VANNOY:

Five HR errors that cost these businesses huge penalties. Hi, I’m Mike Vannoy with Asure, and today we’re going to unpack what I think are just normal use cases that, I’m not going to say innocent business owners because they did get pinched, but I think most of the time business owners don’t realize how many times they’re actually breaking the laws and get themselves in trouble with hr. So we’re going to do straight from the headlines. We’re going to pull these stories. I got a great guest to help me unpack this information. If you’re a regular watcher of the show, Brian Brian Schenker. He’s a New York based attorney with Jackson Lewis. Brian’s practice focuses on representing employers in a wide range of workplace matters, as well as preventative advice and counseling. Brian has extensive experience defending class action and collective action lawsuits under federal and state wage and hour laws.

He has successfully defended wage and hour audits conducted by the US and New York State Departments of Labor, and Brian regularly handles cases before courts, administrative agencies involving claims of discrimination, sexual harassment, and retaliation. Welcome back to the show O’ Brian. Thanks for having me, Mike. So you and I talk all the time on the show trying to give the best advice we can, but sometimes the best teaching just comes from real life examples where I think business owners accidentally we’re going to give ’em the benefit, doubt stumble into these issues. And so I’m, I’m going to read a headline. I’m going to unpack the best I can, the high level what happened, and then if you could give your best advice, if that was your client, what would you be telling them? Maybe after the fact, after it happened, but more importantly, what they could have and should have done to avoid? Does that make sense?

Speaker 1:

Absolutely.

VANNOY:

Okay. So this first one, there was a federal, this is the headline. Federal investigation leads to 604,000 in back wages and damages for a home healthcare business for FLSA violation. So that’s the Fair Labor Standards Act, the US Department of Labor, they did an investigation here into a home healthcare agency. More specifically, it’s two owners. The agency asked direct care employees to sign documents waiving their right to overtime compensation. Instead of paying the legally required overtime rates for hours work beyond the 40 in a work week. The agency paid straight time rates. The results of the investigation, the DOL and the wage and hour division specifically, they recovered $604,288 in back wages and liquidated damages for 50 affected employees. So not a small company, but not a huge company, 50 employees, 604 grand. The back wages amounted to 302,000 with an equal amount awarded as liquidated damages.

Additionally, the agency and its owners were assessed $18,703 in civil money penalties for intentionally violating the Fair Labor Standards Act. So when you read it that way, Brian, it’s hard to defend the business owners. In your experience talking to business owners, I think it might be easier to stumble on these things than you think. It’s like, well, they’re intentionally not paying overtime. Maybe they were trying to smooth out people’s pay. This is the thing I hear all the time. It’s like, Hey, you only work 30 hours this week. You might work 50 hours next week, so I want to give you an even paycheck. So even though you’re technically an hourly employee, I’m not going to pay you overtime, but I’m also going to give you more on the weeks to smooth it all out. You can’t have your employees sign papers that violates the law. Right,

SHENKER:

Right. No, exactly right, Mike. And so I think here this case, again, let’s use it as a learning example so that anyone watching this does not make the same mistake. The biggest issue here was that this employer seemed to believe that they could contract around the requirements of the FLSA. They weren’t just here saying, just refusing to pay overtime. They will give them the benefit of the doubt. They thought that if they entered into agreements with their employees regarding their pay, that and the employee agreed that they believed most likely that, Hey, regular principles of contract law apply, we can do this. Now that being said, here’s where the practical advice to employers comes. There’s no contracting around the FLS a’s requirements. So what does that really mean? So the FLSA sets the floor, it sets the minimum wage and requires overtime for non-exempt employees.

And look, unlike most areas of the law where employers companies can freely contract for the terms they want, the FLSA does not permit that. So what does this really mean? So all it’s saying, all it’s saying is you have to comply with the FLSA and you cannot provide lesser benefits even if the employee agrees to that. Look, I can understand what this employer did because I have many, many clients come to me seeking advice on how to cut their budgets, and obviously labor is a big part of it. And so they get creative and they think, right, something like this, maybe I can pay straight time, just the regular rate for overtime if the employees are agreeable to that, or I can just pay a salary to a non-exempt person as long as they agree to it. But the FLSA doesn’t allow that. So I think what are a few implications of this?

Here’s one clear example, contracting for no overtime, but I think there are, I’ll just go through some other examples of this that I’ve seen from my own practice where employers, again, we’re not talking about intent, but they’re trying to get creative and unfortunately the FLSA and even state wage and hour laws, they don’t care about intent. It’s about compliance. Did you comply or not? So another area I see this, and I think I mentioned it a moment ago, is paying salaries to otherwise non-exempt employees who should be paid an hourly rate plus time and a half for overtime. So a lot of times I’ll have an employer come in and say, Hey, industry practice in my field that this type of employee gets a salary. So that’s what we’re going to do and we’re fine. I know other companies who do this, for instance, I see it a lot in the hospitality industry.

