Abusive Federal Agency Practices

November 19, 2014

I have been dealing with the Department of Labor, which selected an immigrant-owned small business to audit for compliance with minimum wage and overtime laws.  After the audit these unfortunate people were told that they were subject to a fine of over $100,000.  The Department of Labor refused to disclose the basis of this finding but the responsible agent did give us a brief summary of the conclusions.  Great pressure was then put on the owners to respond within a couple of days.  This of course would give no meaningful opportunity to go over the daily time records for the 16 month period of the audit, in order to verify the Department’s conclusions.

The reason for this demand of a hasty response seems to have been that the Department of Labor’s accusations and conclusions were not supported the records of the little business.  The time records, many of which the Department of Labor had not even looked at, refuted the claims against the small business.  We scoured the time records to see how they might have been interpreted to support the allegations of the Department and could not imagine how it justified its claims.

I sent a letter explaining what the time records said.  I couple of weeks later I got an email from the agent who made the assessment, saying she’d get back to me next week with a response.  That was over two months ago.  Still waiting.

At first blush it looks like the agent was trying to make her bones at the Department by abusing a vulnerable business in which the owners, because of language and culture issues, were unlikely to be able to defend themselves and might be daunted by the possibility of this the affecting their immigration status.  My guess though is that the agent was relying on accusations of disgruntled former employees, putting greater reliance on that than a careful examination of the records.

Small businesses have enough difficulties in the roiling seas of commerce without being subject to this kind of abuse.  The risks here are best limited by accurate and well organized record keeping and by having the employees sign a form at the time of their departure from the job that includes reference to such matters.


Computing Overtime

November 17, 2014

Every business owner must be aware of the Department of Labor’s method of computing overtime.  Some businesses are paying the correct amount of money and being assessed substantial penalties.  A common example of this is an employer who employs someone six days a week.  The employer give a fixed amount for the six days.  This amount may include time and a half for the hours worked over forty hours each week.  This meets the Washington State and federal requirements for payment of overtime, but not the recordkeeping requirements of the federal enforcement agency, the Department of Labor.  The DOL will take the position that the pay check does not include overtime and treat the check as payment for six days at the regular hourly rate, then make as assessment equal to the number of overtime hours times fifty percent of the hourly rate which it has computed.  This amounts to a payment  for overtime more than twice the amount due the employee.  The DOL can assess double the amount that it deems underpaid and is authorized to recommend criminal action.

There is no legitimate argument that businesses should not be paying overtime but the means of enforcing the law creates a trap for vulnerable businesses which are paying overtime.


Spurring a Gift Horse

November 17, 2014

What is more complicated than the law?  Answer: family.  I recently got a call from a woman living with her aunt, who had given her a room for the past five years.  The reason for the call was that she had received from her aunt a written demand that she leave or start paying rent.  My enraged caller demanded to know whether this notice complied with landlord-tenant law and whether she had recourse against her aunt for failure to recognize her rights as a tenant.  This caused me to wonder how many “legal matters” could be better resolved with good counseling.  A high percentage I suspect.

Contracts sometimes have mediation clauses in them.  This does not often lead to resolution of a heated dispute because neither side is bound by an outcome and it is easy to dispense with a mediator’s recommendations as being biased or ignorant.  I suppose a mandatory counseling clause would suffer the same fate.


Small Claims Court

November 6, 2014

Want your day in court and want to avoid exposure to lawyers?  When a person represents himself or herself that person is said to be appearing before the court pro se.  People appearing pro se are not usually successful when they are matched against a lawyer on the other side but that unfortunate situation is entirely avoided in small claims court where lawyers are barred from appearing for others.

In Washington claims up to $5000 can be heard in small claims court.  Each side can present its version of the case, call witnesses, and present evidence, all without the involvement of lawyers.  The rules of evidence are very loosely applied, as the litigants customarily are unfamiliar with the rules.

I’ve sat in on small claims cases.  Most of the judges acted as facilitators, helping the participants through the procedural confusion; a few act like bejeweled potentates, but that is certainly not the norm.  The average case that I saw lasted ten to twenty minutes, maybe a little more.

If your claim is more than $5000 but for one reason or another you feel that it is not worth hiring a lawyer, you can bring the action for $5000 in small claims court, waiving your right to the excess amount.  The outcome of small claims cases is not entirely predictable but the price is right.  If you do go there, it’s a good idea to have lawyer look at your complaint and discuss it with you for an hour or so.


Water Easements

November 5, 2014

A common document for which I have not see a standard form is the water easement.  The laws of the various states different in the treatment of these easements but nonetheless there are some common technical issues that the drafter should consider.  The term “water easement” commonly means one of two things.  First, it might transfer the right to draw water from a site.  The phrase is also used to describe the right to convey water by pipe or trough across or beneath the land of another.  A water easement of either sort should also contain an access easement and auxiliary rights related to the maintenance, repair, replacement and possibly construction of improvements.

