Avoiding Workplace Pitfalls: Domestic and Foreign Employee Compliance. Employment Law Breakfast Series Sponsored by Cowles & Thompson, PC & The International Business Council of the Frisco Chamber Employment lawsuits and government audits and investigations are at a record high. In 2013 the government settled the largest immigration fine in history with a Plano, TX based company in the amount of $34 million for charges of visa and I-9 non-compliance. Avoid the penalties, damages, and negative publicity for those who have been caught unaware. Regardless of size or industry, your company must be able to prove its observance of federal and state employment laws and regulations concerning both domestic and foreign workers. The Frisco Chamber of Commerce International Business Council and Cowles & Thompson, PC presented three educational events to help your organization meet regulatory challenges for your domestic and foreign employee workforce. This is the first event - Current Trends in Government Investigations - held on July 23, 2014 at the Frisco Chamber of Commerce, Frisco, Texas.

1. Avoiding Workplace Pitfalls
Domestic and Foreign Employee Compliance
Session I - Current Trends in Government Investigations & Audits

2. Agenda
1
2
3
Legal Trends in North Texas
Wage and Hour Enforcement
Top 12 Mistakes to Avoid in I-9,
E-Verify, and Work Visa Compliance

3. Legal Trends in North Texas
Mark Hill
Shareholder, Cowles & Thompson, P.C.

4. Legal Landscape
 100s of claims are filed in North Texas
State and Federal Courts everyday.
 Employment related claims are an
increasing part of the legal landscape in
Collin, Dallas and surrounding counties.

5. Hot Spots
Top
Filers
Top
Targets
Top Case
Types

6. Top Filers

7. Top Filers (Plaintiffs)
Businesses

8. What are Businesses Filing?
Business
Contract
actions
Fiduciary Duty
& Fraud
actions
Trade Secret
actions

9. Top Filers (Plaintiffs)
Individuals

10. What are Individuals Filing?
Employment and
PI & Negligence
actions

11. Top Targets

12. Top Targets (Defendants)
Contractors

13. How are Contractors being targeted?
Breach of
Contract
actions
Warranty &
DTPA
actions
Employment
actions

14. Top Targets (Defendants)
Businesses

15. How are Businesses being targeted?
Business Contract
actions Negligence actions
Fraud actions
Employment
related actions

16. For the local area business
owner and employer,
what does this tell us?

17. Top Case Types

18. Recent Hot Spots
Fiduciary
cases
Trade
Secret
cases
Employment
cases

19. Employment Cases
Discrimination Non-Compete
Confidentiality
& Trade Secret
FLSA

20. The Importance of Worker Classification
Regulatory
Compliance
Civil Liability

21. Independent Contractor or Employee
This may surprise some, but having a worker
sign an Independent Contractor agreement does
not make that worker an independent
contractor.
…at least not by itself.

22. Several Factors to Consider
Court's in Texas have established a Framework to
determine whether a worker is an Independent
Contractor or an Employee.
There are several factors to consider – and no one
factor controls.

23. Independent Contractor Framework
(1) the independent nature of the worker's business,
(2) the worker's obligation to furnish necessary tools,
supplies, and materials to perform the job,
(3) the degree to which the worker's opportunity for profit
or loss is determined by the employer,
(4) the time for which the worker is employed, and
(5) the method of payment, whether by unit of time or by
the job.

24. Misclassification is a Focus
The U.S. Department of Labor (DOL) is also making
employer compliance with the FLSA a focus, and
misclassification of employees as independent
contractors is at the center of its scrutiny.
A recent study by the University of Texas found that
almost half of all construction workers were
misclassified as independent contractors.

25. Wage and Hour Enforcement
Brian Farrington
Shareholder, Cowles & Thompson, P.C

26. Misclassification of Exempt and
Nonexempt Employees
Fair Labor Standards Act of 1938 is the
basic Federal Wage and Hour Law,
regulating 4 areas
•Minimum Wage (“MW”)
•Overtime (“OT”)
•Child Labor
•Recordkeeping

27. Misclassification of Exempt and
Nonexempt Employees
There are many exemptions from the
Act’s monetary requirements, but one
applies to all kinds of businesses—
complete MW and OT exemption for:
• Executive Employees
• Administrative Employees
• Professional Employees
• Outside Salespersons

28. Misclassification of Exempt and
Nonexempt Employees
One of the requirements for
exemption is (usually) payment
on a salary basis—BUT
• YOU CAN’T MAKE EMPLOYEES
EXEMPT JUST BY PUTTING
THEM ON SALARY AND GIVING
THEM A GRAND TITLE!

