PIECP Compliance Solutions – Staying on Top of the Nine Mandatory Criteria April 14, 2014

1. PIECP Compliance Solutions – Staying on Top of the Nine Mandatory CriteriaApril 14, 2014 www.nationalcia.org

2. Meet Today’s Presenters! • Barbara Auerbach, PIECP Technical Consultant, NCIA • Wil Heslop, Grant Manager, NCIA

3. Agenda • Welcome & Agenda Overview – Wil Heslop • Service vs. PIECP – Wil Heslop • Compliance Review – Barbara Auerbach & Wil Heslop • Wages (Annual Wage Update, 10th P, Training Wage/Period, SOC codes, Properly classifying workers using SOC Codes, Back Wages, Split Wages, Piece Work Wages) • Wages – Minimum Wage • Displacement • Deductions • Voluntary Participation • CAC Re-designation • NEPA • Patient Protection & Affordable Care Act • PIECP Historical Growth – Barbara Auerbach • PIECP Resources – Wil Heslop • Question & Answer • Adjourn

4. Service vs. PIECP Wil Heslop

5. Service vs. PIECP • NCIA often receives a request to review a proposed project and make a determination on whether or not it is a “service” or should be designated as PIECP. • While NCIA and BJA can offer an opinion, neither entity can provide an exception from 18 U.S.C. 1761 for “service” projects. • The only exception BJA can grant is through PIECP.

6. Service vs. PIECP • So, how can a certificate holder make the determination? • Threshold Inquiry for Determining Applicability of PIECP Exception Status – Appropriate PIECP participants include prison industries whose activities would likely violate the 18 U.S.C. 1761(a) prohibition and would likely not fit within an 18 U.S.C. 1761(b) exception. BJA has devised an administrative approach for identifying such industries. This approach incorporates relevant sections 1761 (a) and (b) considerations, including whether a given prisoner-made item qualifies as an excepted agricultural product, whether a given prison industry activity qualifies as an unregulated service, and whether a product distribution activity qualifies as an intrastate distribution of goods.

7. Service vs. PIECP • These considerations are reflected in the following threshold inquiry, which BJA will use to determine whether a prison industry should be encouraged to apply for PIECP exception status: • Is a statutory exception applicable under 18 U.S.C. 1761(b)? • The following prisoner-made items are excepted from the prohibition set forth in section 1761(a): • Parts for the repair of farm machinery; or • Commodities manufactured in a Federal, District of Columbia, or state institution for use by the Federal Government, or by the District of Columbia or by any state or political subdivision of a state or not-for-profit organizations. This exception is intended to inure to the benefit of the public; or • Agricultural commodities grown or cultivated on a farm which retain continuing substantial identity through processing stages, if any. In making the determination as to whether a processing stage changes a product from an agricultural commodity to a manufactured commodity, a relevant consideration is whether the processing is incidental or ancillary to agricultural commodity growth and or cultivation. If the processing is incidental or ancillary in nature and is commonly undertaken by agricultural enterprises, then it would likely fall within the scope of the statutory exception.

8. Service vs. PIECP • Could the contemplated activity trigger 18 U.S.C. 1761(a) by resulting in a production of goods by inmates in any penal or reformatory institution? • The production of goods, which is regulated by 18 U.S.C. 1761(a), must be distinguished from inmate services which are not regulated by the criminal prohibition. The following factors are relevant in determining whether a given activity results in the production of prison-made goods: • Has a tangible item been produced, manufactured or mined? • Has a tangible item been formed or transformed? • Has the activity resulted in the creation of property or in a new, marketable item?

9. Service vs. PIECP • Could the contemplated activity trigger 18 U.S.C. 1761(a) by resulting in a postproduction, interstate transportation of prisoner made goods? • Will there be transportation of prisoner-made goods into the flow of interstate commerce, i.e., across state lines or from a foreign country into the United States? • Is there a commercial economic enterprise present?

10. Service vs. PIECP • BJA will use this preliminary threshold inquiry to instill greater consistency in PIECP eligibility decision-making. If a prison industry activity falls within the scope of the Sec.1761(b) statutory exception, the involved industry need not seek Sec. 1761(c) exception status to avoid Sec. 1761(a) criminal sanctions. Additionally, if a prison industry activity would not result in the production of goods, interstate transport of prisoner-made goods, or does not in any other way trigger Sec. 1761(a), the involved industry need not seek compliance with the requirements set forth in Sec. 1761(c) or this Guideline. • This threshold inquiry was devised only for 18 U.S.C. 1761(c) programmatic purposes and does not reflect the Department of Justice’s 18 U.S.C. 1761(a) prosecution guidelines. Thus, reliance on this Guideline, or any BJA determination based thereon, is not a complete defense to any civil or criminal action, but would depend on other factors as well. • It is recommended that a Certificate Holder review this “threshold inquiry” with their legal counsel prior to start-up.

