decide if additional steps are necessary or advisable.

New OCR HIPAA Mobile Device Educational Tool

While OCR enforcement of HIPAA has significantly increased, compliance and enforcement of the encryption and other Security Rule requirements of HIPAA are a special focus of OCR.

To further promote compliance with the Breach Notification Rule as it relates to ePHI on mobile devices, OCR and the HHS Office of the National Coordinator for Health Information Technology (ONC) recently kicked off a new educational initiative, Mobile Devices: Know the RISKS. Take the STEPS. PROTECT and SECURE Health Information. The program offers health care providers and organizations practical tips on ways to protect their patients’ health information when using mobile devices such as laptops, tablets, and smartphones. For more information, see here. For more information on HIPAA compliance and risk management tips, see here.

For Help With Compliance, Risk Management, Investigations, Policy Updates Or Other Needs

If you need help monitoring HIPAA and other health and health plan related regulatory policy or enforcement developments, or to review or respond to these or other human resources, employee benefit, or other compliance, risk management, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Nationally recognized for her extensive work, publications and leadership on HIPAA and other privacy and data security concerns, Ms. Stamer has extensive experience representing, advising and assisting health care providers, health plans, their business associates and other health industry clients to establish and administer medical and other privacy and data security, employment, employee benefits, and to handle other compliance and risk management policies and practices; to investigate and respond to OCR and other enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She regularly designs and presents HIPAA and other risk management, compliance and other training for health plans, employers, health care providers, professional associations and others.

A Fellow in the American College of Employee Benefit Counsel, State Bar of Texas and American Bar Association, Vice President of the North Texas Health Care Compliance Professionals Association, the Former Chair of the ABA RPTE Employee Benefit & Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice Chair of the ABA TIPS Employee Benefit Committee, an ABA Joint Committee on Employee Benefits Council Representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer serves as the scribe for the ABA Joint Committee on Employee Benefits agency meeting with OCR. Ms. Stamer also regularly works with OCR and other agencies, publishes and speaks extensively on medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights on HIPAA and other data privacy and security concerns appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. For instance, Ms. Stamer for the third year will serve in 2013 as the appointed scribe for the ABA Joint Committee on Employee Benefits Agency meeting with OCR. Her insights on HIPAA risk management and compliance often appear in medical privacy related publications of a broad range of health care, health plan and other industry publications Among others, she has conducted privacy training for the Association of State & Territorial Health Plans (ASTHO), the Los Angeles Health Department, SHRM, HIMMS, the American Bar Association, the Health Care Compliance Association, a multitude of health plan, insurance and financial services, education, employer employee benefit and other clients, trade and professional associations and others. You can get more information about her HIPAA and other experience here.

In addition to this extensive HIPAA specific experience, Ms. Stamer also is recognized for her experience and skill aiding clients with a diverse range of other employment, employee benefits, health and safety, public policy, and other compliance and risk management concerns.

About Solutions Law Press, Inc.™

About Solutions Law Press, Inc.™

1 Comment | Corporate Compliance, Employers, GINA, Health Plans, HIPAA, Human Resources, Insurance, Internal Controls, Internal Investigations, Privacy, Risk Management, Whistleblower | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Labor Department Targeting Businesses Violating Overtime, Other Wage & Hour Laws

December 27, 2012

Employers should make reviewing and tightening their worker classification and pay practices a high priority in light of the continuing aggressive investigation and enforcement of minimum wage, overtime and other federal pay law violations by the U.S. Department of Labor (Labor Department) Wage and Hour Division (W&HD).

Latest Enforcement Shows Commitment

The Labor Department’s strong commitment to the investigation and enforcement of federal wage and hour law violations is reflected in its announcement of yet another wave of successful enforcement actions against a wide range of employers during December including the following:

Car Wash Employees Receive Back Wages. Labor Department officials say Genter’s Detailing Inc. in Frisco, Texas, has paid 53 detail and car wash employees $22,345, following a W&HD investigation that found the employer violated the Fair Labor Standards Act (FLSA) by making illegal deductions from employees’ wages for damages to dealership vehicles, resulting in wages below the federal minimum of $7.25 per hour. The company provides car wash and detailing services to car dealerships in the Dallas-Fort Worth area, in Katy and in Austin. More Details Here.

Oklahoma Electrical Services Company Pays Back Wages. Labor Department officials report Lighthouse Electric Inc. in Tulsa, Okla., has paid $42,452 in overtime back wages to 18 current and former electricians following an investigation that found Lighthouse Electric improperly failed to pay employees for time spent traveling to and from their facility to a work site in violation of the FLSA. More Details Here.

Web-based Auto Company Violated FLSA. Labor Department Officials report Auto Cricket Corp., doing business as AutoCricket.com, has agreed to pay $76,589 in back wages to 414 employees following a W&HD investigation that found the company deducted short rest periods as non-work hours from employee totals of hours worked in violation of the FLSA. Additionally, the company paid overtime for hours worked beyond 80 during a biweekly pay period, instead of time and one-half for all hours worked over 40 in a seven-day workweek. More Details Here.

South Carolina Restaurants Pay $391,000 in Back Wages. Labor Department officials report that three San Jose Mexican restaurants, individually owned and operated by Eraclio Leon, Gregorio Leon Sr. and Antonio Leon, have agreed to pay $390,960 in back wages to 37 employees after the W&HD found the South Carolina businesses violated the FLSA by failing to properly compensate employees for all work hours. Investigators determined that tipped employees, such as servers, were paid direct wages below $2.13 per hour and kitchen staff were paid flat salaries each month. More Details Here.

San Francisco Grocer to Pay Back Wages to 25 Workers. The Labor Department announced a U.S. District Court has ordered Casa Guadalupe to pay $110,071 in overtime back wages and liquidated damages to 25 current and former employees at its three San Francisco stores. The Labor Department also assessed $11,687 in civil penalties against the employer because of the willful and repeat nature of the violations. The grocery store chain admitted not paying required overtime wages. Investigators found similar violations in 2010 that resulted in $6,496 in overtime back wages due to three workers. More Details Here.

Environment Services Company Pays Back Wages To Misclassified Environmental Scientists. The Labor Department also announced that Groundwater and Environmental Services Inc., doing business as GES, will pay $187,165 in back wages to 69 employees after the W&HD found FLSA violations resulting from the company’s misclassification of junior environmental scientists and junior baseline samplers as exempt from overtime pay. The company collects water samples from property owners in close proximity to oil and gas well drilling sites for baseline sampling surveys. The investigation was part of a Wage and Hour Division’s multiyear enforcement initiative focused on the oil and gas industry. More Details Here.

Oklahoma Manufacturer Pays $85,000 for Overtime. Labor Department officials announced Deerebuilt LLC in Ardmore, Okla., has paid $85,105 in overtime back wages to 112 current and former employees following a W&HD investigation that found that the employer paid “straight time” for all hours worked, failing to pay overtime at time and one-half employees’ regular rates of pay for hours worked beyond 40 in a workweek, as required by the FLSA. The employer paid employees for overtime hours worked on weekends with separate checks, at straight-time rates. More Details Here.

Oklahoma City Company Faulted for FLSA & Davis-Bacon Violations. The Labor Department announced that Mallett Plumbing and Utility Co. in Oklahoma City has paid $100,264 in back wages to 19 current and former plumbers after an investigation found violations of the FLSA and the Davis-Bacon Act. The W&HD says the company failed to pay workers for overtime and failed to pay prevailing wage rates and fringe benefits. A W&HD investigation found Mallett Plumbing and Utility paid straight time for all hours worked and failed to pay employees the required wages and fringe benefits applicable to the classifications of work they performed while working on building alterations and construction projects for the Health Resources and Services Administration and the Federal Aviation Administration. More Details Here.

The Christmas Light Co. Inc. According to the Labor Department, an investigation by its Dallas Wage and Hour Division office found that The Christmas Light Co. Inc. violated the FLSA by failing to pay 233 installers and removers the minimum and overtime wages and keep records required by law. The complaint filed in the Northern District of Texas seeks back wages and liquidated damages of nearly $500,000 and an injunction against future violations of the FLSA.

FLSA Violations Generally Costly; Enforcement Rising

The enforcement record of the Labor Department confirms that the Labor Department’s suit against the Christmas Light Co. Inc. lawsuit is reflective of a strong enforcement commitment targeting U.S. employers using aggressive worker classification or other pay practices to avoid paying minimum wage or overtime to workers. Under the Obama Administration, DOL officials have made it a priority to enforce overtime, record keeping, worker classification and other wage and hour law requirements. See e.g., Boston Furs Sued For $1M For Violations Of Fair Labor Standards Act; Record $2.3 Millh ion+ Backpay Order; Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For Employers; Quest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay. In an effort to further promote compliance and enforcement of these rules, the Labor Department is using smart phone applications, social media and a host of other new tools to educate and recruit workers in its effort to find and prosecute violators. See, e.g. New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers. As a result of these effort, employers violating the FLSA now face heightened risk of enforcement from both the Labor Department and private litigation.

Employers Should Strengthen Practices For Defensibility

To minimize exposure under the FLSA, employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take other actions to minimize their potential liability under applicable wages and hour laws. Steps advisable as part of this process include, but are not necessarily limited to:

Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
Review existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiate proper corrective action after consultation with qualified legal counsel;
Review existing documentation and record keeping practices for hourly employees;
Explore available options and alternatives for calculating required wage payments to non-exempt employees;
Consider advisability of tracking hours and activities of employees considered exempt;
Evaluate and manage risks of outsourced labor such as leased, contract or other similar “off-payroll” workers;
Re-engineerwork rules and other practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures; and
Consider and properly coordinate worker classification for health and other employee benefit plan eligibility and other purposes to mitigate risks from unanticipated employee benefit liabilities resulting from misclassification.

Because of the potentially significant liability exposure, employers generally will want to consult with qualified legal counsel before starting their risk assessment and assess risks and claims within the scope of attorney-client privilege to help protect the ability to claim attorney-client privilege or other evidentiary protections to help shelter conversations or certain other sensitive risk activities from discovery under the rules of evidence.

For Help With Investigations, Policy Updates Or Other Needs

If you need help in conducting a risk assessment of or responding to an IRS, DOL, Justice Department, or other federal or state agencies or other private plaintiff or other legal challenges to your organization’s existing workforce classification or other labor and employment, compliance, employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469) 767-8872 .

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer often has worked, extensively on these and other workforce and performance related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.™

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1 Comment | Corporate Compliance, Employers, Human Resources, Internal Controls, Internal Investigations, Risk Management, Wage & Hour | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Bank’ $1Million Plus Overtime Settlement Shows Risks of Misapplying FLSA’s Administrative Exemption

December 1, 2012

Department of Labor (Labor Department) officials are pointing to a more than $1 million backpay settlement paid by First Republic Bank as a reminder of the risks that employers run by treating employees as exempt from minimum wage, overtime and recordkeeping requirements without confirming that the facts surrounding the employment of each employee considered exempt in fact meet every condition that the Fair Labor Standards Act (FLSA) requires to qualify as exempt.

