PACE - Law Presentation: Employment Law 101

Employment Law 101:
Recognizing The Top Mistakes Made by
Mid-Sized Employers
Presented at PACE Conference
Chandler, Arizona
October 8, 2013
Jennifer Phillips

Manuel H. Cairo

602-382-6565
jphillips@swlaw.com

602-382-6534
mcairo@swlaw.com

Overview and Scope of Presentation
•
•

Worksite Enforcement
Federal law focus – Because each state has their own
employment laws
◦
◦
◦
◦

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FLSA – Fair Labor Standards Act
NLRA – National Labor Relations Act
Title VII – Civil Rights Act of 1964
ADAAA – Americans with Disabilities Act as amended
FMLA – Family and Medical Leave Act

©2013 Snell & Wilmer L.L.P.

2

Background
The Immigration Reform and Control Act of 1986 (―IRCA‖)
requires employers to satisfy three separate and distinct
legal obligations:
1.

2.

3.

A person or other entity must not knowingly hire, recruit or
refer for a fee, for employment an alien who is
unauthorized to work in the United States and must not
continue to knowingly employ an alien that is
unauthorized or has become unauthorized to work in the
United States. See 8 U.S.C. § 1324a.
The employer must verify whether or not the new hire is
authorized to work in the United States, and whether or
not the person hired is a citizen or alien. See 8 U.S.C. §
1324a(b).
Refrain from discriminating against individuals on the
basis of actual or perceived national origin, citizenship, or
immigration status.
©2010 ©2013 Snell & Wilmer L.L.P Snell & Wilmer
L.L.P.

3

Common Mistake: “I can handle the
inspection process myself.”

•

Notice of Inspection
Purpose
◦

•

To identify any violations that might lead
to criminal prosecution of an employer
or civil liability

Three Day Rule
◦

8 C.F.R. § 274a.2(b)(2(ii)

© ©2013 Snell & Wilmer L.L.P 2010 Snell & Wilmer
L.L.P.

4


L.L.P.

5

―The issuance of the Notice of
Inspection on any employer is the first
step in the process that may lead to the
issuance of a Notice of Intent to Fine, a
Warning Notice, or finding employer is
in compliance.‖

L.L.P.

6

•

Content
◦

◦
◦
◦
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◦
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Forms I-9 for current and past employees
Roster of all current and terminated employees with hire and
termination dates
Quarterly wage and hour reports/payroll data
Quarterly tax statements
Business Information:
- Employer Identification Number
- Taxpayer Identification Number
- Owner’s Information
- Articles of Incorporation, if any
- Business Licenses
Correspondence from Social Security Administration
E-Verify Information
Electronic System Information

©2 ©2013 Snell & Wilmer L.L.P 010 Snell & Wilmer

7

Common Mistake: Not understanding the
potential role of notices.
•

Notice of Suspect Documents: Advises employer
that based on a review of the Forms I-9 and
documentation submitted by the employee, ICE
has determined that the employee is unauthorized
with respect to employment and advises the
employer of the possible criminal and civil
penalties for continuing to employ the individual.
◦
◦

Confirmation of Notice of Inspection Results
Change to Notice of Inspection Results

©2013 Snell & Wilmer L.L.P

8

Common Mistake: Not understanding the
potential role of notices.
•

Notice of Discrepancies: Advises the employer
that based on a review of the Forms I-9 and
documentation submitted by the employee, ICE
has been unable to determine their work eligibility
in the U.S. A notice explaining the employee’s
rights and responsibilities is forwarded with this
letter, which the employer is requested to serve
on each affected employee.


9

Common Mistake: Not understanding
violations.

•

Verification Violations
Substantive
◦

Defined as ―knowing hire,‖ ―continuing to
employ,‖ failure to prepare and
present, and those serious paperwork
violations that could have led to the
hiring of an unauthorized alien.
-

-

Warning Notice
Notice of Intent to Fine


10

Common Mistake: Not understanding
violations.

•

Verification Violations
Technical/Procedural
◦

◦

Notice of Technical or Procedural
Failures
Ten Business Days To Correct
-

Notice of Inspection Results


11

Consequences: Warning Notice
•

May be issued in circumstances
where substantive violations were
identified but there is the expectation
of future compliance by the employer.