29. Misclassification of Exempt and
Nonexempt Employees
Exemption generally requires
two things:
1. Payment on a salary basis
2. Meeting various “Duties Tests”

30. Misclassification of Exempt and
Nonexempt Employees
Salary Basis of Payment.
Minimum Salary is
$455/wk, or $23,660/yr
General Rule No. 1: Pay exempt
employees their full salary in any
week in which they do any work
General Rule No. 2: Need not pay exempt
employees in any week in which they do
no work, regardless of the reason

31. Misclassification of Exempt and
Nonexempt Employees
EXCEPTIONS—Employers can reduce the salaries
of exempt employees in these situations:
• Absences of employees for personal reasons,
or if they are sick, but only for full day
absences
• Disciplinary suspensions, but only for full days
• Violations of major safety rules

32. Misclassification of Exempt and
Nonexempt Employees
• Primary Duty (i.e., most
important) must be Management
• Must supervise at least 2 FTE’s
• Must be able to hire/fire, or at
least recommend hiring/firing,
promotions, raises, discipline,
etc.
Executive
Employees
Duties
Tests

33. Misclassification of Exempt and
Nonexempt Employees
• Primary duty must be office or non-
manual
• Work must be administrative in
nature (i.e., assist in running or
servicing the business)
• Must make decisions in MATTERS OF
SIGNIFICANCE, and exercise
DISCRETION AND INDEPENDENT
JUDGMENT while doing so
Administrative
Employees
Duties Tests

34. Misclassification of Exempt and
Nonexempt Employees
• Learned Professionals
• Work requiring advanced
knowledge in recognized learned
profession—e.g., law, medicine,
accounting, engineering, sciences
• Work must be intellectual
• Requires discretion and
independent judgment
Professional
Employees
Duties Tests

35. Misclassification of Exempt and
Nonexempt Employees
Creative Artists
• Work requires invention,
originality, and talent
• In a recognized field of
artistic endeavor
Teachers in
educational
institutions

36. Misclassification of Exempt and
Nonexempt Employees
• Primary duty is making
sales or obtaining
contracts for services
• Away from the
employer’s place of
business
Outside
Salespersons
Duties Tests

37. Off-Clock Hours
Employers must accurately record, and properly pay
for all HOURS WORKED. HOURS WORKED includes:
• All time employees are required to be on the
premises
• All time they are required to be at a prescribed
work site
• All time they spend in activities which benefit the
employer

38. Off-Clock Hours
It is MANAGEMENT’S
RESPONSIBILITY to see that
time is accurately recorded
and paid for. Employers
can’t accept “free” or
“voluntary” work from their
employees. If they work it,
the company must pay for
it.

39. Off-Clock Hours
Employers often fail to pay for all hours
worked. Common problems include:
•Not paying for preparatory or concluding
activities—e.g., call centers
•Not paying for travel time
•Employees working through lunch
•Not paying for training time

40. Overtime Compensation
Overtime is time and a
half of the employees’
regular rate for hours
worked over 40 in a
workweek.

41. Overtime Compensation
OT is enforced on a WORKWEEK
basis. A workweek is a designated
period of 7 consecutive 24 hour
days. OT is due after 40 hour in a
single workweek:
• No daily OT is required
• Can’t average workweeks
• No comp time for overtime

42. Overtime Compensation
Overtime is due only after 40 hours ACTUALLY
WORKED—paid time off does not count toward
OT. Take a paid holiday for example:
M T W T F S S
8-H 8 8 8 8 8 X
Employee may be paid for 48, but no OT due,
because only worked 40 hours.

43. Overtime Compensation
Overtime is not paid just on base rate but on the
“regular rate of pay.” The regular rate (“RR”) is
computed by dividing all compensation
attributed to a particular workweek by the hours
worked in that workweek:

44. Overtime Compensation
This means employers pay OT on ALL
compensation, including most bonuses, shift
differentials, commissions, piece rates, etc., not
just on the base rate.

45. Overtime Compensation
Regular Rate Exclusions - Employers don’t have to pay OT on
the following (list is illustrative, not exhaustive):
Christmas
bonuses
Discretionary
bonuses
Expense
reimburse-
ment
Employer
contributions
to 401(k)
Payments to
third parties
for group
insurance,
etc.

46. Minimum Wage
• Enforced on a workweek basis, so
employees paid on a contingent basis
(e.g., piece work and commissions) may
have to get advances to meet MW in each
workweek.
• Deductions for the employer’s benefit
(cash shortages, damage to property)
cannot bring employees below MW in any
workweek.
Current Rate
is $7.25.
Proposed
increase to
$10.10
(unlikely to
pass)

47. Tipped Employees
Minimum cash wage is $2.13.
Employer may claim tip credit
of up to $5.12
Tips are the property of the
employees—employer may not
take employees’ tips.
Tipped employees are by definition
paid MW, so no deductions for
employer’s benefit (e.g., uniforms,
breakage, shortages, walkouts,
etc.)
No tip credit without
disclosures to employees

48. Tip Pools
No set limit on tip
contributions
Contributing employees
must retain at least $5.12
Receiving employees must
make enough to make MW
Only serving employees can
receive tips from the pool—
not managers, back of
house, etc.
Disclosures to employees
required

49. Top 12 Mistakes to Avoid in I-9,
E-Verify, and Work Visa Compliance
Ann Massey Badmus
Shareholder, Cowles & Thompson, P.C

50. Department of Homeland Security
U.S. Citizenship and Immigration
Service (USCIS) www.uscis.gov -
immigration benefits and
services
U.S. Customs and Border
Protection (CBP) – www.cbp.gov
– border patrol and
international travel facilitation

51. Department of Homeland Security
Immigration and Customs Enforcement
Investigates employers for
compliance with employment
employer verification rules
and removes undocumented
aliens from the United States
www.ice.gov

52. U.S. Department of Labor
Investigates employer verification
compliance, visa compliance,
violation of worker rules
www.foreignlaborcert.doleta.gov

53. U.S. Department of Justice
Office of Special Counsel (OSC)
Investigates and prosecutes
charges of immigration-related
unfair employment practices
www.usdoj.gov/crt/osc

54. Mistake # 1
Failure to Use the Correct I-9 Form
After May 7, 2013,
employers must use the
two page I-9 form,
version date March 8,
2013.
Applies to new
employees and re-
verification of existing
employees (if applicable).