First Republic Bank paid $1,009,643.93 in overtime back wages for 392 First Republic Bank employees in California, Connecticut, Massachusetts, New York and Oregon after the Labor Department found the San Francisco-based bank wrongly classified the employees as exempt from the FLSA’s overtime and recordkeeping requirements, resulting in violations of the Fair Labor Standards Act’s overtime and record-keeping provisions. The Labor Department announced the settlement resulting in the payment on November 27, 2012.

The settlement came after an investigation by the Labor Department’s Wage and Hour Division found that the San Francisco-based bank wrongly classified the employees as exempt from overtime, resulting in violations of the FLSA’s overtime and record-keeping provisions.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also are required to maintain accurate time and payroll records.

While the FLSA provides an exemption from both minimum wage and overtime pay requirements for individuals employed in bona fide executive, administrative, professional and outside sales positions, as well as certain computer employees, job titles do not determine the applicability of this or other FLSA exemptions. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the department’s regulations. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

Investigators found that First Republic Bank failed to consider the FLSA’s criteria that allow certain administrative and professional employees to be exempt from receiving overtime pay. In fact, the employees were entitled to overtime compensation at one and one-half times their regular rates for hours worked over 40 in a week. Additionally, the bank failed to include bonus payments in nonexempt employees’ regular rates of pay when computing overtime compensation, in violation of the act. Record-keeping violations resulted from the employer’s failure to record the number of hours worked by the misclassified employees.

“It is essential that employers take the time to carefully assess the FLSA classification of their workforce,” said Secretary of Labor Hilda L. Solis in the Labor Department’s announcement of the settlement. “As this investigation demonstrates, improper classification results in improper wages and causes workers real economic harm.”

FLSA Violations Generally Costly; Enforcement Rising

The enforcement record of the Labor Department confirms that employers that improperly treat workers as exempt from the FLSA’s overtime, minimum wage and recordkeeping requriements run a big risk. The Labor Deprtment and private plaintiffs alike regularly target employers that use aggressive worker classification or other pay practices to avoid paying minimum wage or overtime to workers. Under the Obama Administration, DOL officials have made it a priority to enforce overtime, record keeping, worker classification and other wage and hour law requirements. See e.g., Boston Furs Sued For $1M For Violations Of Fair Labor Standards Act; Record $2.3 Million+ Backpay Order; Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For Employers; Quest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay. In an effort to further promote compliance and enforcement of these rules, the Labor Department is using smart phone applications, social media and a host of other new tools to educate and recruit workers in its effort to find and prosecute violators. See, e.g. New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers. As a result of these effort, employers violating the FLSA now face heightened risk of enforcement from both the Labor Department and private litigation.

Employers Should Strengthen Practices For Defensibility

Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of proper corrective action after consultation with qualified legal counsel;
Review of existing documentation and record keeping practices for hourly employees;
Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and
Re-engineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures.

For Help With Investigations, Policy Updates Or Other Needs

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer often has worked, extensively on these and other workforce and performance related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.™

Comments Off on Bank’ $1Million Plus Overtime Settlement Shows Risks of Misapplying FLSA’s Administrative Exemption | Corporate Compliance, Employers, Human Resources, Internal Controls, Internal Investigations, Risk Management, Wage & Hour | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Labor Department Serves The Christmas Light Co. & Its Owner With Holiday Season FLSA Lawsuit

November 30, 2012

The U.S. Department of Labor (Labor Department) kicked off the 2013 Holiday Season by filing a lawsuit against The Christmas Light Co. Inc. and owner William F. Rathburn to recover approximately $240,881 in wages and an additional amount in liquidated damages under the Fair Labor Standards Act (FLSA) on behalf of 233 employees who installed and removed lights for the company. Yet another in a growing list of lawsuits against U.S. employers accused of failing to comply with FLSA minimum wage and overtime rules, the lawsuit reflects the significant risks that U.S. businesses risk by failing to properly track and pay employees covered by the FLSA as required.

Holiday Season FLSA Suit Casts Shadow Over The Christmas Light Co. Inc.

According to the Labor Department, an investigation by its Dallas Wage and Hour Division office found that The Christmas Light Co. Inc. violated the FLSA by failing to pay 233 installers and removers the minimum and overtime wages and keep records required by law. The complaint filed in the Northern District of Texas seeks back wages and liquidated damages of nearly $500,000 and an injunction against future violations of the FLSA.

The Labor Department says that its investigation determined that the company violated the FLSA by paying non-exempt workers a flat rate for installing and removing Christmas lights without regard to the number of hours the employees had worked. Investigators also found that in most cases employees were paid “straight time” rather than overtime at time and one-half their regular rates for hours worked over 40 in a week, as required. Additionally, the Labor Department found that the company failed to keeprecords required by the FLSA.

The lawsuit against The Christmas Light Co. Inc. spotlights a growing emphasis by the Labor Department on investigation and enforcement of employer violations of the FLSA. “The Labor Department holds employers accountable when they do not properly pay their workers,” said Cynthia Watson, regional administrator for the Wage and Hour Division in the Southwest. “Failing to pay minimum and overtime wages is unacceptable. Such behavior robs workers of their rightful wages and undercuts those hardworking and conscientious employers who obey the law. This lawsuit demonstrates that the department will use all enforcement tools available, including litigation, to recover workers’ wages and ensure a level playing field for law-abiding employers.”

FLSA Violations Generally Costly; Enforcement Rising

Employers Should Strengthen Practices For Defensibility

Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of proper corrective action after consultation with qualified legal counsel;
Review of existing documentation and record keeping practices for hourly employees;
Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and
Re-engineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures.

For Help With Investigations, Policy Updates Or Other Needs

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer often has worked, extensively on these and other workforce and performance related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.™

Comments Off on Labor Department Serves The Christmas Light Co. & Its Owner With Holiday Season FLSA Lawsuit | Corporate Compliance, Employers, Human Resources, Internal Controls, Internal Investigations, Risk Management, Wage & Hour | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Boston Hides and Furs Ltd. Sued For $1 Million For Alleged Willful FLSA Wage & Hour Law Violations

November 28, 2012

U.S. employers using aggressive worker classification or other pay practices to avoid paying overtime should heed the expensive lesson that the U.S. Department of Labor (DOL) hopes to teach employer Boston Hides & Furs Ltd. and members of its management in a lawsuit filed in Boston.

Citing “knowing, deliberate and intentional” violations of federal wage and hour law, the DOL is suing Boston Hides and Furs Ltd. and company officials seeking at least $500,000 in back wages and an equal amount in liquidated damages for allegedly underpaying employees of the Chelsea wholesale animal hide business. See Solis v. Boston Hides & Furs Ltd., Anthony Andreottola, Angelo Andreottola and Antoinetta Andreottola Parisi, CV-1:12-CV-11997-MLW. The suit illustrates the significant liability that companies or their owners or management risk by failing to properly pay workers covered by the FLSA and meet other FLSA requirements.

FLSA Generally

The FLSA generally requires that an employee pay each covered employees at least the federal minimum wage of $7.25 per hour as well as time and one-half their regular rates for every hour they work beyond 40 per week. When the state minimum wage is higher than the federally mandated wage, and employees work more than 40 hours in a week calculated in accordance with applicable state laws, employees paid at the minimum permissible level are entitled to overtime compensation based on the higher state minimum wage. Time credited may be determined differently under state law versus the FLSA. Employers must make sure proper crediting, record keeping and payment in time to meet both applicable requirements.

The FLSA also requires employers to keep accurate records of covered employees’ wages, hours and other conditions of employment and prohibits employers from retaliating against employees who exercise their rights under the law. Special rules also may apply to the employment of children or other special populations.

The rules generally establish a legal presumption that a worker performing services is working as a covered employee of the recipient. Unfortunately, many businesses that receive services often unintentionally incur liability because they ill-advisedly misclassify workers as performing services as independent contractors, salaried employees or otherwise exempt by failing to recognize the implications of this presumption. The presumption that a worker is a covered employee generally means that an employer that treats a worker as exempt bears bear the burden of providing that a worker is not a covered employee and keeping accurate records to show that it has properly tracked the hours of and paid each covered employee.

The FLSA provides that employers who violate the law are, as a general rule, liable to employees for back wages and an equal amount in liquidated damages. State wage and hour laws also typically provide for back pay and liquidated damage awards. Attorneys’ fees and other costs often also are recoverable. In certain instances where the violations are knowing, deliberate and intentional, violators often may risk criminal as well as civil liability.

DOL Sues Boston Hides and Furs Ltd For Knowing, Deliberate & Willful FLSA Violations

The DOL lawsuit seeks to recover more than $1 million from Boston Hides and Furs Ltd and various company officials for allegedly engaging in knowing and deliberate violations of the FLSA minimum wage, overtime and retaliation rules.

The DOL filed the lawsuit in federal court in the U.S. District Court for the District of Massachusetts after a DOL Wage & Hour Division investigation found the employer committed willful and repeated violations of the minimum wage, overtime and record-keeping provisions of the FLSA including offering for shipment or sale “hot goods” produced in violation of the law during a period spanning at least three years. The suit also asserts that the company unlawfully retaliated against several workers by firing them after they cooperated with the federal investigation.

In its complaint, the DOL claims the investigation found that 14 Boston Hides & Furs employees worked approximately 10 hours per day, six days per week processing hides and furs for shipping to tanneries. DOL says Boston Hides paid these workers a daily cash wage of $50 to $70, which amounted to an hourly pay rate far below the federal minimum wage of $7.25 per hour. The employees also were not paid time and one-half the required state minimum wage of $8 applicable for those hours worked above 40 in a week. Additionally, the defendants failed to keep adequate records of the workers’ employment, work hours and pay rates, and a representative of the defendants falsely told investigators that the company’s payroll records included all employees.

The lawsuit also charges that the defendants ordered employees to hide in a nearby house when DOL Wage and Hour Division investigators first arrived at Boston Hides & Furs so they could not be interviewed. Two days after investigators subsequently interviewed the workers, the defendants fired the workers. During their employment, DOL claims company officials threatened and subjected the workers to verbally abusive treatment on an ongoing basis, particularly when they asked about their pay rates.

In addition to back wages and liquidated damages, the DOL lawsuit seeks to permanently prohibit the defendants from future FLSA violations — including a prohibition against shipping any goods handled by workers who were paid in violation of the law — and compensatory and punitive damages for the workers on account of their unlawful firing. The Wage and Hour Division also has assessed $100,000 in civil money penalties against Boston Hides & Furs Ltd. for willful violations of the FLSA.

Overtime & Other Wage & Hour Enforcement Risks Rising

Employers increasingly risk triggering significant liability by failing to properly characterize, track and pay workers for compensable time in violation of the FSLA or other laws. Unfortunately, many employers often are overly optimistic or otherwise fail to properly understand and apply FLSA rules for characterizing on-call or other time, classifying workers as exempt versus non-exempt or making other key determinations.

The potential that noncompliant employers will incur these liabilities has risen significantly in recent years. Under the Obama Administration, DOL officials have made it a priority to enforce overtime, record keeping, worker classification and other wage and hour law requirements. While all employers face heightened prosecution risks, federal officials specifically are targeting government contractors, health care, technology and certain other industry employers for special scrutiny. DOL also is using smart phone applications, social media and a host of other new tools to educate and recruit workers in its effort to find and prosecute violators. See, e.g. New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers. Meanwhile, private enforcement of these requirements by also has soared following the highly-publicized implementation of updated FLSA regulations on the classification of workers during the last Bush Administration. See Record $2.3 Million+ Backpay Order; Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For Employers; Quest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay.