Take a pizza place, the pizza guy, the pizza maker, those guys, they often want a consistent amount each week. They want a salary. And so they say, I’ll only work for a salary now as the employer, even if they ask for it, even if they say they won’t work for anything but a salary, if you go ahead and pay that salary and don’t pay overtime to this non-exempt employee, there’s exposure. It is a violation and it won’t be a defense that the employee wanted it that way. Like you mentioned, I think flex time is one of those things where an employee employer might see, alright, the employee worked 50 hours in week one and alright, we’ll have them work 30 hours in week two then so that they’ve averaged 40 hours a week and oh, we’re not going to pay overtime. It’s a biweekly payroll. Again, that’s a problem because over time calculations are done on a weekly basis. So again, I think employers just need to understand there might be some creative ideas out there in terms of complying and keeping budget costs down, but it’s important to ensure that these ideas that even your employees might agree with to ensure they’re actually compliant.

VANNOY:

Again, I’m going to always try to err in the side of the employer and what was maybe going through their head. I don’t think people who are intentionally breaking the law are watching this show to learn how to break the law even better. They’re here to learn. So if you are an employer that you’re just trying to smooth out the weekly paychecks so you don’t have a bunch of big ones, we don’t have a bunch of small ones and just even it out, it’s illegal maybe. Well-intentioned illegal. The other use case that was interesting you talked about is I think a lot of employers just don’t realize there’s two things. There’s the FLSA requirement that you must classify employees as either exempt or non-exempt, and there’s lit test of whether that person is a 10 99 contractor or not. Those are two separate concepts, but they relate to each other and I think there’s a lot of employers think, oh, I’ll just pay them like a contractor.

Well, that’s not your decision. There are tests to decide whether it’s a 10 99 or whether it’s an employee. And if it’s an employee, you must classify exempt or not exempt. And if it’s non-exempt, you have to pay overtime period. You don’t get to contract around the law. So I think those are probably the two most common use cases where an employer may have good intentions but they still find themselves in trouble. In this case, two business owners over 600 grand. I mean that very likely could have put ’em out of business. I have no idea. Maybe they’re super well-heeled, but I mean for a 50 employee company, 600 grand, we’ll put most people out of business

SHENKER:

And look based on these violations and the number of employees. I mean, look, I could have easily have seen this audit coming in seven figures. So that’s 604 figure is probably on the more reasonable side because given this factual scenario and the number of employees, the exposure could have been far worse. And Mike, to your point exactly, on the independent contractor issue and the exemption issue, I think employers often put the cart before the horse, right, in that I’ll ask them, Hey, is this person an independent contractor or an employee? Well, we’ve classified them as an independent contractor. We have an agreement with them that they are, and the employee’s fine with it. Yeah, but no, that’s not telling us are they a contractor under law? Right? That’s what we need to determine. And same with the exemption. I love when I ask an employer about someone’s classification and they tell me, well, we pay them a salary so they’re exempt. That’s not the test. We need to meet the duties tests for the certain exemptions. And so again, whenever an employer is doing something that’s basically getting around the law, especially in the wage in hour context, it’s a good idea to look into is this permitted? Am I going under the floor set by the FLSA and creating

VANNOY:

Issues? And Brian, we’re not trying to unduly scare people here, right? There’s people who are well-intentioned and maybe they just heard this and saying, well, maybe I’m out of bounds on this thing. Maybe I’m on a fine line. But you know what? They’ve worked for me for 15 years. They come to my kids’ birthday parties, I go to their kids’ birthday parties. We’re like family here. I mean, all that’s true. And so maybe you’re not going to get turned in, but just think about this last, call it two years. Have you been to the grocery store? I mean that same employee, maybe you’re close like family, things have changed a lot in a person’s ability to even feed their family. I mean, it’s insane. You go to the grocery store, you try to fill up your tank inflation, and this is not an economics political conversation. Inflation has increased people’s costs so much that they may just be more sensitized to these issues than ever before. And maybe they were okay with it all the time, all the years they’ve worked for you until now because now they actually need the money, right?

SHENKER:

Yeah. It’s spot on, Mike, because I think the way I’ve seen it a lot with wage and hour litigation or audits is that it’s usually a financial issue. I’ve heard those stories from clients too, that this guy came to our weddings, all sorts of events and birthday celebrations, and then they go and file something and look, it’s simply because people are going to be loyal until there’s a bigger issue. And obviously money is a big issue, having tight budgets these days because inflation only worsens those issues. So that provides a prime set of circumstances for employees who might’ve been okay, gone along with these policies before, but now it’s actually hurting them. And where it counts.