11. Compliance Review Barbara Auerbach & Wil Heslop

12. Wages Wil Heslop

13. Wage Requirements • Wages must be paid at a rate that “is not less than that paid for work of a similar nature in the locality in which the work is performed” [18 U.S.C.1761(c)] • See 10th Percentile definition (next slide) • Prevailing wage verification must be obtained from the State DES agency

14. Wages: 10th Percentile • Since 2006, wages may not fall below the 10th percentile unless the DES provides written approval of a lower wage for a “limited training period” • In 2011, the approval of the “limited training period” was clarified by BJA – the CH must have written approval from the DES of both the training wage and period • 10th Percentile Wage means that 10% of similarly situated workers in the locality are paid at or less than this wage and 90% are paid more

15. Wage Requirements: General • The prevailing wage must be received by workers performing notable tasks • It must be verified prior to the initiation of the project and annually thereafter (on or before the anniversary of the last wage update)

16. Wage Requirements: General • The annual wage update must be performed for each individual CAC (since CACs are designated at different times of the year) • CHs may “align” wage verifications for each CAC as long as each CAC is verified within one year of the previous verification (see next slide for examples)

17. Wage Requirements: Annual Update CAC NameDesignation Date*Next Wage Update CAC1 6/1/2013 Before 6/1/2014 CAC2 6/1/2013 Before 6/1/2014 CAC3 9/1/2013 Before 9/1/2014 To “align” CAC3 with CAC 1&2, just update CAC3 wages before 6/1/2014 *or last verification date

18. Wage Requirements: Annual Update CAC NameNext Wage UpdateWhen to Start?* CAC1 Before 6/1/2014 Good Question!** CAC2 Before 6/1/2014 “ ” CAC3 Before 9/1/2014 Same time as CAC 1&2 *In other words … when to start the annual wage verification process! **Allow yourself enough time to contact the DES, send your written request for wage verification and receive your response in enough time to update wages in your system – 1 to 3 months (keep in mind that the DES response expires in six months).

19. Wage Requirements: General • In no case can the wage fall below the Federal or State minimum wage, whichever is higher • IMPORTANT – This doesn’t set the wage “floor” at FMW/SMW (see 10th Percentile Wage) • Overtime must be paid at time-and-a-half for work in excess of 40 hours per week

20. Wages: SOC Codes • All inmate work must be described by SOC code. • SOC = Standard Occupational Classification • SOC codes can be found at: http://www.bls.gov/soc/home.htm

21. Wages: SOC Codes - Example Source: U.S. Department of Labor, Bureau of Labor Statistics, Standard Occupational Classifications (http://www.bls.gov/soc/home.htm)

22. Wages: 10th Percentile Example Source = U.S Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics (http://www.bls.gov/oes/home.htm)

23. Properly Classifying Workers Using SOC Codes • Your CAC has 25 workers … all classified as SOC Code = 53-7064 (Packers & Packagers – Hand). • For your locality, the DES has determined that the 10th P Wage for 53-7064 is $7.65/hr. • For this CAC, 23 of the 25 workers perform duties related to the Packer & Packager – Hand, SOC Code = 53-7064 … what about the other two?

24. Properly Classifying Workers Using SOC Codes • One of the workers drives a forklift 2 hours per day (works the rest of the shift packing) • This worker should have a split-classification in that this worker should receive 10th P wages as a forklift operator for 2 hours per day. For the rest of the hours worked, this worker should receive the 10th P wage of $7.65/hour (for SOC Code = 53-7064)

25. Properly Classifying Workers Using SOC Codes • One of the workers operates a computer for the entire shift that generates/prints out packing slips and box ID tags. • This worker should be re-classified to an SOC Code appropriate to the type of work described above (not a Packer & Packager – Hand) and paid the 10th P wage for that SOC Code.

26. Wages: Training Wages • The DES agency and the Certificate Holder should work together to design a training wage and time period • Training wage periods and amounts must be comparable to those used in similar private sector operations • BJA has clarified that Certificate Holders must obtain written justification of the training wage & period for all CACs

27. Wages: Training Wages • Ideally, your DES will provide or approve the training wage & period • In cases where the DES cannot provide the information, the Certificate Holder may submit other documentation showing comparable training wages & periods for the locality

28. Wages: Training Wages • Any CAC utilizing a training wage & period that is designated after January 2011, must have written justification of the training wage & period, and it must be updated annually • Any CAC currently utilizing a training wage & period must have had written justification from the DES for the next annual wage update after January 2011 and from thereon • Training period justification will be reviewed in this upcoming (2014) assessment

29. Wages: Training Wages • Request to DES SOC CodeTraining WageTraining Period10th P Wage 51-4031 $9.25 180 days $10.84 51-6031 $7.25 90 days $8.25 • At the completion of the 180 day (for 51-4031) and 90 day (for 51-6031) training period, workers must advance to the 10th P Wage for that SOC code

30. Wages: Training Wages • Request to DES SOC CodeTraining WageTraining Period10th P Wage 51-4031 $9.25 920 hours $10.84 51-6031 $7.25 480 hours $8.25 • At the completion of the 920 hours (for 51-4031) and 480 hours (for 51-6031) training period, workers must advance to the 10th P Wage for that SOC code • CHs may use a “graduated” training period as long as it is approved by the DES