55. Mistake # 1
Failure to Use the Correct I-9 Form
Correct outdated
forms
Give new hires full
expanded I-9
instructions
Optional fields- SSN,
telephone number, e-
mail address
Leave no blanks – use
“N/A”

56. Mistake # 2
Failure to Comply with 3-day Rule
Employee must fill out I-9
form on first day of
employment and provide
employment eligibility
documents for Section 2 by
the 3rd business day of
employment.
Business day = any day the
business is open or
operational (holidays and
weekends included)

57. Mistake # 3
Failure to Properly Complete Form
• Not listing date
employment began
(Section 2)
• Missing information,
signatures and dates
(Sections 1 and 2)
• Not listing document
title, issuing authority,
expiration date, or
document number
(Section 2)

58. Mistake # 3
Failure to Properly Complete Form
Department of Justice Order
United States of America v. Golf International d/b/a
Desert Canyon Gold, OCAHO Case No. 13A00074,
June 13, 2014
Golf International ordered to pay $57,650 (reduced
from initial assessment of $136,697) for paperwork
violations, including failure to sign section 2 for 110
employees.

59. Mistake # 4
Failure to Properly Retain I-9 Forms
I-9 Retention Rule
Keep the I-9 form for
each employee either
(1) three years after the
date of hire OR (2) one
year after the
employee’s last date of
employment, whichever
is later.

60. Mistake # 4
Failure to Properly Retain I-9 Forms
I-9 Retention Form
Date of Hire__________+ 3 years =____________
Date of Separation ________+ 1 year = _____________
Take the later date and enter it here:
_____________________________________
Retention Date

61. Mistake # 4
Failure to Properly Retain I-9 Forms
Quick Tips
Keep I-9 forms
separate from
personnel files
Keep retention
date
spreadsheet
Destroy I-9
forms once
retention date
is reached

62. Mistake # 5
Demanding Specific Documents
Employee may produce any
List A or List B and C
documents listed on the I-9
form.
A demand for specific
documents, e.g. green card
or social security card, can
violate anti-discrimination
rules.

63. E-Verify
E-Verify is an Internet-based system
that compares information from an
employee's Form I-9, Employment
Eligibility Verification, to data from U.S.
Department of Homeland Security and
Social Security Administration records
to confirm employment eligibility.

64. E-Verify Required
Federal
agencies
Federal
contractors
Certain
State
agencies
and private
employers
Companies
located in
states that
require E-
Verify
Employers
of STEM F-1
students
seeking OPT
extension

65. Mistake # 6
Failure to Verify Employee in 3 days
Employer must
complete I-9 form AND
run E-Verify check
within 3 business days
of start date.

66. Mistake # 7
Premature Termination of Employment
Tentative Non-Confirmation
Employers must give
employee 8 days to contest
non-confirmation and
continue employment
during this period.

67. Foreign Workers

68. Mistake # 8
Failure to Maintain Public Access File
Employers of H-1B workers
must maintain a public
access file containing
specific information about
work conditions, e.g. labor
condition application,
prevailing wage
determinations, for public
inspection.

69. Mistake # 9
Failure to Pay the Required Wage
All employers must pay the H-1B
employee the prevailing wage or
the actual wage for the position,
whichever is higher. The approved
wage cannot be lowered without
DOL and USCIS approval.

70. Mistake # 10
Benching
Employer must pay H-1B and H-2B
employees the required wage for the full
number of approved hours even if the
employee has no assigned work or client
contracts.
• H-1B employees must be paid within 30
to 60 days of H-1B status.

71. Mistake # 11
Failure to Properly Terminate
Employment
Letter of
termination
Offer of return
transportation
(air fare) to
home country
Notification to
the USCIS
Three step process for early
termination of H-1B employment

72. Mistake # 12
Failure to Obtain Deemed Export
License
Foreign National employees with access to
controlled technologies may require an
export license pursuant to “deemed
export” rule.
• Dual use technologies
• Country of last citizenship
• Release of information to foreign
national

73. Best Practice to Avoid These Mistakes
Immigration Compliance Plan
•Self-Audits
•Annual Training
•Written Procedures

74. Questions?

75. What to Do Next?
Facts of each case are different.
The general information provided
here should not be relied and is
not legal advice.
Consult with an experienced
attorney to get the right
advice for your specific
circumstances.

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Suite 3900
Dallas, Texas 75202
214-672-2000
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www.cowlesthompson.com
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