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.
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.
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.