VANNOY:

I mean, people behave differently when you’re impacting their ability to feed their kids. And I think that’s literally the situation for a lot of folks. Okay, let’s move on to the next one here. The second case, so this is really interesting because it’s not just employees, it’s a customer that’s involved here. So there’s a grocery store. The title is Grocery Store to Pay $50,000 to Settle E eoc Sexual Harassment Lawsuit. Okay? This is the business, they’re a grocery store. They agreed to pay this $50,000 fine to settle this sexual harassment lawsuit. And the lawsuit was filed by not the employee, the EEOC, equal Employment Opportunity Commission. According to the EOC lawsuit, the business subjected female employees at the grocery store to frequent unwelcome sexual touching by a regular customer, not employee, a customer of the store for several years. Although female employees repeatedly complained to store supervisors, the company failed to take prompt corrective action to prevent or stop the harassment.

The repeated complaints went unheated. One female employee called the police who came to the store and issued the customer a trespass notice signed by the store manager. Nevertheless, the customer is still allowed back in the store. Big mistake decree resolving the lawsuit requires the business to pay $50,000 to one victim of the harassment. The business will develop or revise policies and procedures to prevent corrective sexual harassment. They’re also required to conduct annual training for all employees and managers. And the EEOC is going to monitor all this. So this is one, I mean, it sounds so egregious when you read it like this. In the way these articles are written. I’m going to give the owner of the business the benefit of the doubt that maybe they thought they couldn’t control a customer, they thought they had control over employees, but maybe they didn’t think there’s anything they could do about it. Or maybe those managers didn’t even report it to the owner. There’s an excellent chance the owner never even knew about it until the lawsuit was filed. If you could help these guys step back in time and you were their attorney, how would you advise them?

SHENKER:

Yeah, yeah. This is a real interesting spin on the typical sexual harassment scenario where it’s being done by a third party. I think the guidance starts with an understanding of the law where employers should understand, then, listen clear on this. An employer can be held liable, vicariously liable for the harassment by third parties or even coworkers of an employee of the company. And so basically what an employee must show is that the employer knew or should have known about their harassment and it failed to take prompt remedial action. And so here that clearly took place. We don’t have necessarily all the details to explain. Maybe there’s some mitigating circumstances. Maybe it’s just like you said, an employer didn’t understand their obligations or that they could do things. So I mean, first obviously a well drafted written harassment policies, the starting point for everything. But from there, I mean, once an employer is put on notice of a potential complaint of harassment, and that could be like you said, Mike, it doesn’t need to be a complaint to the head of the company or a complaint to the head of hr.

It can be a complaint to the supervisor. And those need to get up, move up the line to the right person who can address it. And so what should typically happen is once you have that complaint, there should be a prompt investigation. And here a prompt investigation would’ve uncovered that this individual was being harassed. And once the employer’s on notice of being harassed, I mean this is very clear. I mean physical touching is just never acceptable. And so the employer was on notice, and so it’s obligated to take prompt action that’s reasonably calculated to end the harassment. So here the company took no action, but there are various things they could have done. They could have you mentioned they could go to the extreme and bar this individual from the store. They could also have management speak to this individual or try to resolve it that way or ensure that whenever this individual came to the store, that there’s a manager there making sure, for instance, that if there’s a cashier that they went to a different cashier.

But again, we’d then want to monitor and make sure there’s no issue. But there’s a whole host of things that could have been done, may or may not have worked, but at least could have been attempted. And so I think this provides a great example. But look, there are other times I just want to go through some other potential examples of when this can occur because it’s not always customers. Think of other non-employees who come into your workplace in a given week. That could be vendors, it could be delivery people, the people who deliver milk for the fridge or deliver paper. There are lots of delivery people that come in. Maybe one of the delivery people constantly asks the receptionist on a date, even though she declines or makes comments to the receptionist every time he sees her. Right? And that’s repeated conduct. And again, if there’s no reason for the employer to know about it, it won’t necessarily have exposure.

But if there are people that observe it, they can’t ignore it, especially if it’s somewhat a supervisor or management. And of course a complaint should be taken seriously. Now, obviously there’s no magic word that complainants need to use. An employee doesn’t need to say sexual harassment, the magic words, but that’s where certainly training for managers comes in so that they can identify when they’re hearing a complaint or they can identify when they’re seeing something that’s potentially inappropriate and can take action. So I think management training for this company could have gone real far. People would’ve known, the manager would’ve known. This is not something to ignore. Even in this one when it escalated all the way to the police being called and the manager signed the police document, that should have been a clear indication they had to do something.