12

Consequences: Warning Notice
•

Inappropriate when:
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―knowing hire‖ and/or ―continuing to
employer‖ violations
Failure to prepare and present
Unauthorized aliens hired as a result of
substantive paperwork violations
Fraud
Prior ICE history
Failure to correct technical violations

13

Consequences:
•

•

Recommendation of fine based on statutory
requirements and internal guidance memoranda
Structure:
◦ I-763 Notice of Intent to Fine
◦ I-761 Application for Notice of Intent to Fine
◦ Memorandum to Case File for Determination of
Civil Money Penalty
◦ Charging Documents
◦ Evidence Summary List
◦ Exhibits


14

Consequences:
Substantive/Uncorrected Technical Violations
Standard Fine Amount
Substantive Verification
Violations

0%-9%

1st Offense
$110 - $1100

2nd Offense
$110-$1100

3rd Offense+
$110-$1100

$110

$550

$1,100

10% - 19%

$275

$650

$1,100

20% - 29%

$440

$750

$1,100

30%-39%

$605

$850

$1,100

40%-49%

$770

$950

$1,100

50% or more

$935

$1,100

$1,100

©2010 Sn ©2013 Snell & Wilmer L.L.P ell & Wilmer
L.L.P.

15

Consequences:
Knowing Hire/Continue to Employ
Standard Fine Amount
Knowing Hire and Continuing to
Employ Violations

First Tier
$375 - $3,200

Second Tier
$3,200 - $6,500

$375

$3,200

10% - 19%

$845

$3,750

$6,250

20% - 29%

$1315

$4,300

$8,200

30% - 39%

$1785

$4,850

$10,150

40%-49%

$2255

$5,400

$12,100

50% or more

$2,725

$5,950

$14,050

0%-9%

Third Tier
$4,300-$16,000

$4,300

L.L.P.

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Consequences:
Factors and Enhancement

L.L.P.

17

Consequences:
Settlement and Appeals
•

•
•

•

Final Order
Settlement Agreements
Office of the Chief Administrative
Hearing Officer
Federal Circuit Court of Appeals


18

Common Mistake: Misclassifying
Employees as “Independent Contractors”
•

Fair Labor Standards Act (―FLSA‖)
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Federal law governing ―wage and hour‖ issues – minimum wage, overtime, equal
pay, and record-keeping requirements

◦

Enterprise Coverage vs. Individual Coverage
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Enterprise Coverage: Employees who work for certain businesses or organizations
("enterprises") are covered by the FLSA. These enterprises, which must have at least
two employees, are:
•
•

-

Individual Coverage: Even when there is no enterprise coverage, employees are
protected by the FLSA if their work regularly involves them in commerce between States
("interstate commerce"). The FLSA covers individual workers who are "engaged in
commerce or in the production of goods for commerce."
•

◦

(1) those that have an annual dollar volume of sales or business done of at least $500k
(2) hospitals, businesses providing medical or nursing care for residents, schools, and government agencies

I.e.: Workers who produce goods (worker assembling components in a factory or a secretary
typing letters in an office) that will be sent out of state, regularly make telephone calls to persons
located in other States, handle records of interstate transactions, travel to other States on their
jobs, and do janitorial work in buildings where goods are produced for shipment outside the State.

Wage and Hour Division of the U.S. Department of Labor (―DOL‖) is the federal
agency which investigates and prosecutes alleged FLSA violations

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Employees as “Exempt”
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FLSA - Exempt vs. Nonexempt Workers
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Commissioned sales employees of retail or service establishments are exempt from overtime if
more than half of the employee's earnings come from commissions and the employee averages at
least one and one-half times the minimum wage for each hour worked.
Computer professionals: Section 13(a)(17) of the FLSA provides that certain computer
professionals paid at least $27.63 per hour are exempt from the overtime provisions of the FLSA.
Drivers, driver's helpers, loaders and mechanics are exempt from the overtime pay provisions of
the FLSA if employed by a motor carrier, and if the employee's duties affect the safety of operation
of the vehicles in transportation of passengers or property in interstate or foreign commerce.
Farmworkers employed on small farms are exempt from both the minimum wage and overtime
pay provisions of the FLSA.
Salesmen, partsmen and mechanics employed by automobile dealerships are exempt from the
overtime pay provisions of the FLSA.
Seasonal and recreational establishments: Employees employed by certain seasonal and
recreational establishments are exempt from both the minimum wage and overtime pay provisions of
the FLSA.
Executive, administrative, professional and outside sales employees: (as defined in DOL
regulations) who are paid on a salary basis are exempt from both the minimum wage and overtime
provisions of the FLSA.