Employers Should Strengthen Practices For Defensibility

Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of appropriate corrective action after consultation with qualified legal counsel;
Review of existing documentation and record keeping practices for hourly employees;
Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and
Reengineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations and enforcement exposures.

For Help With Investigations, Policy Updates Or Other Needs

If you need help in conducting a risk assessment of or responding to an IRS, DOL, Justice Department, PBGC, private plaintiff or other legal challenges to your organization’s existing workforce classification or other labor and employment, employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469) 767-8872 .

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer often has worked, extensively on these and other workforce and performance related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For more information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.™

Comments Off on Boston Hides and Furs Ltd. Sued For $1 Million For Alleged Willful FLSA Wage & Hour Law Violations | Corporate Compliance, Employers, Human Resources, Internal Controls, Internal Investigations, Risk Management, Wage & Hour | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers

November 9, 2012

Restaurant and other U.S. employers should audit and tighten their pay and record keeping practices as the U.S. Department of Labor (DOL) Wage & Hour Division’s deploys its new employee Smart Phone application and other technology tools that DOL plans to use in waging war against employers that violate the Fair Labor Standards Act (FLSA) minimum wage, overtime and record-keeping requirements against employers.

DOL Unveils New Smart Phone Employee App & Other Tools To Promote FLSA Compliance

Under the Obama Administration, the DOL has undertaken a wide range of efforts to promote compliance with and enforce the minimum wage, overtime and other requirements of the FLSA against restaurant and other employers. As part of this enforcement and compliance campaign, DOL is developing and deploying new Smartphone applications and other tools that it hopes with help employees and DOL enforce the FLSA.

One of the newest of these tools is a new Smartphone application intended for use by employees. DOL recently has developed a Smartphone application available here that DOL intends will help employees independently track the hours they work and determine the wages their employer owes them. Available in English and Spanish, DOL reports users can track regular work hours, break times and any overtime hours for one or more employers. DOL touts the new application as allowing workers to keep their own records instead of having to rely on their employers’ records.

The new timekeeping application tool for employees is just one of several new resources that the DOL hopes will support its enforcement and compliance initiatives. For instance, the free mobile application “Eat Shop Sleep” available here from the DOL allows consumers, employees and other members of the public to check if the DOL Wage and Hour Division has investigated a hotel, restaurant or retail location and whether DOL found FLSA violations.

FLSA Wage & Hour Violations Can Carry Big Liability

The FLSA requires that covered nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates for hours worked beyond 40 per week. In accordance with the FLSA, an employer of a tipped employee is required to pay no less than $2.13 an hour in direct wages provided that amount plus the tips received equals at least the federal minimum wage of $7.25 an hour. If an employee’s tips combined with the employer’s direct wages do not equal the minimum wage, the employer must make up the difference. Employers are required to provide employees notice of the FLSA’s tip credit provisions, to maintain accurate time and payroll records, and to comply with the act’s restrictions applying to workers under age 18.

Violation of these requirements can result in significant civil or even criminal liability. Under the FLSA’s civil remedy provisions, employers violating minimum wage or overtime requirements can be held liable for back pay plus exemplary damages, attorneys’ fees and other costs. Additional liability can arise from civil penalties imposed for record-keeping violations. If the violations are found to be knowing and willful, criminal penalties also are possible. Since such violations can qualify as a felony under the FLSA, these liabilities can extend both to the employing entity as well as owners or management officials under certain circumstances.

Under the Obama Administration, enforcement of these rules in the restaurant and other industries with low paid workforces has become a key Labor Department priority, as evidenced by recent enforcement actions that the DOL has taken against Oklahoma-based El Tequila LLC restaurants and Florida-based Domino’s Pizza franchise operator PDQ Pizza.

Lawsuit against El Tequila LLC Seeks $1M In Back pay

On October 25, the DOL announced it is suing Tulsa-based El Tequila LLC and its owner, Carlos Aguirre, for alleged violations of the FLSA’s minimum wage, overtime and record-keeping provisions which DOL claims resulted in a total of approximately $1 million in unpaid wages owed to 221 kitchen and wait staff, hosts and bussers at four restaurant locations.

DOL charges that El Tequila LLC violated the FLSA by paying FLSA-covered employees, who in some cases worked as many as 72 hours in a week, a fixed salary without overtime pay for hours worked in excess of 40 hours in a week. In addition to overtime violations, DOL charges this practice resulted in minimum wage violations because employees did not always receive at least the federal minimum wage of $7.25 per hour. DOL also claims investigators found that wait personnel were required to turn their tips over to management at the end of every shift, which caused their pay to fall below the minimum wage. Finally, the suit charges employer did not keep proper records as required.

The suit filed in the Northern District of Oklahoma, Tulsa Division, seeks to recover the full amount of nearly $1 million in back wages for the employees as well as an injunction prohibiting future violations of the FLSA.

Florida-Based Domino’s Pizza Franchise To Pay $371,675 Back pay Settlement

DOL’s announcement of its El Tequila LLC lawsuit follows on the heels of DOL’s October 24 announcement that Melbourne, Florida-based PDQ Pizza, doing business as Domino’s Pizza, has paid $371,675 back pay to settle DOL charges that it violated the FLSA’s overtime, minimum wage and record-keeping provisions.

According to DOL, PDQ operates Domino’s Pizza franchises in 19 locations in Palm Beach, Indian River and Brevard counties.

DOL says its Investigators found systemic violations resulting from the company’s failure to properly compensate tip-earning employees, such as delivery drivers, for all of their hours worked. Even when performing nontipped duties such as cooking, cleaning and stocking, DOL says PDQ Pizza paid the workers as if they were tipped employees, with hourly wage rates as low as $5.15 rather than the required federal minimum wage of $7.25.

DOL also charges that the employer made illegal deductions from employees’ wages for uniforms, and failed to properly calculate and compensate tipped employees for all overtime hours (those worked in excess of 40 in a week).

Finally, DOL charged the employer failed to record and designate hours worked as tipped or nontipped in order to pay employees correctly, which violates the FLSA’s record-keeping provisions.

Following the investigations, DOL reports PDQ Pizza paid all back wages owed and agreed to support future compliance with the FLSA. The company also committed to changing its timekeeping and payroll practices to ensure that all hours worked by tipped and nontipped employees are properly recorded and compensated in accordance with the FLSA.

South Carolina Ponchos Restaurants Pay $486,000 Backpay Settlement

PDQ Pizza’s settlement isn’t unusual. Earlier in October, Poncho’s Inc. – doing business as Poncho’s Mexican Restaurant I, II and III – and Papa’s and Beer Mexican Restaurant agreed to pay 85 employees a total of $485,913 in back wages under a FLSA settlement covering DOL charges of overtime, minimum wage and record-keeping violations at all four restaurant locations.

At Pancho’s Mexican Restaurant I, II and III, investigators found that employees were not properly compensated for all work hours. By reviewing payroll records and conducting employee interviews, investigators determined that tip-earning employees such as servers were made to rely primarily on tips for pay and consequently earned wages that fell below $2.13 per hour in violation of the FLSA’s minimum wage provision. Additionally, other employees such as kitchen staff were paid flat salaries each month — without regard to hours worked — that did not satisfy minimum wage or overtime pay requirements. The employer also failed to maintain accurate records of employees’ work hours and wages. As a result, 38 employees will receive a total of $414,079 in back wages.

DOL says the Papa’s and Beer Mexican Restaurant investigation revealed that the employer made impermissible deductions for uniforms and other expenses from the wages of tip-earning employees, causing their hourly wages to fall below the federal minimum wage. Additionally, other employees such as kitchen staff were paid flat salaries each month — without regard to hours worked — that did not satisfy minimum wage or overtime pay requirements. The employer also failed to record the hours worked by kitchen staff. As a result, a total of $71,834 in back wages is owed to 47 employees.

The restaurants have agreed to maintain future compliance with the FLSA by keeping accurate records of all hours worked by all employees, paying them at least the federal minimum wage, providing overtime compensation, and informing employees in advance that the tip credit will be used.

Restaurant & Other Employers Of Low-Paid Workers Face High Enforcement Risks

While the Obama Administration has made FLSA enforcement in general a priority, it is particularly targeting restaurant and certain other categories of employers who employ low-income workers for scrutiny and enforcement. “The restaurant industry employs some of our country’s lowest-paid, most vulnerable workers,” said Secretary of Labor Hilda L. Solis. “When violations of the FLSA are discovered, the Labor Department will take appropriate action to ensure workers receive the wages they have earned and to which they are legally entitled.”

The Ponchos investigations were conducted under a multiyear enforcement initiative focused on the restaurant industry in South Carolina, where widespread noncompliance with the FLSA has been found. Since the start of fiscal year 2009, the division’s Columbia District Office has concluded more than 300 investigations under the initiative, resulting in more than $2.5 million in back wages recovered for more than 2,500 workers.

“We found many low-wage employees working up to 65 hours a week without any overtime compensation and receiving pay below the federal minimum wage. Unfortunately, significant labor violations like the ones we found in this case are all too common in the restaurant industry,” said Michelle Garvey, director of the division’s Columbia office in the announcement concerning the Ponchos settlement. “We are pleased that these workers finally will be paid their rightful wages and, as demonstrated by our ongoing initiative, we will continue to investigate South Carolina restaurants to remedy violations and ensure sustained compliance with the law.”

In light of these enforcement emphasis and the growing range of tools that the Labor Department is deploying to find and prosecute FLSA violations, restaurant and other employers should use care to ensure that their practices for classifying workers as exempt or non-exempt, recording hours worked and compensating non-exempt workers comply with the FLSA and other relevant laws. When evaluating and deciding how to address potential FLSA exposures, it is critical that employers avoid the temptation to wear role tinted glasses when making wage and hour worker classification or compensable time determinations or take for granted the legal defensibility of past practices within their own or industry workforces.

Under the FSLA and applicable state wage and hour laws, employers generally bear the burden of proving that they have properly paid their employees in accordance with the FLSA. Additionally, the FLSA and most applicable state wage and hour laws typically mandate that employers maintain records of the hours worked by employees by non-exempt employees, documentation of the employer’s proper payment of its non-exempt employees in accordance with the minimum wage and overtime mandates of the FLSA, and certain other records. Since the burden of proof of compliance generally rests upon the employer, employers should take steps to ensure their ability to demonstrate that they have properly paid non-exempt employees in accordance with applicable FLSA and state wage and hour mandates and that employees not paid in accordance with these mandates qualify as exempt from coverage under the FLSA.

These mistakes can be very costly. Employers that fail to properly pay employees under Federal and state wage and hour regulations face substantial risk. In addition to liability for back pay awards, violation of wage and hour mandates carries substantial civil – and in the case of willful violations, even criminal- liability exposure. Civil awards commonly include back pay, punitive damages and attorneys’ fees.