VANNOY:

Yeah, I mean, I say I’ll give the owners the benefit of the doubt most of the time. I mean, if the police were called, oh my gosh. So maybe you were just a little out of touch and you’re like, Hey, oh, that’s just Johnny. He didn’t mean any harm by it. And you’re kind of clueless about the inappropriateness of that when the police were called by God, that should be a gigantic red flag that you need to act. And if I go back to, and I’m probably going to go on thin ice here, even if you as an owner didn’t think it was material sexual harassment, and maybe you thought your employee was overreacting and that’s the reason you did nothing, you’re still in very dangerous water. You have to act, you have to investigate, you have to remediate. That doesn’t mean you’re choosing sides even, but it does mean you are responding in a legally responsible manner. What would you say about that? Again, if I’m giving the benefit of the doubt, I’m going to assume the owner, either they didn’t know or they thought the employee was overreacting and oh, that’s just Johnny, and as silly and stupid and out of touch culturally in the moment. That may be what would be your guidance to the employer who thought, who maybe took the side of the customer here and thought their employee was overreacting,

SHENKER:

Right? No, what you state, it really cements how important documented investigations are, right? Because let’s give the benefit of the doubt. Maybe the employer did look into it, but they have no documentation, right? The manager spoke to the employee, they didn’t think it was serious or they didn’t think it was a credible complaint. And maybe it’s one of those situations where like a bartender who’s dealing with numerous people hitting on her throughout a shift, the manager says, grow thicker skin. That’s not the right response, but it happens. And so I think this just shows that it’s so important to conduct a prompt investigation and document it. The result may be that nothing inappropriate occurred, but now at least the company can show they took the complaint seriously. And look, companies don’t get charged with getting investigations the same way. We might never know what the actual truth is. All a company can do is conduct interviews, get the documentation together, and then weigh the evidence and come to a result. And so if this company could have done an investigation and perhaps there could have been information that said, no, it’s not a credible complaint, and they would’ve then been credited for taking this prompt action, and even if they were wrong, it might not mean exposure, but it’s the fact that they did nothing and they did nothing. And that

VANNOY:

As evidenced by the outcome, it’s not a fine, it’s a lawsuit that was filed by the EEOC against the business and it was $50,000. That’s a fairly pull the number out of the sky. You did bad. I’m going to punish you to the tune of $50,000 kind of a number. Had they, regardless of the rightness or wrongness of the accusation, had they just had a good paper trail that showed, oh, this is serious. We’re going to investigate. Here’s the results of our investigation. We actually think our employee was in the wrong here and we continue to let this customer come back. And here’s why. I mean, they might’ve still had the cost to defend if the employee went to the EOC, but it probably wouldn’t have ended this way,

SHENKER:

Right? No, exactly. And look, setting the right culture at a workplace too. Look, if employees understand that when I make complaints, it’s taken seriously and they’re going to look into it and hey, they might not always come out on my side, but I know they’re listening to me and looking into it, that’s huge. That means that in this scenario, that employee wouldn’t have had to go and file with the EEOC, right? They would’ve felt respected and that their company actually cared about their wellbeing by promptly looking into this. So I think that’s another way to keep things, prevent actual lawsuits, right? By investigating things that will can absolutely result in less litigation. Because look, employees want to feel respected. They want to feel that you are taking their concerns seriously and performing an investigation immediately, not waiting a week, not waiting several days, but starting it that day or the next day, that’s important. And then communicating with the complainant throughout the process so that they understand that it’s being investigated very important. And I think that type of follow-up and commitment to a company’s policies can certainly avoid this type of action, even if they don’t get it right. Just going through the process and having that to show is worth a lot here, worth money to the employer.

VANNOY:

Last thing I’ll say on this subject, for the intent of the show, I’m probably always going to continue to advocate, maybe obnoxiously for the employer also as a dad with a bunch of daughters, if one of your employees complains, step up and do something about do the right thing. Okay, we’ll move on. Okay, next case, $270,000 in back wages due to restaurant workers from a Department of Labor DOL investigation. So this was a Mexican food restaurant. They violated the Fair Labor Standards Act, the FLSA. These practices included requiring servers to share tips with dishwashers, specifically deducting $5 a night on Fridays and Saturdays. Additionally, maybe a well-intentioned thing, right? Additionally, the employer failed to pay overtime wages to non-exempt employees who work more than 40 hours in a workweek. The result of the violations is that 82 employees are going to benefit from recovered back wages totaling $270,751. Further investigation by the DOL discovered the business neglected to pay non-exempt employees the proper minimum wage for all hours in a workweek. Additionally, the company failed to maintain accurate records. Also a requirement of FLSA for some of the employee’s work hours.