20

•

―Employee‖ vs. ―Independent Contractor‖
◦

FLSA applies to ―any individual employed by an employer‖ but not to
independent contractors because they are not considered ―employees‖
under the FLSA

◦

Employers cannot simply claim workers are exempt from the FLSA
requirements (such as paying overtime) by calling workers
independent contractors--misclassifying workers as independent
contractors leads to costly and expensive investigations by
agencies such as the DOL
-

The FY 2013 budget includes resources to continue to detect and deter the
misclassification of workers as independent contractors by including $14 million to
combat misclassification, including $10 million for grants to States to identify
misclassification and recover unpaid taxes and $4 million for investigators at the
Wage and Hour Division. http://www.dol.gov/dol/budget/2013/bib.htm


21

•

◦

The Common-Law Test

(There are multiple state and federal tests to
determine IC status, but most of the considerations are similar)
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The most important factor in determining independent contractor
status involves the independent contractor’s right to control the
manner and means of accomplishing the desired result, even if the
contractor did not exercise that right with respect to all details.

-

Factors examined within that right to control include:





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Whether company had the right to discharge at-will without cause
Whether person performing services is engaged in a distinct
occupational business
Whether the work is usually performed under close direction or by a
specialist without supervision
The skills required in the particular occupation


22

•

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The Common-Law Test (cont.)
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Factors examined within that right to control include:
 Whether the company or the worker supplied the instruments tools
and place for performing the work
 The length of time for which the services are to be performed
 The method of payment, whether by time or by job
 Whether the work is part of the company’s regular business
 Whether the parties believe they are creating the relationship of
employer/employee


23

•

◦

Cromwell v. Driftwood Electrical Contractors, Inc., 15 Wage &
Hour Cas. 2d (BNA) 718 (5th Cir. 2009)

◦
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-

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Court held that two cable splicers were ―employees‖ and not ―independent contractors‖
for purposes of the FLSA overtime requirements even though the two workers controlled
how they performed their work, lacked close supervision, provided their own equipment
and tools, took responsibility for their own insurance and employment taxes, and
exercised a high level of skill.
Those factors were outweighed by the permanency and extent of the working
relationship (they worked full-time and exclusively for employer for 11 months), and by
the workers’ limited opportunities for profit or loss (they had no control over their own
schedule or pay)
The court used the ―Economic Reality Test,‖ and stated:
•
―…as a matter of economic reality, [the employees] were economically dependent
upon [their employer], and were not in business for themselves.‖


24

•

Consequences of Misclassification:
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◦
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Liability for unpaid wages, minimum wage, overtime, failure to keep accurate
records, meal and rest breaks plus penalties & interest
Unpaid tax liability, workers’ compensation liability plus penalties and interest
Not just from DOL, but also IRS, state Industrial Commissions, ICE, etc.

Suggestions:
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◦

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Always ask what is the motivation for classifying someone as an
independent contractor?
Is it based on the reality of the situation? Or is it based on an interest in
avoiding taxes, workers’ compensation expenses,
or other wage withholdings? (not ok)
Always remember, “independent contractor” status is
defined by law and not by the parties’ agreement


25

Common Mistake: “My company is not unionized,
so the NLRA doesn’t apply me.”
•

National Labor Relations Act (―NLRA‖)
◦

Federal law which guarantees basic rights of private sector employees
to organize into trade unions, engage in collective bargaining for better
terms and conditions at work, and take collective action including strike
if necessary

◦

National Labor Relations Board (―NLRB‖) is the federal agency which
investigates and prosecutes alleged violations of the NLRA

o Vast self-expansion of the NLRB’s roles and duties in the past decade,
leading to much political controversy and aggressive enforcement by the
NLRB (Noel Canning and the President’s invalid recess appointments of
3 members of the 5 member Board; August 13, 2013 federal court ruling
that Acting General Counsel not properly appointed, etc.)


26

•

NLRA – Section 7 and ―Protected Concerted Activity‖
◦

Section 7 of the NLRA gives all employees (union and nonunion) the right to
engage in protected concerted activities. Employer may not discipline or
discharge an employee for his/her protected concerted activities.

◦

Employers may not interfere with, restrain, or coerce employees in engaging in
protected concerted activities or in the exercise of rights relating to
organizing, forming, joining or assisting a labor organization for collectivebargaining purposes.