The easement may either be given to the owner of land so that the easement rights pass automatically with the transfer of title to the land or given to a person or entity.  The first type of easement is called an appurtenant easement, even though in Washington the two parcels are not necessarily required to have a common boundary.  The second mentioned type of easement is somewhat awkwardly called an easement in gross.  (American law is derived from English law but easements in gross are not recognized in England.  This concept is derived from Roman law.) It should be clear which of these alternatives is intended and if the easement is intended to benefit a person or entity, then the drafter has to be concerned that the easement is valid under state law.

If the intention is merely to give a person permission to draw water or convey it across land, then consideration should be given to calling the right a license, rather than an easement.  Licenses are less formal and less likely to impact title.  They are also usually revocable.  An irrevocable license requires consideration and is best treated with the formality of a commercial easement in gross.

In any case the instrument should always contain all intended conditions on the use.  For example, there might a set duration, a limit on amount of water, limitations on access, size of pipe, licensing, type of use, who may use the easement, a condition related to the land owner’s use of the property.  From the land owner’s perspective rather than having a long list of conditions, it might be best to use a nonassignable, revocable license.

Easements should contain the legal description of the land that is subject to the easement and should in most cases be recorded. Easements appurtenant should also describe the benefitted land.  It is prudent to specify the amount of water that is authorized to be taken from the source, permitted use and sometimes the depth of a well.  Remember that in Washington the land owner will be required to sign a covenant that prohibits use within one hundred feet of a well used for drinking water.

If the easement is given for future development it is best to make it immediately effective, not effective whenever the development occurs to avoid creating a voidable future interest.


Water Rights: Let the Buyer Beware.

November 4, 2014

Water rights issues are cropping up with increasing frequency as water becomes a diminishing commodity. In the Puget Sound area this is a somewhat ironic concept, as flooding seems to have been on the uptick and the drizzle for which the area is renown has certainly not disappeared. Flooding however is often attributed to logging and development which causes rainwater to become surface water, rather than groundwater, available through wells. The expansion of the population beyond areas served by water systems has created a proliferation of wells, drawing from largely unknown underground estuaries. This increased burden on the supply of water diminishes the quantity of water available to wells, sometimes with disastrous results.

Care must be taken when purchasing water rights or acquiring property with water rights. The value of property is often dependent on water rights but too often property is purchased without a thorough investigation of those water rights. Scrutiny of a title report may give the buyer false confidence in the availability of water.

In verifying the validity of a water source the inquirer enters into the Byzantine realm of Washington water rights, which defy easy explanation. Broadly speaking there are three levels of inquiry. First water systems must be permitted by the State Department of Ecology. However, there are certain exemptions from state permitting requirements and water systems that predate the water code of 1917 need not be permitted. Roughly 166,000 systems claim to have originated before 1917 but very few claims, if any, have been adjudicated. Next the county determines compliance with health requirements and conducts routine inspections. This is usually a fairly straight forward inquiry for the purchaser.

The last common level of inquiry relates to the assignment of water rights. The right to draw water is assignable. As to any water source that is off-site, the validity of the transfer of water rights must be verified. If there is a well on site, all documents transferring rights to others, or allocating rights of use, must be verified. When creating a joint-use well a great deal of difficulty can be avoided by carefully delineating each user’s rights and duties. This warrants as much care as the determination of the rights and regulations governing a home owners’ association.


US Department of Labor; Small Businesses; Minimum Wage

October 22, 2014

Many startups are often owned and operated by U.S. immigrants and in most cities there is a burgeoning workforce ready to work at minimum wage.  Immigrants, and many other new business owners, are often unfamiliar with the complexity of overlapping laws and regulations that apply to businesses.

There is one business trap that I have been working on that business owners should heed: minimum wage documentation.  The reason I mention immigrant in this context is that a Department of Labor investigator I spoke with had a great deal of familiarity with asian-owned small businesses and seemed to be disdainful of their intention to comply with minimum wage law.  I don’t know that the Department of Labor is focusing on this segment of the population but from this conversation I got the impression that it might be or at least this investigator seemed to view this part of the business world with cynicism.

Apparently based on a complaint by a disgruntled formed employee the Department of Labor investigated an immigrant-owned small business and found that its recordkeeping was inadequate with respect to hours actually worked.  Apparently based on the word of this former employee, the Department of Labor determined that a nearly crippling amount of money was owed to employees for nonpayment of overtime.

The business owners were not fluent in English, were not given a translator, and the method of calculating the underpayment was not shown to them.  They were not advised to get a lawyer and they were told that if they did not pay it right away they would be taken to court where they would be assessed a higher amount and have to pay a huge amount of money for lawyers.  The people were terrified, signed a “confession,” and agreed to pay the assessment.

These bullying tactics have been repeated.  People subjected to a minimum wage audit need to be aware of their rights and understand that the unverified conclusions of the Department of Labor can be substantially off the mark.

The Fair Labor Standards Act, a federal law, requires a level or recordkeeping that is not difficult to maintain.  It is prudent to verify compliance.  If audited by the Department of Labor, seek assistance as the conclusions of the Department of Labor are not unassailable.


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