31. Wages: Training Wages, cont’d. • Graduated training period Training 1880 hrs. Wage480 hrs.920 hrs.1400 hrs.10th P wage $7.25 $7.50 $8.00 $8.25 $8.50 • As the workers progresses through 480/920/1400/1880 hours, the wage increases at a “graduated” rate until it reaches the 10th P wage for that specific SOC code • Again, need approval by your DES

32. Wages: Training Wages, cont’d. • The workers must earn the 10th percentile wage upon completion of the approved training period • Workers who complete the approved training period must have their 10th percentile wages updated annually

33. Wages: Training Wages, cont’d. • Sources for training periods: • O-net (http://www.onetonline.org/)

34. Wages: Training Wages, cont’d. • Sources for training periods: • O-net (http://www.onetonline.org/)

35. Wages: Training Wages, cont’d. • Sources for training periods: • Your private partners (employer model) … or customers (customer model) who employ the same SOC codes • Your DES may have this information

36. Wages: Back Wages • Back wages must be paid to inmate workers who have been paid less than the DES determined wage • BJA has written guidance on the topic • Back Wage policy located on NCIA and BJA Website

37. Wages: Back Wages • Back Wage Policy (December 2010) – Available in PIECP Assessment Workbook • The Certificate Holder should measure the difference between the DES approved wage and the actual wage for the period of time the inmate workers were underpaid and pay that amount to the workers in question • Allowable deductions may be taken from back wage gross pay • If a given worker cannot be located, an alternate recipient may be used (e.g., the inmate welfare fund, the victims’ compensation fund, etc.)

38. Wages – Minimum Wage Wil Heslop

39. Wages: Minimum Wage • Some states are raising their State Minimum Wage (SMW) or have legislation pending to raise the SMW • In some cases, the SMW is higher than the Federal Minimum Wage or FMW (currently $7.25) • An increase in the SMW may affect PIECP wages if the SMW is higher than the 10th P wage

40. Wages: Minimum Wage (Example #1) Wage Update on April 1, 2014 SOC 10th P Wage SMW (now – April 2, 2014) 51-6031 $8.25 7.25 SOC 10th P Wage SMW (increased on July 1, 2014) 51-6031 $8.25 $8.50 Starting July 1, 2014, you would need to pay a minimum of $8.50 to all offenders with SOC = 51-6031

41. Wages: Minimum Wage (Example #2) Wage Update on April 1, 2014 SOC 10th P Wage SMW (now – April 2, 2014) 51-6031 $8.25 7.25 SOC 10th P Wage SMW (increased on July 1, 2014) 51-6031 $8.25 $8.05 On July 1, 2014, you would continue to pay the 10th P wage of $8.25 to all offenders with SOC = 51-6031

42. Wages: Minimum Wage • An increase in the SMW may also affect your training wages • If there is an increase in the SMW you should consult your DES

43. Split Wages Wil Heslop

44. Split Wages • Some Certificate Holders designate “split wage” CACs • A split wage CAC manufactures product for both “traditional” and “PIECP” • An example would be a garment shop where the CAC produces uniforms for the DOC, and also produces other garments bound for interstate commerce (PIECP) • The CAC “splits” the wage paid to offenders between traditional wages and PIECP wages

45. Split Wages • Some examples of a split wage • In the following examples, we are going to use two wage rates for illustrative purposes: • Traditional wage - $.50/hour • PIECP 10th P wage - $8.50/hour

46. Split Wages • Some examples of a split wage • Percentage of Sales – The CAC calculates 70% of sales from traditional work / 30% of sales from PIECP work. The CAC pays offenders the traditional hourly rate for 70% of time worked, and the PIECP hourly rate for 30% of time worked • Example - an offender works 10 hours per week: • 7 hours – paid at $ .50/hour (traditional wage) … or gross wages of $3.50 • 3 hours – paid at $ 8.50/hour (PIECP 10th P wage) … or gross wages of $25.50 • Total gross wages for the 10 hour week = $29.00

47. Split Wages • Some examples of a split wage • Split Shop – workers are divided into “traditional” workers and “PIECP” workers • Example – The CAC has three production lines (running parallel to each other): • 2 of the lines produce traditional product - all offenders working these two lines earn the traditional wage ($.50/hour) • The remaining line produces PIECP product – all offenders working this line earn the PIECP wage ($8.50/hour)

48. Split Wages • Some examples of a split wage • By specific product – when an offender works on a PIECP products, he/she earns PIECP wages ($8.50); when an offender works on traditional products, he/she earns traditional wages ($.50/hour) • How do you do this? • Tag the product as it moves through the manufacturing process, identifying it as Traditional or PIECP • Tag/identify batches of product as Traditional or PIECP • Offenders log hours based on which product they are working on

49. Split Wages • At assessment – assessors will want to see a written description of the split • Explain the written description of the split with offenders • What you are not allowed to do: • Arbitrarily select a group of workers to receive PIECP wages

50. Piece Work Wages Wil Heslop