The potential that noncompliant employers will incur these liabilities has risen significantly in recent years. Under the Obama Administration, Labor Department officials have made it a priority to enforce overtime, recordkeeping, worker classification and other wage and hour law requirements. While all employers face heightened prosecution risks, federal officials specifically are targeting government contractors, health care, technology and certain other industry employers for special scrutiny. Meanwhile, private enforcement of these requirements by also has soared following the highly-publicized implementation of updated FLSA regulations regarding the classification of workers during the last Bush Administration. See Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For Employers; Quest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay.

Employers Should Strengthen Practices For Defensibility

As a consequence, most employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take appropriate steps to minimize their potential liability under applicable wages and hour laws. To minimize exposure under the FLSA, employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take appropriate steps to minimize their potential liability under applicable wages and hour laws. Steps advisable as part of this process include, but are not necessarily limited to:

Audit of each position current classified as exempt to assess its continued sustainability and to develop documentation justifying that characterization;
Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
Review the characterization of on-call and other time demands placed on employees to confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
If the audit raises questions about the appropriateness of the classification of an employee as exempt, self-initiation of appropriate corrective action after consultation with qualified legal counsel;
Review of existing documentation and recordkeeping practices for hourly employees;
Exploration of available options and alternatives for calculating required wage payments to non-exempt employees; and
Reengineering of work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations.

Because of the potentially significant liability exposure, employers generally will want to consult with qualified legal counsel prior to the commencement of their assessment and to conduct the assessment within the scope of attorney-client privilege to minimize risks that might arise out of communications made in the course of conducting this sensitive investigation.

For Help With Investigations, Policy Updates Or Other Needs

If you need assistance in conducting a risk assessment of or responding to an IRS, Labor Department or other legal challenges to your organization’s existing pay, workforce classification or other labor and employment, employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872 .

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. The immediate Past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and HR.com editorial advisory board member, Ms. Stamer frequently has worked, extensively on these and other workforce and performance related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters.Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.™

Comments Off on New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers | Employers, Human Resources, Internal Controls, Internal Investigations, Risk Management, Wage & Hour | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Texas Landscaper’s $106,000 In Minimum Wage & Overtime Settlement Reminds Employers To Prepare For FLSA Enforcement

October 17, 2012

Midland, Texas-based landscaper, Turf Specialties Inc. (TSI) will pay $106,818 in back wages to 70 current and former landscape workers to settle charges made by the U.S. Department of Labor Wage and Hour Division (DOL) that TSI payment of workers a fixed, bi-weekly salary violated the Fair Labor Standards Act (FLSA) minimum and overtime provisions. The settlement is a reminder to landscape and other U.S. employers of the importance of insuring that their company designs and administers worker classification, salary and other wage and compensation practices and data to defend against wage and other charges and claims.

FLSA & Other Minimum Wage & Overtime Violations Risky

The FLSA requires that properly classify covered non-exempt workers and pay the workers at least the federal minimum wage of $7.25 per hour for all regular hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers treating workers performing serves as exempt from the FLSA minimum wage, overtime and other rules generally bear the burden of proving that the worker either is not properly classified as a common law employee or qualifies as exempt from the FLSA requirements under one of the applicable FLSA exemptions. For non-exempt employees, the applicable employer also generally is responsible for collecting and maintaining records of hours worked and its proper payment of minimum wage and overtime in accordance with the FLSA requirements. In addition to these federal rules, employers generally also are subject to various state minimum wage and overtime requirements. Beyond the risk of enforcement by the DOL and state labor officials, employers violating these rules also generally run the risk of lawsuits brought by employees or groups of employees, seeking actual damages, attorneys fees and costs and punitive or other awards.

TSI Action Illustrates Big Risks of Misclassification Or Other FLSA Violations

The TSI settlement announced today highlights some of the risks that employers run when they get caught playing fast and loose with the FLSA or other wage and hour laws.

According to today’s announcement, a DOL investigation of TSI uncovered a series of FLSA wage and hour DOL investigators found that TSI paid the landscape employees a fixed, biweekly salary that in many workweeks amounted to less than the federal minimum wage of $7.25 per hour and did not compensate the employees at time and one-half their regular rates of pay for hours worked in excess of 40 hours in a particular workweek. DOL also says that TSI committed other minimum wage and overtime violations by improperly deducting from employees’ paychecks amounts for uniforms, broken tools and equipment damage. Investigators also found that several employees working as “crew leaders” were improperly classified as exempt from the FLSA’s overtime provision and consequently denied proper overtime compensation.

TSI Settlement Highlights Rising Risks

One of a growing number of costly wage and hour law settlements, the TSI settlement is a relatively small reminder of how costly a mistake employers can make by engaging in overly aggressive worker classification or pay practices. Through the settlement, TSI avoided potentially much greater fines by agreeing to pay all back wages of more than $106,000 due to the affected workers and committing to future compliance with the FLSA. It comes on the same day as another employer might not get off that lucky. Along with the TSI announcement, DOL also announced that it sued to recover $285,000 in back wages for 171 Ohio restaurant workers working under restaurants three restaurants doing business as El Rancho Grande.Highlighting the growing exposure employers generally face from the heightened Labor Department emphasis on overtime and other wage and hour law enforcement, .the settlement also demonstrates the significant risks that employers face from mischaracterizing or failing to properly pay for on-call, standby or other similar times required of non-exempt employees. Employers and others providing workforce staffing should check and tighten existing worker classification, timekeeping and classification, record keeping and other practices and take other steps to strengthen the defensibility of their practices. As the DOL and private plaintiffs become increasingly aggressive about enforcing these rules, settlements of hundreds of thousands to millions of dollars are increasingly common. See, e.g. Record $2.3 Million+ H-2A Backpay Order Plus Civil Money Penalty Reminds Businesses Employing Foreign Workers To Manage Compliance; Employer Charged With Misclassifying & Underpaying Workers To Pay $754,578 FLSA Back pay Settlement; March 21 New Deadline To Comment On Proposal To Extend Minimum Wage, Overtime Rules To In Home Care Workers; $1 Million + FLSA Overtime Settlement Shows Employers Should Tighten On-Call, Other Wage & Hour Practices; New IRS Voluntary IRS Settlement Program Offers New Option For Resolving Payroll Tax Risks Of Misclassification But Employers Also Must Manage Other Legal Risks; Medical Resident Stipend Ruling Shows Health Care, Other Employers Should Review Payroll Practices; Employment Tax Takes Center Stage as IRS Begins National Research Project , Executive Compensation Audits.

Unfortunately, many employers often are overly optimistic or otherwise fail to properly understand and apply FLSA rules for characterizing on-call or other time, classifying workers as exempt versus non-exempt or making other key determinations.

Employers wearing rose-tinted glasses when making wage and hour worker classification or compensable time determinations tend to overlook the significance of the burden of proof they can expect to bear should their classification be challenged. Under the FLSA and applicable state wage and hour laws, employers generally bear the burden of proving that they have properly paid their employees in accordance with the FLSA. Additionally, the FLSA and most applicable state wage and hour laws typically mandate that employers maintain records of the hours worked by employees by non-exempt employees, documentation of the employer’s proper payment of its non-exempt employees in accordance with the minimum wage and overtime mandates of the FLSA, and certain other records. Since the burden of proof of compliance generally rests upon the employer, employers should take steps to ensure their ability to demonstrate that they have properly paid non-exempt employees in accordance with applicable FLSA and state wage and hour mandates and that employees not paid in accordance with these mandates qualify as exempt from coverage under the FLSA.

These mistakes can be very costly. Employers that fail to properly pay employees under Federal and state wage and hour regulations face substantial risk. In addition to liability for back pay awards, violation of wage and hour mandates carries substantial civil – and in the case of willful violations, even criminal liability exposure. Civil awards commonly include back pay, punitive damages and attorneys’ fees.

The potential that noncompliant employers will incur these liabilities has risen significantly in recent years. Under the Obama Administration, Labor Department officials have made it a priority to enforce overtime, record keeping, worker classification and other wage and hour law requirements. While all employers face heightened prosecution risks, federal officials specifically are targeting government contractors, health care, technology and certain other industry employers for special scrutiny. Meanwhile, private enforcement of these requirements by also has soared after the highly publicized implementation of updated FLSA regulations on the classification of workers during the last Bush Administration. See Minimum Wage, Overtime Risks Highlighted By Labor Department Strike Force Targeting Residential Care & Group Homes; Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; 250 New Investigators, Renewed DOL Enforcement Emphasis Signal Rising Wage & Hour Risks For Employers; Quest Diagnostics, Inc. To Pay $688,000 In Overtime Backpay.

Employers Should Strengthen Worker Classification & Pay Practices For Defensibility

As a result, most employers should check and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and take proper steps to minimize their potential liability under applicable wages and hour laws. To minimize exposure under the FLSA, employers should review and document the defensibility of their existing practices for classifying and compensating workers under existing Federal and state wage and hour laws and tighten processes as needed to minimize their potential liability under applicable wages and hour laws. Steps advisable as part of this process include, but are not necessarily limited to:

Audit of each that the employer treats as either contract labor, salaried or otherwise exempt to assess its continued sustainability and to develop documentation justifying that characterization;
Audit characterization of workers obtained from staffing, employee leasing, independent contractor and other arrangements and implement contractual and other oversight arrangements to minimize risks that these relationships could create if workers are recharacterized as employed by the employer receiving these services;
Review situations where the employer pays a worker salary, flat fees for weeks of work, on-call, standby, per job, per diem or other ways other than on an hourly basisto confirm that all compensable time is properly identified, tracked, documented, compensated and reported;
Review of existing practices for tracking compensable hours and paying non-exempt employees for compliance with applicable regulations and to identify opportunities to minimize costs and liabilities arising out of the regulatory mandates;
If the audit raises questions about the appropriateness of the classification of an employee as exempt, consult with qualified, experienced legal counsel about options and the advisability of corrective action;
Review of existing documentation and recordkeeping practices for hourly, salaried, and other employees and contractors to build a safety net to help mitigate exposures in the event of reclassification or other challenges;
Explore available options and alternatives for calculating required wage payments to non-exempt employees;
Reengineer work rules and other practices to minimize costs and liabilities as appropriate in light of the regulations;
Re-evaluate these arrangements periodically, as well as in the event of a challenge by a similar worker; and
Stay vigilent.

Because of the potentially significant liability exposure, employers generally will want to consult with qualified legal counsel before beginning an assessment and to conduct the assessment within the scope of attorney-client privilege to minimize risks that might arise out of communications made in the course of conducting this sensitive investigation. Because conversations among leadership, with vendors, or with accounting or other consulting service providers about worker classification, wage and other compensation arrangements typically do not enjoy the protection of attorney-client privilege, employers also should exercise caution about securing the assistance of these service providers to conduct risk audits, or when discussing concerns or possible remedies with these parties unless and until proper arrangements are made to include those discussions within the scope of attorney-client privilege or making other suitable arrangements to manage the risks of these disclosures.

For Help With Investigations, Policy Updates Or Other Needs

If you need help in conducting a risk assessment of or responding to an IRS, Labor Department or other agency or private plaintiff legal challenges to your organization’s existing workforce classification, pay or other labor and employment, employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469) 767-8872 .