◦

NLRB’s Most Recent Target – Company Social Media Policies
• A policy barring employees from disclosing
―confidential guest, team member or company
information‖ on social networking sites like Facebook
or YouTube is unlawful because it can ―reasonably be
interpreted as prohibiting employees from discussing
and disclosing information regarding their own
conditions of employment, as well as the conditions of
employment of employees other than themselves—
activities that are clearly protected by Section 7.‖


27

•

Employer Tips – (Union and Nonunion)
◦

Threats – Supervisors cannot threaten individuals participating in union activities
with reprisals such as reducing their benefits, or termination of employment.
Company also cannot commit the threatened acts.

◦

Interrogation – Supervisors cannot question employees about whether they
signed a union card, whether they support the union effort, how they would vote
in a union election, how they feel about union representation.

◦

Promises – Supervisors cannot promise wage or benefit
increases, promotions, or future benefits for opposing the union. Company also
cannot grant any such benefits.

◦

Surveillance/Spying - Supervisors cannot watch union
activities in order to determine who is attending meetings
or supporting the union. This applies on- and off-work time
and on- and off-work premises


28

•

Employer Tips – (Union and Nonunion)
◦

Protected Concerted Activity – Protected under Section 7, and is BROADLY
construed, and applies to union and nonunion employers alike
-

Confidentiality Policies - An employer prohibiting disclosure of confidential and proprietary
information should be ready to narrowly define ―confidential‖ and ―proprietary‖. Using examples
helps prevent overbroad definitions.

-

Litigation Holds - An employer should be careful when considering how and whether to restrict
employees’ comments on legal matters, litigation, or disputes because it could restrict
employees from discussing the protected subject of potential claims against the employer.

-

Reporting Coworker Misconduct - An employer requiring employees to report certain activities
or communications of others could be problematic, but an employer’s policy instructing
employees to be cautious or even develop a healthy suspicion of persons trying to ―trick‖ them
into disclosing confidential information can be acceptable.

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Social Media Policies [Again] - An employer should ensure that any prohibition on
―offensive, demeaning, abusive or inappropriate remarks‖ should be narrowly tailored and
consider providing examples. The general prohibition could be overbroad because the
prohibited remarks could cover ―a broad spectrum of communications that would include
protected criticisms of the Employer’s labor policies or treatment of employees.‖


29

Common Mistake: Allowing a Sexually Charged
Atmosphere or Other Hostile Work Environment

•

Title VII of the Civil Rights Act of 1964
◦

Federal law which prohibits discrimination by covered employers on the basis of
race, color, religion, sex or national origin
- Many other classes of protected individuals, pursuant to other federal laws
(i.e. ADAAA, PDA) and state and local ordinances (i.e. Phoenix and Tucson
City Ordinances)
• Disability
• Pregnancy
• Sexual Orientation
• Gender Identity

◦

Applies to: an employer ―who has fifteen (15) or more employees for each
working day in each of twenty or more calendar weeks in the current or preceding
calendar year‖

◦

The Equal Employment Opportunity Commission (―EEOC‖) is the federal agency
which investigates and prosecutes alleged violations of Title VII

◦

Work sharing agreements with state and other federal agencies.

30

•

◦

Duty to Prevent Harassment
-

-

Must have an effective harassment policy
Must be committed to following that policy
Anti-harassment training is important – part of employers’ defense
Investigate all reports of harassment, major or minor
Document in writing the investigation and findings
Follow up with the alleged victim, even if the investigation yields
inconclusive findings or findings of no harassment at all
Make sure that follow up meeting with alleged victim is attended
by more than one supervisor/manager


31

•

◦

Duty to Prevent Harassment
- What happens off-site counts!
•
•
•

-

Holiday parties
Relationships between supervisors and subordinates
Travel

The Company can be liable
for harassment not only by
supervisors, but also coworkers and non-employees!


32

Common Mistake: Failing to recognize the
overlap between ADAAA Leave and FMLA Leave

•

Americans with Disabilities Act (―ADA‖)
◦

◦

•

Americans with Disabilities Act Amendments Act (―ADAAA‖)
◦

◦

•

Amendments to the ADA (enacted in 2008) made significant changes to the definition of the
term ―disability‖ by rejecting the holdings of several Supreme Court decisions and portions of
EEOC’s ADA regulations
The effect of these changes is to make it easier for an individual seeking protection under the
ADA to establish that he or she has a disability within the meaning of the ADA.