This one, it hit me in two ways. When I first started reading this, I’m like, oh man, they were trying to be good, their kitchen staff, and they probably work on ridiculously thin margins trying to squeak out a living. They feel empathetic for their dishwasher and they want them to share the success of the business, and let’s do a tip out to them, and we’ll just do that in the form of a deduction so that they don’t get screwed here, but it’s illegal. It’s just flatly illegal. Let’s maybe unpack that first part before we go to the second part, which, okay, maybe just flat ignorance of the law and it’s a bit more egregious,

SHENKER:

Right? So yeah, starting with the tip pool issue, and I agree with you that by all accounts, this employer was not ill intentions. They thought that spreading around the money among the employees would be better than the front of the house getting it all, and there’s no indication that they were, the employer was taking any money from the tip pool, which would obviously be a violation. But in terms of who can share in a tip pool, the federal law sets it up in a bifurcated way, and it’s depending on whether the company elects the tip credit or not, it potentially changes who could be allowed to partake in that tip pool. As with anything, state requirements can be different though many states do follow the FLSA. So in a traditional tip pool, which I believe that’s the case here, is that tipped food service employees are paid pursuant to the tip credit, which means instead of under the FLSA paying the full $7 25 cents minimum wage, you get a tip credit, which is $5 12 cents per hour. So really the employer is only paying what $2 and 13 cents per hour.

And that’s allowable. That is absolutely lawful, and many employers do elect to take the tip credit because it’s a financial benefit to them. But if they elect the tip credit and pay that way, then only tipped employees can be part of the tip pool. Those would be waiters, bartenders, busers, bellhops in a hotel. So only those in occupations that customarily and regularly receive the tips can participate. So that’s clearly what was violated in this situation where these employees were likely paid pursuant to the tip credit, and then we’re including back of the house individuals in that tip pool, right? Dishwashers, they’re not in a regularly tipped occupation, so they shouldn’t be getting tips. So what’ll happen there, they don’t get to take that money back from the dishwashers, but presumably all of the $5 per night that was deducted, all of that is now owed to a group of servers who were in the tip pool and should have received that money.

Just in the other situation where an employer does not take the tip credit and the employer plays the full minimum wage, then you can include other individuals that are in regularly tipped occupations like a dishwasher in that tip pool. But that’s only if the full minimum wage is paid. And I should note, regardless of tip, credit managers and supervisors cannot partake in a tip. Pool managers, if they’re working in a server capacity, they can keep their directly provided tips that are directly given to them, but they can’t share in any tip pool. So I think initially that is the big issue that occurred here. And again, this is one tip issue. There are lots of others that I see as a common occurrence that violate the FLSA.

VANNOY:

Brian, one of the things that jumped out to me here is that there’re probably clearly black and white out of bounds anyway, but there’s an arbitrariness here also that this was a rule for just Friday and Saturday nights, right? I mean, the FLSA doesn’t have any rule that says, oh, if it’s on a Friday and it’s the summer solstice and we’re serving this type of food this night, the FLSA is the FL SA. You don’t get to choose and make up these rules on your own.

SHENKER:

Right? And just to touch on a couple other common tip issues that I see. One is an employer should understand this has some positive and some negatives. A lot of customers pay on a credit card and credit card companies typically charge the restaurant some percentage processing fee, like two or 3% or what have you and the law provides, the FLSA allows the employer to deduct that fee from credit card tips. So if a customer leaves a hundred dollars tip on a credit card and that credit card has a 2% processing fee, then the employer can take out that 2% and only provide the $98 of tips that they received. So that’s one thing, and certainly that can be good, right? Because an employer doesn’t have to burden themselves by paying the credit card processing fee and then also paying that same money to the tipped employee. But of course, an employer can’t go and deduct more than what that credit card fee is.

VANNOY:

Do you have any insight here? If we move off of tips to the overtime violations you have? Was it just a classic exempt non-exempt to misclassification issue?

SHENKER:

So I think what occurred here was that the employees would’ve been paid an hourly rate, but there’s often mistakes that companies make with calculating overtime when they’re electing the tip credit. So like I said before, we take the full federal minimum wage of 7 25 an hour, and there’s a $5 12 cent tip credit. So the wages that the employer has to pay these people is only $2 and 13 cents per hour. And so a common mistake is then saying, alright, for overtime hours, I’m just going to take time and a half of $2 and 13 cents. That’s the wrong way. The right way to calculate time for tipped employees is you take the full minimum wage, which is seven and a quarter, multiply that by time and a half, you get to 10 87, $10, 87 cents, and then you subtract the tip credit amount. So you take 10 87 minus the five 12 cents. So

VANNOY:

You can see how somebody could, I mean, maybe they’re being cheap, but maybe they’re trying to also survive and keep their business open. You could see how that could be an innocent mistake, but that’s a really good point.

SHENKER:

Yeah, it is a common one with the tip credit. So employers should be careful about that over time calculation.

VANNOY:

So most likely this wasn’t someone trying to contract outside of the law or just being ignorant and Hey, we don’t pay overtime. They probably thought they were doing it right, but they were just calculating off the wrong base.