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. A member of the Editorial Advisory Board of HR.com, the immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer frequently has worked, extensively on these and other workforce and performance related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters.Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press, Inc.™

Comments Off on Texas Landscaper’s $106,000 In Minimum Wage & Overtime Settlement Reminds Employers To Prepare For FLSA Enforcement | Employers, Human Resources, Internal Controls, Internal Investigations, Risk Management, Wage & Hour | Tagged: Backpay, Employer, Employment, employment law, Fair Labor Standards Act, FSLA, IT, Labor Department, Minimum Wage, Technology, Wage & Hour, wage and hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

DC Court Enjoins Implementation of NLRB Poster Rule

April 17, 2012

The District Court for the District of Columbia today (April 17, 2012) granted employers a temporary reprieve from the obligation to comply with a National Labor Relations Board (NLRB) poster mandate scheduled to take effect April 30, 2012.

The NLRB rule that was scheduled to take effect on April 30 would dictate that most private sector employers post a 11-by-17-inch notice informing workers of certain union organizing and other labor-management relations rights under the National Labor Relations Act using language dictated by the NLRB. The notice is available at no cost from the NLRB through its website, which has more information on posting requirements and NLRB jurisdiction.

Facing litigation challenging the rule, the NLRB announced on December 23, 2011 that it would delay the deadline to comply with the rule until April 30, 2012. Today’s court ruling enjoins the NLRB from enforcing the new requirement pending additional litigation.

In addition to the D.C. Circuit Court’s decision, a South Carolina Court also recently issued rulings questioning the NLRB’s enforcement mechanisms under the impending rule.

In response to today’s D.C. Circuit Court decision, NLRB Chairman Mark Gaston Pearce said of the recent decisions, “We continue to believe that requiring employers to post this notice is well within the Board’s authority, and that it provides a genuine service to employees who may not otherwise know their rights under our law.” Nevertheless, the NLRB announced today thaat it plans to delay further implementation of the poster rule by its regional offices pending the outcome of the impending litigation.

For Help or More Information

If you need help with labor and employment or other human resource, performance management, internal controls or compliance and risk management matters, please contact the author of this article, Cynthia Marcotte Stamer. Board Certified in Labor & employment Law by the Texas Board of Legal Specialization,management attorney, author and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers carry out, audit, manage and defend worker classification,union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions.

Widely published on worker classification and other workforce risk management and compliance concerns, the immediate past-Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee and current Co-Chair of its Welfare Plan Committee, Vice Chair of the ABA TIPS Section Employee Benefits Committee, a Council Representative of the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, worker classification, re-engineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

Other Resources

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Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources available at www.solutionslawpress.com.

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Posted by Cynthia Marcotte Stamer

March 21 New Deadline To Comment On Proposal To Extend Minimum Wage, Overtime Rules To In Home Care Workers

March 9, 2012

The U.S. Department of Labor’s Wage and Hour Division (WHD) has extended until March 12 the comment period for its proposed rule to provide minimum wage and overtime protections for nearly 2 million workers who provide in-home care services. See here.

In December, 2011, the WHD published a proposed rule that would expand minimum wage and overtime protections to all home care workers employed by third parties, such as staffing agencies. It also would clarify that individuals performing skilled in-home care work are entitled to minimum wage and overtime pay. However, individuals engaged by families for true companionship or fellowship activities, such as visiting with friends or pursuing hobbies, still would be considered “companions” and not be required to meet the act’s labor standards provisions. See Notice of Proposed Rulemaking [1] (NPRM).

Among other things, the NPRM proposes to revise the companionship and live-in worker regulations under the Fair Labor Standards Act (FLSA):

To more clearly define the tasks that may be performed by an exempt companion;
To limit the companionship exemption to companions employed only by the family or household using the services; and
To provide that third party employers, such as in-home care staffing agencies, could not claim the companionship exemption or the overtime exemption for live-in domestic workers, even if the employee is jointly employed by the third party and the family or household.

When Congress expanded protections to “domestic service” workers in 1974, it exempted casual babysitters and companions for the aged and inform from both the minimum wage and overtime pay requirements of the FLSA and exempted live-in domestic workers from the overtime pay requirement only. While WHD has left regulations governing this exemption substantially unchanged since first issued in 1975, it now believes the in-home care service industry. workers employed by in-home care staffing agencies are not the workers that Congress envisioned in enacting the companionship exemption (i.e., neighbors performing elder sitting).

As a result of these determines, WHD is moving to modify its existing rules to broaden protections for professionally employed home care workers as well as outreaching to inform employers and workers about the requirements that it perceives employers of these workers must meet.

The proposed tightening of regulations for home health workers follows a general toughening by WHD of its regulation and enforcement of wage and hour laws in the health care industry. See, e.g. Home health care company in Dallas agrees to pay 80 nurses more than $92,000 in back wages following US Labor Department investigation; US Department of Labor secures nearly $62,000 in back overtime wages for 21 health care employees in Pine Bluff, Ark.; US Department of Labor initiative targeted toward increasing FLSA compliance in New York’s health care industry; US Department of Labor initiative targeted toward residential health care industry in Connecticut and Rhode Island to increase FLSA compliance; Partners HealthCare Systems agrees to pay 700 employees more than $2.7 million in overtime back wages to resolve U.S. Labor Department lawsuit; US Labor Department sues Kentucky home health care provider to obtain more than $512,000 in back wages and damages for 22 employees; and Buffalo, Minn.-based home health care provider agrees to pay more than $150,000 in back wages following US Labor Department investigation.

Many have expressed concerns about the potential added costs that changes proposed in the NPRM would trigger in providing in home health and companion care for aging and disabled family members. The extension of the comment deadline provides added time for members of the public concerned about these rules to share their input.

Whether or not the proposed rule is adopted, the growing aggressiveness of the WHD and private plaintiffs to bring actions against employers violating minimum wage and overtime rules means health care and others employing home care workers should take well-documented steps to manage their risks. These employers should both confirm the adequacy of their practices under existing rules, as well as evaluate and begin preparing to respond to the proposed modifications to these rules. In both cases, employers of home care or other health care workers are encouraged to critically evaluate their classification or workers, both with respect to their status as employees versus contractor or leased employees, as well as their characterization as exempt versus non-exempt for wage and hour law purposes. In addition, given the nature of the scheduled frequently worked by home care givers, their employers also generally should pay particular attention to the adequacy of practices for recordkeeping.

For Help or More Information

If you need help with these and other human resources or health care concerns controls matters, please contact the author of this article, Cynthia Marcotte Stamer. Board Certified in Labor & employment Law by the Texas Board of Legal Specialization,management attorney, author and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers carry out, audit, manage and defend worker classification,union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

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Posted by Cynthia Marcotte Stamer

NLRB Report Shows Rise In Unfair Labor Practice Complaints & Formal Proceedings

March 9, 2012

The National Labor Relations Board Summary of Activities for Fiscal Year 2011 (Summary) released by NLRB Acting General Counsel Lafe Solomon this week reflects the increased activism and streamlined handling of matters by the NLRB in 2011

Statistics in the Summary reflect an increase in unfair labor practice complaints as well as an increase in the number of complaints that NLRB Regional offices found to merit formal prosecutions. According to the Summary, In FY 2011, the Regional Offices issued 1,342 complaints as compared to 1,243 in FY 2010. In addition to issuing almost 100 more complaints, the percentage of unfair labor practice cases in which a Regional Director determined that formal proceedings were warranted (the merit factor) rose from 35.6% in FY 2010 to 37%. Since 1980, the merit factor has fluctuated between 32% and 40%.

In addition to these results, the General Counsel chose to highlight accomplishments by the NLRB in expediting the handling of investigations and proceedings in several areas. NLRB cut its working inventory of cases by moving matters through faster. The working inventory of cases at the end of FY 2011 was 4,421, compared to 4,063 at the end of FY 2010. Other processing efficiency highlights included:

91.7% of all initial elections were conducted within 56 days of the filing of the petition.
Initial elections in union representation elections were conducted in a median of 38 days from the filing of the petition.
A 93% settlement rate was achieved in the Regional Offices in meritorious unfair labor practice cases.
The Regional Offices won 87% of Board and Administrative Law Judge unfair labor practice and compliance decisions in whole or in part in FY 2011.
A total of $60,514,922 was recovered on behalf of employees as backpay or reimbursement of fees, dues, and fines, with 1,644 employees offered reinstatement.
The Agency exceeded two of its three ambitious overarching goals and came close to achieving the third, closing 84.7% of all representation cases within 100 days (target 85%), 72.5% of all unfair labor practice cases within 120 days (target 71.2%), and 83.2% of all meritorious unfair labor practice cases within 365 days (target 80.2%). The target for each 2011 overarching goal was higher than in FY 2010 and has been increased for FY 2012.
Agency representatives participated in over 600 outreach events during FY 2011.

Other statistics of note include:

The NLRB”s total case intake during FY 2011 declined to 24,990, compared to 26,585 cases in FY 2010, representing a 5.9% decrease in overall intake. Unfair labor practice case intake declined 5.1% compared to 2010..Total representation case intake declined 2,813, a 12.2% decrease from the FY 2010.
Petitions filed in certification and decertification decreased 11.2% from 2,969 in FY 2010 to 2,634 in FY 2011. Petitions filed in unit deauthorization, unit amendment and unit clarification (UD, AC and UC) cases decreased by 23.8% from the previous year’s intake, with the filing of 179 petitions in FY 2011 compared to 235 filed in FY 2010.

For Help or More Information

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Posted by Cynthia Marcotte Stamer

Sullivan University System to Pay $483,000 in Back Wages Overtime Violations Stemming From Worker Misclassifications

March 8, 2012

Sullivan University System, Inc. learned the hard way that U.S employers that misclassify workers as independent contractors, as exempt for wage and hour law purposes or otherwise increasingly risk investigation and enforcement from federal and state agencies targeting perceived misclassification abuses.

Following an investigation by the Labor Department’s Wage and Hour Division, Kentucky based Sullivan University System Inc. will pay $483,201 in back wages to 248 employees who the Department found it wrongfully denied overtime pay while working as admissions officers and high school representatives. The investigation found that employees were incorrectly classified as exempt from the overtime provisions of the Fair Labor Standards Act and the employer failed to keep accurate records of the employees’ hours.

The Sullivan University System, Inc. settlement provides another example of the growing risks that U.S. employers face from misclassifying workers as exempt employees for purposes of wage and hour and overtime laws. As a result of the mischaracterization of workers as contractors that the Labor Department determined to qualify as employees for purposes of wage and hour and overtime laws, the Labor Department found the employer failed to pay required overtime and to maintain required time records in violation of the Fair Labor Standards Act.

Wage and hour laws are only one of a myriad of areas in which the Department of Labor, Internal Revenue Service and other federal and state regulators increasingloy are scrutinizing worker classifications to uncover violations of applicable law resulting from the mischaracterization of workers as exempt or as non-employee service providers.

The Obama Administration is targeting employers that misclassify workers for enforcement.