Applies to:
◦

•

Federal law (enacted in 1990) which prohibits discrimination, including employment
discrimination against individuals with disabilities. ―Disability‖ is defined as ―a physical or
mental impairment that substantially limits a major life activity.‖
Discrimination may include, among other things, limiting or classifying a job applicant or
employee in an adverse way, denying employment opportunities to people who truly qualify, or
not making reasonable accommodations to the known physical or mental limitations of
disabled employees, not advancing employees with disabilities in the business, and/or not
providing needed accommodations in training materials or policies

Same employers as Title VII—―a person engaged in an industry affecting commerce who has
15 or more employees for each working day in each of 20 or more calendar weeks in the
current or preceding calendar year . . . .‖

Collectively referred to as:
◦

―ADA as amended‖ or ―ADAAA‖


33


•

Family and Medical Leave Act (―FMLA‖)
◦

Federal law requiring covered employers to provide employees 12 weeks of jobprotected and unpaid leave for qualified medical and family reasons.

◦

Qualified medical and family reasons include: personal or family illness, family
military leave, pregnancy, adoption, or the foster care placement of a child

◦

In order to be eligible for FMLA leave, an employee must have been at the
business at least 12 months, and worked at least 1,250 hours over the past 12
months, and work at a location where the company employs 50 or more
employees within 75 miles.


34


What is the ―overlap?‖
• Answer:
•

When an employee needs time off work because of a medical or disability-related issue,
remember that they may have leave rights under both the ADAAA and FMLA

•

For example, an injury that requires hospitalization or incapacitates an employee for
more than three days and requires continuing treatment by a healthcare provider
generally qualifies as a serious health condition under the FMLA

•

If the injury causes a permanent mental or physical impairment that substantially limits a
major life activity, that same employee could be entitled to additional leave as a
reasonable accommodation under the ADAAA

FMLA
Leave

Both

ADA
Leave


35


•

Permanent disability hypothetical
◦
◦
◦
◦
◦

On January 9, 2013, Bill hurt his back when he reached down and moved a 5
gallon bucket of scrap metal approximately 30 feet.
Bill returns to his employer with a note from his doctor explaining that Bill has a
herniated disk in his lower back and needs surgery to repair it.
Bill’s leave is counted as FMLA leave.
Bill’s recuperation takes longer than the doctor had anticipated.
Eight (8) weeks after the surgery, Bill returns to the Company’s HR director with a
doctor’s note which states that Bill needs an additional three (3) weeks off of
work to recuperate and for physical therapy.


36


•

◦
◦
◦

It is now April 2, 2013, one day less than 12 weeks since Bill first reported off of
work due to his back injury.
Bill’s boss has been periodically sending the HR director email notes questioning
Bill’s status, and has begun to question openly whether Bill might be malingering.
The HR director assures him that Bill has used up all of his available FMLA
leave, and tells the supervisor that if Bill fails to show up the next day ready to
go back to work, he would be fired.


37


•

◦

◦
◦

◦
◦

Just before the start of the day shift the next morning Bill arrives at work with
another note from his doctor. This time the note says that Bill’s recovery is
moving along ―according to plan,‖ and that Bill should be ready to return to work
―with some lifting restrictions‖ in two weeks.
The note also states that Bill will likely have a 10% permanent disability per the
―AMA Guides.‖ (Think: ADAAA)
The HR Director, dreading the thought of having to face Bill’s boss again, tells Bill
that because he does not have a medical release to return to work that day, his
employment is terminated effective immediately.
Bill, a 15-year employee, can’t believe what he’s hearing and tells the HR
Director she’ll be hearing from his lawyer.
Should the Company be concerned about Bill’s threat?


38


•

◦

Answer: YES
-

-

-

Because the doctor has established that Bill’s back injury is permanent, Bill
might now be considered disabled under the ADAAA.
The ADA as amended requires employers to make reasonable
accommodations to allow qualified disabled individuals to do their jobs, as long
as these accommodations do not pose an undue hardship for the employer.
The HR director has to make two determinations when faced with Bill’s request
for two additional weeks off (in addition to what he already got in FMLA leave):
•
•

(1) She must decide whether to treat Bill as disabled under the ADAAA.
(2) If Bill is considered disabled, the HR Director must determine whether the
accommodation Bill has requested is ―reasonable‖ and does not pose an ―undue
hardship‖ to the employer.


39

Q&A


40

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