SHENKER:

And that’s the problem with the FLSA, right? An innocent mistake is still a mistake that exposes the company to liability.

VANNOY:

The last one in this that I wanted to point out is around record keeping. I’m going to guess that part of this $270,000 fine, maybe they were doing it right, but they couldn’t prove it and because that was, I suspect anyway, and I want you to comment, I suspect that the DOL did an audit. They concretely confirmed that you were doing it wrong in this case or these cases, but because you couldn’t prove that you were doing it right in these, you got this. Is that probably how this played out, you think?

SHENKER:

Absolutely. That is a problem that I see in my practice on almost a daily basis that the employer might have some records, but not all of them, and maybe not enough to establish compliance. For instance, take an hourly employee who gets paid overtime, but we have no pay stub, right? The company just doesn’t issue pay stubs. So every week this employee just gets a check or gets cash and some amount maybe they come and allege that they were paid a salary and they’re owed overtime. They were never paid any overtime. Realistically, they probably were. But how is the employer going to approve it if it has no payroll records to show the amount of hours worked, the rate, the regular rate, the overtime rate, and that is exactly what the FL SSA’s record keeping requirements are geared towards. All the stuff that’s required under the FSA to be kept by employers are really for employer’s own benefit because they are the things that an employer will use to show compliance. So there are some smaller things, but records for non-exempt employees. This is really our focus here.

We need to establish, have documentation of their hourly rate, their hours and days worked each week, their weekly straight time earnings, their weekly overtime earnings, total wages. These are, so what I’m talking about, that’s a lot of payroll, but there’s other stuff, right? The FLSA requires companies to keep preserve payroll records for at least three years and two years for time records and work schedules. And again, just be aware these set the minimum, your specific state or locality. For instance, in New York, the statute of limitations is six years. So minimally you’re keeping records for six, maybe even seven years to be safe. But here under the FOSA, we’re talking the requirements are two or three years. And the other thing to recall is these records need to remain available, right? If the DOL ever comes knocking for an audit, which is a real possibility, the company needs to respond within 72 hours with the documentation like payroll. So if it’s in storage, that could present a problem. So often if companies cannot store records at a specific work site, they should find a centralized record keeping office where they can keep everything so that they have a space where they know everything is, and you get a lawsuit and audit, you’re ready to comply with the law and produce the

VANNOY:

Records. Last thing I maybe want to say on this, we’ll move on to the next one. And I always come back to these, so many business owners think that, okay, that might be the law, but we’re a small company. I’ve never had anybody sue me. All my have great relationship with all my employees or all long-term employees. And you could get lulled to sleep of not having good records for years, even decades in some cases. And you probably do have fantastic relationship with your employees and maybe you’re 15 employee company and it’s employee number 16. It’s that one person who all of a sudden feels grieved and maybe they’re wrong, and you’re right, but they feel grieved. They report this somehow. Now all of a sudden DOL is auditing all the records for all these employees who do love you and who have loved you for years, and you’re screwed. You have no records, no documentation to prove it, and the fines coming, even though all your employees don’t want the fine to come, they think you’re being the victim here, but it’s coming. Am I right?

SHENKER:

Yeah, exactly. I’ve seen that play out so many times where the DOL, they can come in randomly or it all takes is one employee complaint. And the DOL is not necessarily coming in to just investigate the one employee complaint. If they’re a salesperson or what have you. And you have 25 other salespeople, they’re going to look at all your salespeople. And if there’s a problem for one, it’s likely you did the same wrong thing for others. And it’s kind of like the DOL version of a class action that they’re going to look at a whole classification or company-wide, god forbid. And so you have those issues. And again, that just means, like you said, you can’t get L to sleep because some employees are okay with it because when the DOL comes after you, it’s not up to these employees whether they want to be part of the audit or not, they’re included. And if there’s exposure, the DOL will get that money from the employer regardless of whether the employees are actually interested in receiving it.

VANNOY:

Let’s move on to case number four here, and we’ll probably accelerate to these last couple. I think for sake of time, manufacturer pays $175,000 to settle a Americans with Disabilities Act violations. Again, this is an EEOC lawsuit. So these things can come at you in different ways. It’s an EEOC lawsuit. Business faced allegations denying employment to a class of individuals. The company unlawfully regarded as disabled. The applicants were offered positions as packing operators or material handlers, but were subjected to pre-employment, medical, and physical examinations. Subsequently, the company rescinded job offers based on unfounded assumptions about their physical condition, particularly related to the ability to back impairments and lifting abilities. The EOC argued that the business actions violated the Americans with Disabilities Act, the A DA, which strictly prohibits employers from discriminating against applicants and employees based on actual perceived or record of disability. The business managers and human resource personnel are now required to undergo specialized training on a prohibitions against disability discrimination and their legal obligations to prevent address and remedy such discrimination. What can you tell us about this case? Again, I’m assuming the owner of this business wasn’t thinking they’re going to discriminate against people with disabilities. They probably thought they were doing the right thing here,