Meanwhile, the Internal Revenue Service (IRS) continues to conduct worker classification audits while encouraging employers to self correct existing payroll tax misclassifications by participating in a new Voluntary Worker Classification Settlement Program (“Settlement Program”) announced in September. However the limited scope of the relief provided makes use of the program challenging for most employers. See New IRS Voluntary IRS Settlement Program Offers New Option For Resolving Payroll Tax Risks Of Misclassification But Employers Also Must Manage Other Legal Risks; Medical Resident Stipend Ruling Shows Health Care, Other Employers Should Review Payroll Practices; Employment Tax Takes Center Stage as IRS Begins National Research Project , Executive Compensation Audits.

While these and other agencies continue to keep the heat up on employers that misclassify workers, Congress also continues to consider legislation that would further clarify and tighten worker classification rules. See e.g., Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; New IRS Worker Classification Settlement Program and Its Risks.

In her November 3, 2011 testimony to the House Subcommittee on Workforce Protections Committee on Education and the Workforce, U.S. Labor Department Wage & Hour Division (WHD) Deputy Administrator (WHD) Nancy Leppink confirmed that the Labor Department is joining a growing list of federal and state agencies that are making ending employee misclassification an audit and enforcement priority. Ms Leppink testified that “employee misclassification is a serious and, according to all available evidence, growing problem” that the Obama Administration is “committed to working to end.” See Testimony of Nancy J. Leppink, Deputy Wage and Hour Administrator, Wage and Hour Division, U.S. Department of Labor before the Subcommittee on Workforce Protections, Committee on Education and the Workforce, U.S. House of Representatives (November 3, 2011).

Her testimony also makes clear that interagency coöperation and sharing of information among agencies is an increasingly valuable tool to this effort. Ms. Leppink told the Subcommittee that the Labor Department is a part of a multi-agency Misclassification Initiative that seeks to strengthen and coördinate Federal and State efforts to enforce violations of the law that result from employee misclassification.

According to Ms. Leppink, the WHD’s exchange of information about investigations with other law enforcement agencies is as “particularly important with respect to our efforts to combat the violations of our laws that occur because of employees who are misclassified as independent contractors or other non-employees.” On September 19, 2011 the Labor Department and Internal Revenue Service (IRS) signed a Memorandum of Understanding (MOU) to share information about investigations with each other. The MOU helps the IRS investigate if employers the Labor Department has found in violation of federal labor laws have paid the proper employment taxes. Similarly, the WHD also entered into MOUs with several state labor agencies that allow the Labor Department to share information about its investigations and coordinate misclassification enforcement when appropriate.

“These agreements mean that all levels of government are working together to solve this critical problem,” she said.

Employers Urged To Audit & Strengthen Worker Classification Practices

To guard against these and other growing risks of worker classification, employers receiving services from workers who are not considered employees for purposes of income or payroll should review within the scope of attorney-client privilege the defensibility of their existing worker classification, employee benefit, fringe benefit, employment, wage and hour, and other workforce policies and consult with qualified legal counsel about the advisability to adjust these practices to mitigate exposures to potential IRS, Labor Department or other penalties associated with worker misclassification.

Review and management of these issues is particularly timely in light of the opening by the Internal Revenue Service (IRS) of a new settlement program for resolving payroll tax issues resulting from misclassification. Given broader labor and other risks, however, before taking advantage of a new Internal Revenue Service program offering employers the opportunity to resolve potential payroll tax liabilities arising from the misclassification of workers, employers should consider and develop a risk management their overall worker misclassification liability exposures. See “New IRS Worker Classification Settlement Program and its Risks,” in the January, 2011 issue of the Dallas Bar Journal To read her article, see page 8 of the January, 2012 Dallas Bar Journal here.

For Help or More Information

If you need help with worker classification or other human resources or internal controls matters, please contact the author of this article, Cynthia Marcotte Stamer. Board Certified in Labor & employment Law by the Texas Board of Legal Specialization,management attorney, author and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers carry out, audit, manage and defend worker classification,union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

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Posted by Cynthia Marcotte Stamer

New DOL Final Rules Tighten Requirements For Employers To Hire Alien Workers Using H-2B Visas

February 21, 2012

Employers of workers relying on H-2B visas for eligibility to work will need to update their practices to comply with a new Final Rule on the H-2B program issued February 21, 2012 by the Department of Labor’s Employment and Training Administration and Wage and Hour Division.

Effective April 23, 2012, the Final Rule amends Labor Department regulations governing the certification of the employment of nonimmigrant workers performing temporary or seasonal non-agricultural labor or services and the enforcement of the obligations applicable to employers under the H-2B program. Among other things, the Final Rule:

Revises the process by which employers obtain a temporary labor certification from the Labor Department for use in petitioning the Department of Homeland Security (DHS) to employ a nonimmigrant worker in H-2B status;
Establishes new rules providing increased worker protections for both U.S. and foreign workers;
Creates a national electronic job registry for all H-2B job orders to improve U.S. worker access to these temporary jobs;
Contains provisions to enhance recruitment of U.S. workers from across the country;
Increases the amount of time during which U.S. workers must be recruited and hired; and
Requires the rehiring of former employees when available.

U.S. employers need to exercise care to properly manage and maintain appropriate documentation showing compliance with applicable Visa, I-9 eligibility to work, and other applicable Immigration and Customs law requirements impacting their recruitment and employment of foreign and other workers. Violation of these requirements can expose employers to substantial civil and even criminal liability. At the same time, all employers also need to tread carefully to manage the significant employment discrimination liabilities that can arise from charges of improper discrimination against workers in violation of national origin, race and other federal and state nondiscrimination laws. See, e.g. Manufacturer’s Excessive I-9 Documentation Triggers Discrimination Liability.

When reviewing the adequacy of existing practices and administering these practices, employers should keep in mind the advisability of ensuring appropriate compliance and risk management of these responsibilities both with regard to workers performing services directly for their organizations in the capacity of employees, as well as workers providing services as independent contractors, leased employees or pursuant to other contracted services arrangements.

When designing and administering these processes, employers also generally should keep in mind that alien workers hired in violation of I-9 eligibility to work requirements generally still continue to enjoy the protection of the employment discrimination, wage and hour, anti-retaliation and other laws that otherwise would apply to other similarly situated employees. Accordingly, employers should exercise care to properly coördinate their responsibilities to promote their ability to demonstrate proper collection of required eligibility to work documentation, proper classification for worker classification, wage and hour and other laws, and appropriate adherence to nondiscrimination and other employment, tax and other applicable laws and regulations.

For Help or More Information

If you need help with these or other human resources, risk management or compliance or internal controls matters, please contact the author of this article, Cynthia Marcotte Stamer. Board Certified in Labor & employment Law by the Texas Board of Legal Specialization,management attorney, author and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, I-9 and other immigration and customs, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers carry out, audit, manage and defend worker classification,union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

Comments Off on New DOL Final Rules Tighten Requirements For Employers To Hire Alien Workers Using H-2B Visas | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Independent Contractor, Overtime, payroll tax, Wage & Hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

OSHA $1Million Award Against AirTran Airways Highlights Retaliation Risks

January 18, 2012

A million dollar plus backpay award announced by the Occupational Health & Safety Administration (OSHA) reminds U.S. employer of the growing importance of taking steps to manage whistleblower and other retaliation claims when dealing with employees who have reported possible safety, discrimination or other activities protected under Federal or state whistleblower or other anti-retaliation laws.

On January 17, 2012, OSHA issued an order requiring AirTran Airways AirTran Airways, a subsidiary of Dallas, Texas-based Southwest Airlines Co., to reinstate and pay more than $1 million in backpay plis interest and compensatory damages to a former pilot who charged AriTran fired him in retaliation for his reporting numerous mechanical concerns.

According to OSHA, the reinstatement and backpay award follows an investigation by OSHA’s Whistleblower Protection Program in which OSHA found reasonable cause to believe that the termination of the pilot, whose name is withheld as part of OSHA’s policy, was an act of retaliation in violation of the whistleblower provision of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, known as AIR21.

According to OSHA, the pilot’s complaint alleged that the airline removed him from flight status on Aug. 23, 2007, pending an investigative hearing regarding a sudden spike in the pilot’s mechanical malfunction reports, or PIREPS. The airline held an internal investigative hearing on Sept. 6, 2007, that lasted 17 minutes. Seven days later, the airline terminated the pilot’s employment, claiming that he did not satisfactorily answer a question regarding the spike in reports. OSHA found that the pilot did not refuse to answer any questions during the hearing, answers to questions were appropriate, and the action taken by the airline was retaliatory.

Either party to the case can file an appeal with the Labor Department’s Office of Administrative Law Judges, but such an appeal does not stay the preliminary reinstatement order.

AirTran Airways is a subsidiary of AirTran Holdings Inc. with headquarters in Orlando. On May 2, 2011, Southwest Airlines completed the acquisition of AirTran Holdings Inc. and now operates AirTran Airways as a wholly-owned subsidiary.

OSHA enforces the whistleblower provision of AIR21, as well as 20 other statutes protecting employees who report violations of various securities, trucking, workplace health and safety, nuclear, pipeline, environmental, rail, maritime, health care, consumer product and food safety laws. Employees who believe that they have been retaliated against for engaging in protected conduct may file a complaint with the secretary of labor for an investigation by OSHA’s Whistleblower Protection Program.

These whistleblower and anti-retaliation provisions are just a small fraction of the growing list of federal and state laws that provide whistleblower or other anti-retaliation protections to employees and others for reporting known or suspected violations or engaging in other activities protected by the applicable law. Other examples include federal employment discrimination, securities, tax, customs, immigration, labor, family or military leave, employee benefits, privacy, antitrust, and a wide range of other laws. Because the prior reporting of information or other exercise or attempted exercise of protected rights often can create presumptions which employers may be required to rebut to avoid whistleblower or other liability under many of these laws, employees increasingly make claims or point to prior reports or activities as a means of challenging or disputing termination or other undesired employer actions.

To better position themselves to prevent or defend against these types of claims, employers need to be prepared both to demonstrate the appropriateness of their employment and discipline actions, as well as to rebut claims of retaliation. As part of these efforts, employers among other things should:

Carefully document and administer employee hiring, promotion, discipline and other practices to document their administration in accordance with applicable law based on valid performance based business justifications;

Clearly communicate and educate management and other employees about the employer’s policies against retaliation and procedures for reporting suspected problems;

Review employee terminations and other actions for patterns or other evidence of correlation to prior protected activities by employees that might evidence potential discrimination or other retaliation;

Establish and communicate clear procedures for reporting potential legal or policy violations that might for the basis of retaliation or whistleblower claims;

Conduct prompt, well-documented investigations of all reports of potential compliance or safety concerns, as well as retaliation claims;

Give clear, well-documented instructions to managers and others involved in investigations or other compliance efforts against retaliation or other misconduct;

Establish and administer monitoring and oversight processes and procedures for possible retaliation or other misconduct against protected parties; and

Provide exit interview and other opportunities for employees to share possible retaliation or other concerns with responsible management trained to properly investigate and redress these concerns.

For Help or More Information

If you need help with these or other human resources, internal controls or risk management matters, please contact the author of this article, Cynthia Marcotte Stamer. Board Certified in Labor & employment Law by the Texas Board of Legal Specialization,management attorney, author and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers carry out, audit, manage and defend worker classification,union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions.

Widely published on workforce risk management and compliance concerns, the immediate past-Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee and current Co-Chair of its Welfare Plan Committee, Vice Chair of the ABA TIPS Section Employee Benefits Committee, a Council Representative of the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, compliance, re-engineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

Comments Off on OSHA $1Million Award Against AirTran Airways Highlights Retaliation Risks | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employer, Employment, employment law, Health Care, Independent Contractor, OSHA, Overtime, payroll tax, Retaliation, Safety, Wage & Hour, Whistleblower, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Stamer Dallas Bar Journal Article Cautions Employers Must Take Holistic Approach To Address Worker Misclassification Risks

December 27, 2011

Cynthia Marcotte Stamer’s cautions that before taking advantage of a new Internal Revenue Service program offering employers the opportunity to resolve potential payroll tax liabilities arising from the misclassification of workers, employers should consider and develop a risk management their overall worker misclassification liability exposures.

Ms. Stamer discusses the need for employers to take a holistic approach to assessing and addressing worker classification risks in her article, “New IRS Worker Classification Settlement Program and its Risks,” in the January, 2011 issue of the Dallas Bar Journal To read her article, see page 8 of the January, 2012 Dallas Bar Journal here.

U.S employers that misclassify workers as independent contractors, as exempt for payroll or other tax, wage and hour, immigration, and a wide range of other legal purposes or otherwise increasingly risk investigation and enforcement from federal and state agencies targeting perceived misclassification abuses. While U.S. employers should review and correct as needed worker misclassifications that could result in violations laws in light of the growing enforcement emphasis and interagency coordination targeting employers that violate federal or state tax, labor and other laws by misclassifying workers, employers should evaluate and address these concerns on a holistic, rather than peice meal basis.The Obama Administration is targeting employers that misclassify workers for enforcement.

Agency officials and members of Congress have sent numerous messages to U.S. employers to clean up their worker classification practices. For instance, Labor Department enforcement actions increasingly show its employer misclassification audit and enforcement emphasis. See, e.g.Employer Charged With Misclassifying & Underpaying Workers To Pay $754,578 FLSA Backpay Settlement; $1 Million + FLSA Overtime Settlement Shows Employers Should Tighten On-Call, Other Wage & Hour Practices; New IRS Voluntary IRS Settlement Program Offers New Option For Resolving Payroll Tax Risks Of Misclassification But Employers Also Must Manage Other Legal Risks; Medical Resident Stipend Ruling Shows Health Care, Other Employers Should Review Payroll Practices; Employment Tax Takes Center Stage as IRS Begins National Research Project , Executive Compensation Audits;

While these and other agencies continue to keep the heat up on employers that misclassify workers, Congress also continues to hear testimony and consider legislation that would further clarify and tighten worker classification rules. See e.g., Review & Strengthen Defensibility of Existing Worker Classification Practices In Light of Rising Congressional & Regulatory Scrutiny; New IRS Worker Classification Settlement Program and Its Risks. Agency officials arefueling and responding to Congressional worker classification concerns by highlighting issues in Congressional testimony and other communications. In her November 3, 2011 testimony to the House Subcommittee on Workforce Protections Committee on Education and the Workforce, for instance, U.S. Labor Department Wage & Hour Division (WHD) Deputy Administrator (WHD) Nancy Leppink testified that “employee misclassification is a serious and, according to all available evidence, growing problem” that the Obama Administration is “committed to working to end.” See Testimony of Nancy J. Leppink, Deputy Wage and Hour Administrator, Wage and Hour Division, U.S. Department of Labor before the Subcommittee on Workforce Protections, Committee on Education and the Workforce, U.S. House of Representatives (November 3, 2011).

“These agreements mean that all levels of government are working together to solve this critical problem,” she said.

Employers Urged To Audit & Strengthen Worker Classification Practices

As Federal and state regulators take aim at misclassification abuses, U.S. employers need to review each arrangement where their business receives services that the business treats as not employed by their business, as well as any employees of their business that the business treats as exempt employees keeping in mind that they generally will bear the burden of proving the appropriateness of that characterization for most purposes of law. The coordination and interrelationship of issues that Ms. Leppink testified about in her November 3 Subscommittee testimony shows that employers need to take a holistic approach in evaluating and addressing their worker classification exposures.

For Help or More Information

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If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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Comments Off on Stamer Dallas Bar Journal Article Cautions Employers Must Take Holistic Approach To Address Worker Misclassification Risks | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Independent Contractor, Overtime, payroll tax, Wage & Hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

Employers Urged To Strengthen Worker Classification Defenses As Obama Administration Targets Employers Misclassifying Workers

December 26, 2011

U.S employers that misclassify workers as independent contractors, as exempt for wage and hour law purposes or otherwise increasingly risk investigation and enforcement from federal and state agencies targeting perceived misclassification abuses.

U.S. employers should review and correct as needed worker misclassifications that could result in violations of federal wage and hour or other employment, tax or other laws in light of the growing enforcement emphasis and interagency coordination targeting employers that violate federal or state tax, labor and other laws by misclassifying workers. Testimony of a top Labor Department official confirms that the Obama Administration has employers that misclassify workers in its sights and is ready to take swift action to punish their noncompliance.

Aggressive Employer Worker Classification Practices Under Seige

The Obama Administration is targeting employers that misclassify workers for enforcement.

In her November 3, 2011 testimony to the House Subcommittee on Workforce Protections Committee on Education and the Workforce, U.S. Labor Department Wage & Hour Division (WHD) Deputy Administrator (WHD) Nancy Leppink confirmed that the Labor Department is joining a growing list of federal and state agencies that are making ending employee misclassification an audit and enforcement priority. testified that “employee misclassification is a serious and, according to all available evidence, growing problem” that the Obama Administration is “committed to working to end.” See Testimony of Nancy J. Leppink, Deputy Wage and Hour Administrator, Wage and Hour Division, U.S. Department of Labor before the Subcommittee on Workforce Protections, Committee on Education and the Workforce, U.S. House of Representatives (November 3, 2011).

“These agreements mean that all levels of government are working together to solve this critical problem,” she said.

Employers Urged To Audit & Strengthen Worker Classification Practices

For Help or More Information

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If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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1 Comment | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Independent Contractor, Overtime, payroll tax, Wage & Hour, Worker Classification | Permalink
Posted by Cynthia Marcotte Stamer

2/27 Deadline For Employers To Comment On DOL Proposed Rule Changes Extending Minimum Wage & Overtime Rules To More Home Caregiver Workers

December 25, 2011

February 27, 2012 will be the deadline for interested employers to comment on changes that the U.S. Department of Labor’s Wage and Hour Division (WHD) proposes to make to its rules on when its minimum wage and overtime protections apply to workers who provide in-home care services for the elderly and infirm. The proposal will revise the companionship and live-in worker regulations under the Fair Labor Standards Act to more clearly define the tasks that may be performed by an exempt companion, and to limit the companionship exemption to companions employed only by the family or household using the services. In addition, the Department proposes that third party employers, such as in-home care staffing agencies, could not claim the companionship exemption or the overtime exemption for live-in domestic workers, even if the employee is jointly employed by the third party and the family or household.

If adopted as proposed, the proposed rules will significantly expand the number of home health care and other home care workers covered by minimum wage and overtime requirements. As proposed, the proposed regulation will revise the companionship and live-in worker regulations under the Fair Labor Standards Act (FLSA):

To more clearly define the tasks that may be performed by an exempt companion;
To limit the companionship exemption to companions employed only by the family or household using the services; and
To provide that third party employers, such as in-home care staffing agencies, could not claim the companionship exemption or the overtime exemption for live-in domestic workers, even if the employee is jointly employed by the third party and the family or household.

Coupled with these and other enforcement efforts against health industry employers, WHD’s announcement of plans to tighten rules for home care givers. In connection with its announcement of the planned regulatory changes, for instance, WHD highlighted the following guidance about the wage and hour rules that employers of home care workers can anticipate being required to meet when employing these workers:

Violation of wage and hour laws exposes an employer to significant back pay awards, substantial civil penalties and, if the violation is found to be willful, even potential criminal liability.

In light of the proposed regulatory changes and demonstrated willingness of WHD and private plaintiffs to bring actions against employers violating these rules, health care and others employing home care workers should take well-documented steps to manage their risks. These employers should both confirm the adequacy of their practices under existing rules, as well as evaluate and begin preparing to respond to the proposed modifications to these rules. In both cases, employers of home care or other health care workers are encouraged to critically evaluate their classification or workers, both with respect to their status as employees versus contractor or leased employees, as well as their characterization as exempt versus non-exempt for wage and hour law purposes. In addition, given the nature of the scheduled frequently worked by home care givers, their employers also generally should pay particular attention to the adequacy of practices for recordkeeping.

This notice of proposed rulemaking will be available for comment beginning December 27, 2011 at www.regulations.gov. The comment period will close on February 27, 2012.

For Help With Compliance & Risk Management and Defense

If you need help in auditing or assessing, updating or defending your organization’s compliance, risk manage or other internal controls practices or actions under these or other laws, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, reengineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

[1] WHD’s announcement of the planned rule notes that this draft shared December 15 remains subject to change before formally published in the Federal Register.

Comments Off on 2/27 Deadline For Employers To Comment On DOL Proposed Rule Changes Extending Minimum Wage & Overtime Rules To More Home Caregiver Workers | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Overtime, Wage & Hour | Permalink
Posted by Cynthia Marcotte Stamer

NLRB Changes Certification Election Case Procedures

December 25, 2011

The National Labor Relations Board (NLRB) has adopted a final rule amending its election case procedures. The final rule published in the Federal Register on December 22, 2011primarily focuses on procedures followed by the NLRB in the minority of cases in which parties can’t agree on issues such as whether the employees covered by the election petition are an appropriate voting group. In such cases, the matter goes to a hearing in a regional office and the NLRB Regional Director decides the question and sets the election.

Scheduled to take effect April 30, 2012, the new final rule Final Rule on Election Procedures seeks to reduce litigation. Among other things, the Final Rule:

Amends § 102.64 to expressly construe Section 9(c) of the Act and to state that the statutory purpose of a pre-election hearing is to determine if a question of representation exists;
Amends § 102.66(a) and eliminate § 101.20(c) (along with all of Part 101, Subpart C) to ensure that hearing officers presiding over pre-election hearings have the authority to limit the presentation of evidence to that which supports a party’s contentions and is relevant to the existence of a question concerning representation;
Amends § 102.66(d) to afford hearing officers presiding over pre-election hearings discretion over the filing of post-hearing briefs, including over the subjects to be addressed and the time for filing;
Amends §§ 102.67 and 102.69 to eliminate the parties’ right to file a pre-election request for review of a regional director’s decision and direction of election, and instead to defer all requests for Board review until after the election, when any such request can be consolidated with a request for review of any post-election rulings;
Eliminates the recommendation in § 101.21(d) (as stated, along with all of Part 101, Subpart C) that the regional director should ordinarily not schedule an election sooner than 25 days after the decision and direction of election in order to give the Board an opportunity to rule on a pre-election request for review;
Amends § 102.65 to make explicit and narrow the circumstances under which a request for special permission to appeal to the Board will be granted;
Amends §§ 102.62(b) and 102.69 to create a uniform procedure for resolving election objections and potentially outcome-determinative challenges in stipulated and directed election cases and to provide that Board review of regional directors’ resolution of such disputes is discretionary; and
Eliminates part 101, subpart C of Board regulations and makes other conforming amendments.