SHENKER:

Right? No, exactly. And so, right. I think this type of situation is much more common than you might think because the employer is perhaps, again, giving them benefit of the doubt. They’re thinking, well, I’m just making sure I don’t put someone in a position where they might get injured or set them up for failure in a position because they can’t lift what I’m going to ask to lift. But unfortunately, this raises the issue of being regarded or perceived as disabled under the A DA, which is normally we’re just dealing with an employee who has a disability under the A DA and issues of whether they were discriminated against or really quite often for employers how to accommodate and whether there’s a reasonable accommodation. That’s not what we’re talking about here. So with respect to regarded as unquote regarded as, what that means is that the employer regarded as discrimination means the employer has subjected the individual to some action prohibited by the A DA because of a perceived physical or mental impairment.

Now, again, all the employee has to do to establish a claim like this, is show the employer believe they had an impairment that substantially limited their performance of a major life activity. So again, there’s no duty to accommodate someone who the employer perceives as being disabled, but the problem here is that you can’t take action based on that. So here, these individuals, these applicants, they went through these exams and they were not actually disabled, right? There was not, but the company had unfounded assumptions, whatever those might be about their conditions and revoke their offers. So that is the problem here. And as a best practice, employers should really just focus on the behavior at issue or the job performance at issue or those requirements and not the underlying cause. Right? Here they were looking at an underlying cause, right? Whether there’s a back impairment or instead, the employer should simply be asking the employee, can you perform this position? You may be asked to carry things of 50 pounds. Is that something you’re able to do? So those are things that are asked about the actual position, and that’s where the inquiry should really be, not on any, this

VANNOY:

Is so interesting because this is, as it turns out, it’s an A violation that was for people who didn’t have disabilities, but it was the wrongful application of the discriminating practice, right?

SHENKER:

Right. Yeah, exactly. And so a very similar type situation is employees who have a record of a disability. So they’re not disabled currently, but they have some record some past history of having been classified with a physical or mental impairment. And it’s also unlawful to discriminate against someone because of that record. So let’s say in this situation, they had an employee who had a back problem, maybe a stress fracture in the back years ago that they disclosed, but the question is, can they perform now? Yes. And they’re saying it doesn’t, I’m not impaired by that now, but if the employer took the, well, we can’t risk you hurting yourself again, we can’t hire you. Well, that would be discrimination based on the person have a record of disability. Again, those are two instances of where someone without a disability has a viable claim under the A DA.

So I think it’s very important that employers and I think very much tied to this, that employers understand what they can and cannot ask at certain times. There’s not necessarily an indication that there is a timing issue here. But the case scenario you mentioned included some pre-employment, medical or physical examinations. And so that brings up an issue too, of the law allows it, but there are certain requirements as to when. Right. So just real quick to get through this, if an applicant has not received a conditional offer of employment, then really the employer’s hands are tied, right? You can’t ask about the existence of any disability, no questions about their medical condition. You can ask about their ability to perform the functions of the job, but not inquiring into the disability. If the employee voluntarily discloses a disability, for instance, during an interview, an employer can ask if they’ll need a reasonable accommodation, but that’s really the extent of it. Before an offer is made after a conditional offer employment’s been made right, then the employer can make certain disability related inquiries provided though that they make those very same inquiries to every single other individual for that job category or position.

VANNOY:

All right, let’s move to our last one. Staffing company, penalized by Justice Department for requiring excessive employment paperwork. This is an interesting one. The Justice Department’s investigation to a staffing company stemmed from a complaint made by a newly hired non-US citizen worker. The worker alleged the staff demanded unnecessary documentation to prove permission to work, even though he had already provided sufficient proof. The investigation revealed that the office routinely required certain non-US citizens to present additional immigration documents despite already having valid documentation. Assistant Attorney General Kristen Clark emphasized that demanding excessive documentation from workers causes undue stress, financial hardships, and obstacles to employment, particularly for vulnerable individuals to resolve the violations the business had agreed they have agreed to a settlement with the Justice Department. As part of that settlement, the company will pay civil penalties and be subject to departmental monitoring for a period. This is tough because I can see as a business owner, you’re super paranoid, you don’t want to break any laws and you don’t want ice knocking down your door because you’ve done something wrong. You think you’re being extra diligent and really you’re being discriminatory. What’s your guidance here for a business owner,

SHENKER:

Right? No, you’re exactly right. And again, giving this employer the benefit of the doubt, maybe they just thought it’s better to really cross our T’s, dot our i’s be abundantly sure that these people have authorization to work in the us. But again, that’s a problem. So what we’re really dealing here is the Immigration Reform and Control Act, which governs the I nine process. So that’s really what we’re dealing here. When you hire a new employee, you sit them down typically on or before the first day of work, and you have them fill out the I nine form. You have the column A documents where you can provide a column, a document, or you need to provide one from column B and one from columns column C and the Justice Department. Or there are instructions for the I nine form that you can walk through. This training is always good for whatever individual in your business is handling the I nine process.