According to the NLRB, the changes in the Final Rule will ensure that going forward, the regional hearings will be expressly limited to issues relevant to the question of whether an election should be conducted. The hearing officer will have the authority to limit testimony to relevant issues, and to decide whether or not to accept post-hearing briefs.

Also, all appeals of regional director decisions to the Board will be consolidated into a single post-election request for review. Parties can currently appeal regional director decisions to the Board at multiple stages in the process.

In addition, the rule makes all Board review of Regional Directors’ decisions discretionary, leaving more final decisions in the hands of career civil servants with long experience supervising elections.

Click here to read the Final Rule.

The Final Rule annoucnement was followed by the NLRB’s announcement that it is delaying the deadline for employers to comply with its employee rights notice-posting rule until April 30, 2012. However the extension does little to relieve employers from the wave of added regulatory and enforcement guidance including new social networking guidance issued coincident with the extension announcement.

While the poster requirement is delayed, the NLRB continues to pursue an active regulatory and enforcement agenda. See, e.g., Employers Face New Labor-Management Exposures Under Activist National Labor Relations Board. Employers should continue to strengthen their labor-management policies and practices to mitigate the growing labor exposures that result from this activist agenda. In fact, the NLRB accompanied its extension anouncement by sharing new guidance about its position on labor law restrictions on employer regulation of social networking and other communications.

For Help or More Information

If you need help with labor managmeent relations or other human resources or internal controls matters, please contact the author of this article, Cynthia Marcotte Stamer.

Board Certified in Labor & employment Law by the Texas Board of Legal Specialization, ,management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, reengineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

[1] WHD’s announcement of the planned rule notes that this draft shared December 15 remains subject to change before formally published in the Federal Register.

Comments Off on NLRB Changes Certification Election Case Procedures | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: aor law, department of labor, Employment, Health Care, lovertime, NLRA, NLRB, Union, Wage & Hour | Permalink
Posted by Cynthia Marcotte Stamer

NLRB Delays Deadline For Employee Labor Rights Poster Requirement To April 30

December 25, 2011

The National Labor Relations Board (NLRB) is delaying the deadline for employers to comply with its employee rights notice-posting rule until April 30, 2012. However the extension does little to relieve employers from the wave of added regulatory and enforcement guidance including new social networking guidance issued coincident with the extension announcement.

The NLRB rule will require that most private sector employers will be required to post the 11-by-17-inch notice on the new implementation date of April 30. The notice is available at no cost from the NLRB through its website, which has additional information on posting requirements and NLRB jurisdiction.

Facing litigation challenging the rule, the NLRB announced on December 23, 2011 that it would delay the deadline to comply with the rule to comply with he request of the federal court in Washington, DC hearing the llegal challenge. Following the announcement, the new implementation date is April 30, 2012.

For Help or More Information

If you need help with labor managmeent relations or other human resources or internal controls matters, please contact the author of this article, Cynthia Marcotte Stamer.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

[1] WHD’s announcement of the planned rule notes that this draft shared December 15 remains subject to change before formally published in the Federal Register.

Comments Off on NLRB Delays Deadline For Employee Labor Rights Poster Requirement To April 30 | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Overtime, Wage & Hour | Permalink
Posted by Cynthia Marcotte Stamer

New Labor Department Retaliation Guidance Reminder Of Retailiation Risks

December 23, 2011

U.S. employers should exercise care to guard against potential retaliation claims brought by current or former employees under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) and other federal employment laws.

Retaliation claims have emerged as a leading source of liability for U.S. employers. Most U.S. labor and employment laws, as well as many other statutes prohibit companies from retaliating against employees for exercising protected rights under the law’s provisions. Challenges and risks in managing this growing source of liability has been further fueled by the U.S. Supreme Court’s ruling in Crawford v. Metropolitan Gov’t of Nashville and Davidson County, No. 06-1595, that the anti-retaliation provisions of Title VII extend to employees who take part in investigations even if that employee does not file a complaint of retaliation. See Supreme Court Decision May Open Doors To More Retaliation Claims

In light of these risks, U.S. employers should tighten employee discipline and other practices and documentation to guard against retaliation claims.

In undertaking these risk management efforts, employers should take advantage of the insights given from three new fact sheets addressing retaliation published by the U.S. Department of Labor Wage and Hour Division (WHD) on December 23, 2011:

Fact Sheet #77A, Prohibiting Retaliation Under the Fair Labor Standards Act (FLSA), provides general information concerning the FLSA’s prohibition of retaliating against any employee who has filed a complaint or cooperated in an investigation and is available on the WHD website at here;
Fact Sheet #77B, Protection for Individuals under the FMLA, provides general information concerning the Family and Medical Leave Act’s (FMLA) prohibition of retaliating against an individual for exercising his or her rights or participating in matters protected under the FMLA and is available on the WHD website at here; and
Fact Sheet #77C, Prohibiting Retaliation Under the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), provides general information concerning MSPA’s prohibition of discrimination against a migrant or seasonal agricultural worker who has filed a complaint or participated in any proceeding under or related to MSPA and is available on the WHD website at here.

The guidance comes as the WHD is proposing to adopt new rules that would provide minimum wage and overtime protections for nearly two million workers who provide in-home care services for the elderly and infirm. WHD’s focus on home health workers is an extension of its expanded regulation and enforcement efforts targeting a broad range of health care industry employers. See Notice of Proposed Rulemaking (NPRM) to revise the companionship and live-in worker regulations under the Fair Labor Standards Act (FLSA).

The proposed tightening of regulations for home health workers follows a general toughening by WHD of its regulation and enforcement of wage and hour laws in the health care and many other industries. See, e.g. Home health care company in Dallas agrees to pay 80 nurses more than $92,000 in back wages following US Labor Department investigation; US Department of Labor secures nearly $62,000 in back overtime wages for 21 health care employees in Pine Bluff, Ark.; US Department of Labor initiative targeted toward increasing FLSA compliance in New York’s health care industry; US Department of Labor initiative targeted toward residential health care industry in Connecticut and Rhode Island to increase FLSA compliance; Partners HealthCare Systems agrees to pay 700 employees more than $2.7 million in overtime back wages to resolve U.S. Labor Department lawsuit; US Labor Department sues Kentucky home health care provider to obtain more than $512,000 in back wages and damages for 22 employees; and Buffalo, Minn.-based home health care provider agrees to pay more than $150,000 in back wages following US Labor Department investigation.

Employers should take steps to manage compliance and other exposures under these and other federal laws, including those for engaging in prohibited retaliation. Employers should both confirm the adequacy of their practices under existing rules, as well as take steps to decrease exposures to retaliation claims.

For Help With Compliance & Risk Management and Defense

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, reengineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

*WHD’s announcement of the planned rule notes that this draft shared December 15 remains subject to change before formally published in the Federal Register.

Comments Off on New Labor Department Retaliation Guidance Reminder Of Retailiation Risks | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Overtime, Wage & Hour | Permalink
Posted by Cynthia Marcotte Stamer

Labor Department Proposes Changing Minimum Wage& Overtime Rules For Home Caregivers, Keeps Heat On Health Care Employers

December 15, 2011

The U.S. Department of Labor Wage and Hour Division (WHD) plans to propose new rules that would provide minimum wage and overtime protections for nearly two million workers who provide in-home care services for the elderly and infirm. WHD’s focus on home health workers is an extension of its expanded regulation and enforcement efforts targeting a broad range of health care industry employers.

On December 15, 2011 the WHD announced that it will publish a Notice of Proposed Rulemaking [1] (NPRM) to revise the companionship and live-in worker regulations under the Fair Labor Standards Act (FLSA):

To more clearly define the tasks that may be performed by an exempt companion;
To limit the companionship exemption to companions employed only by the family or household using the services; and
To provide that third party employers, such as in-home care staffing agencies, could not claim the companionship exemption or the overtime exemption for live-in domestic workers, even if the employee is jointly employed by the third party and the family or household.

Violation of wage and hour laws exposes an employer to significant back pay awards, substantial civil penalties and, if the violation is found to be willful, even potential criminal liability.

For Help With Compliance & Risk Management and Defense

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping private and governmental organizations and their management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; schools and other governmental agencies and others design, administer and defend innovative compliance, risk management, workforce, compensation, employee benefit, privacy, procurement and other management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend union-management relations, wage and hour, discrimination and other labor and employment laws, procurement, conflict of interest, discrimination management, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, reengineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

[1] WHD’s announcement of the planned rule notes that this draft shared December 15 remains subject to change before formally published in the Federal Register.

Comments Off on Labor Department Proposes Changing Minimum Wage& Overtime Rules For Home Caregivers, Keeps Heat On Health Care Employers | Corporate Compliance, Employers, Fair Labor Standards Act, Human Resources, Internal Controls, Internal Investigations, Wage & Hour | Tagged: department of labor, Employment, Health Care, Overtime, Wage & Hour | Permalink
Posted by Cynthia Marcotte Stamer

Self-Insured Health Plan Sponsors, Health Insurers Brace To Pay New ACA-Imposed Fees

1st OCR Small HIPAA Breach Settlement Shows Plans, Other Covered Entities At Risk From Small Breach Reports Too

$50K Settlement Shows Small Breach Reports Carry Enforcement Risk

Labor Department Targeting Businesses Violating Overtime, Other Wage & Hour Laws

Bank’ $1Million Plus Overtime Settlement Shows Risks of Misapplying FLSA’s Administrative Exemption

Labor Department Serves The Christmas Light Co. & Its Owner With Holiday Season FLSA Lawsuit

Boston Hides and Furs Ltd. Sued For $1 Million For Alleged Willful FLSA Wage & Hour Law Violations

New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers

Texas Landscaper’s $106,000 In Minimum Wage & Overtime Settlement Reminds Employers To Prepare For FLSA Enforcement

DC Court Enjoins Implementation of NLRB Poster Rule

March 21 New Deadline To Comment On Proposal To Extend Minimum Wage, Overtime Rules To In Home Care Workers

NLRB Report Shows Rise In Unfair Labor Practice Complaints & Formal Proceedings

Sullivan University System to Pay $483,000 in Back Wages Overtime Violations Stemming From Worker Misclassifications

New DOL Final Rules Tighten Requirements For Employers To Hire Alien Workers Using H-2B Visas

OSHA $1Million Award Against AirTran Airways Highlights Retaliation Risks

Stamer Dallas Bar Journal Article Cautions Employers Must Take Holistic Approach To Address Worker Misclassification Risks

Employers Urged To Strengthen Worker Classification Defenses As Obama Administration Targets Employers Misclassifying Workers

2/27 Deadline For Employers To Comment On DOL Proposed Rule Changes Extending Minimum Wage & Overtime Rules To More Home Caregiver Workers

NLRB Changes Certification Election Case Procedures

NLRB Delays Deadline For Employee Labor Rights Poster Requirement To April 30

New Labor Department Retaliation Guidance Reminder Of Retailiation Risks

Labor Department Proposes Changing Minimum Wage& Overtime Rules For Home Caregivers, Keeps Heat On Health Care Employers

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