But really what the law says is the employer should only accept the documents that are required by column A, B, and C and only accept what’s necessary. So if I’m taking one document from B and one document from C to establish identity and authorization to work, that means I’m only taking those two documents. Now, what often is a situation, and this has come up for many of my clients, especially when they’re dealing with a population of workers that might not be fluent in English and be able to read the I nine form. So perhaps you have employees who might not understand which documents I need to provide. And so let’s say we have a scenario where that employee says, oh, here’s five documents I have. I think these are all what you might need under columns A, B, or C. And let’s say the employer then says, alright, thank you for all those documents. Takes them, copies them, fills out the I nine Dave. That’s potentially unlawful, right? Because you should have only limited it to the documents required and the minimum amount of documents required. We’re not asking for more. Now what

VANNOY:

The law, and this is ironic because the case we just reviewed was about not having good enough records. And so poor entrepreneurs and business owners, it’s like we thump ’em over the head, keep more records, better records, more detail. And again, it’s entirely possible that this was an intentional discriminatory practice trying to weeded out a certain group of people. It could have been that, but it’s more likely in my mind that it was somebody, it was a staffing company. Their reputation’s on the line, they’re going to put that employee out somebody else. And if they’re putting somebody who’s not legally qualified to work, it’s their business that’s in their brand and their reputation. So they probably give ’em the benefit of the doubt thought that we’re just being extra diligent. It’s just so hard. Yeah, it’s because we tell ’em more records, better records keep more, but this is one of those cases follow the law, nothing more.

SHENKER:

Right? And I think the key here is we’re always preaching consistency, treat employees the same. That’s how good HR is. And so I think that’s also a problem. If they had required additional documentation for all employees, US citizens and non-US citizens alike, it would not have complied with the law, right? They’re still burdening these employees, but that might not be discriminatory. That might be an I nine violation, but it would not be discriminatory. It’s

VANNOY:

Really good they’re

SHENKER:

Not having different practices for different groups of employees based on citizenship. So here, the real problem for the discrimination element of this was that they’re treating non-US citizens different. They were requiring additional documents from these non-US citizens, which the Justice Department looks as that at as being intended to push those applicants, those employees away because maybe it’s too burdensome to come up with this. So that I think is the intent here. But yeah, I think that it is tough. We have said more documentation on discipline is great. Documentation on wage and hour stuff is great, but right when it comes to I nines, no, no more is not better. And so that’s important to understand. And look, I think it’s a very good idea to have whoever in your organization is in charge of the I nine process to have training because it’s not so simple.

There’s a lot of work moving parts with the I nines and depending on what a work authorization someone has that you can’t just take an employee off the street and say, Hey, you’re our I nine guy, now go do these. So it’s an important one. And the Justice Department and ICE can be aggressive with I nine violations or I nine discrimination in this situation here. I know it didn’t tell us how much the employer was going to get fined, but I can tell you I’ve regularly seen six figure fines from the Justice Department in these types of cases

VANNOY:

I hadn’t thought about. But the point you made about the consistency, again, our guidance is to follow the law period. And so it is outside the requirement to ask for additional forms of identification. You shouldn’t do that anyway, but if you made that error and you were doing it with everybody, then maybe you get away with a slap in the wrist, maybe nothing happens. But when people feel aggrieved because they feel they’re treated differently than the rest, that’s when you’re on thin ice, right? Yeah,

SHENKER:

Exactly.

VANNOY:

Brian, is there anything else on this one you want to say before we wrap?

SHENKER:

No, I think that really covers that scenario.

VANNOY:

Yeah. Okay. So five use cases, very different. Every single one of ’em. I like format that we do once in a while, Brian, because I think it’s important to unpack singular HR legal topics every once in a while. But I think for the most part, most businesses, most business owners, they’re just grinding away trying to make a living and treat their employees best they can. You won’t be in business long if you don’t, but they’re unaware of what the laws even are. And then there’s more laws that are passed every single day that just layer on top of each other and increasingly sometimes conflict and contradict each other. It leaves people’s heads spinning. So hopefully this is a good use to everybody’s time that they can just see, even if you’re well-intentioned, you got to do hr, right? Because it can cost you.

SHENKER:

Yeah. Well said Mike.

VANNOY:

Okay, Brian, good to talk to you as always. Until next time, thanks for everybody joining. We’ll talk to you next week.

Speaker 1:

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