The Wage and Hour Audits Are Coming: Be Prepared

1. The Wage and Hour Audits Are Coming: Be Prepared Co-Sponsored By:

2. Speaker Panel • Overview – Harold P. Coxson, Jr. (Washington, D.C.) • Wage and Hour Division – Alfred B. Robinson, Jr. (Washington, D.C.) • Office of Federal Contract Compliance Programs – Leigh M. Nason (Columbia) • Immigration – Jay C. Ruby (Atlanta) • Occupational Safety and Health Administration – Stephen C. Yohay (Washington, D.C.) • Moderator – James M. McGrew (Atlanta)

3. DOL’s Spring 2010 Regulatory Agenda Presented By: Harold P. Coxson, Jr. (Washington, D.C.)

4. DOL’s Spring 2010 Regulatory Agenda • Department-Wide Regulatory and Enforcement Strategies • “Plan/Prevent/Protect” • Openness and Transparency

5. DOL’s Plan/Prevent/Protect Enforcement Strategy • The Labor Department has limited resources to protect America’s workers • With only a few thousand inspectors, the Labor Department is charged with protecting 140 million workers in some 9 million workplaces. Unfortunately, in our current system, Labor Department enforcement personnel must intervene to assure compliance in too many cases. It is a “catch me if you can” system.

6. DOL’s Plan/Prevent/Protect Enforcement Strategy • Employers and other regulated entities should be encouraged to plan to prevent violations and protect workers, while the Labor Department’s worker protection agencies should create and strategically deploy the tools needed to ensure that employers and other regulated entities that continually fail, or simply refuse, to comply with the law are held accountable.

7. DOL’s Plan/Prevent/Protect Enforcement Strategy • Employers and others must “find and fix” violations – that is, assure compliance – before a Labor Department investigator arrives at the workplace. Employers and others in the Department’s regulated communities must understand that the burden is on them to obey the law, not on the Labor Department to catch them violating the law. This is the heart of the Labor Department’s new strategy. • We are going to replace “catch me if you can” with “Plan/Prevent/Protect.”

8. DOL’s Plan/Prevent/Protect Enforcement Strategy • “Plan/Prevent/Protect” marks an expansion of * * * more worker protection efforts in the Labor Department. (T)he Occupational Safety and Health Administration (OSHA), MSHA, OFCCP, and the Wage and Hour Division (WHD) will propose regulatory actions that require employers * * * to develop programs to address certain employment law compliance issues within each agency’s portfolio. Although the specifics will vary by law, industry and regulated enterprise, this “Plan/Prevent/Protect” strategy will require all regulated entities to take three steps to ensure safe and secure workplaces and compliance with the law:

9. Plan/Prevent/Protect • “Plan”: The Department will propose a requirement that employers and other regulated entities create a plan for identifying and remediating risks of legal violations and other risks to workers – for example, a plan to search their workplaces for safety hazards that might injure or kill workers. The employer or other regulated entity would provide their employees with opportunities to participate in the creation of the plans. In addition, the plans would be made available to workers so they can fully understand them and help to monitor their implementation.

10. Plan/Prevent/Protect • “Prevent”: The Department will propose a requirement that employers and other regulated entities thoroughly and completely implement the plan in a manner that prevents legal violations. The plan cannot be a mere paper process. The employer or other regulated entity cannot draft a plan and then put it on a shelf. The plan must be fully implemented for the employer to comply with the “Plan/Prevent/Protect” compliance strategy.

11. Plan/Prevent/Protect • “Protect”: The Department will propose a requirement that the employer or other regulated entity ensures that the plan’s objectives are met on a regular basis. Just any plan will not do. The plan must actually protect workers from violations of their workplace rights.

12. Plan/Prevent/Protect • Employers and other regulated entities who fail to take these steps to address comprehensively the risks, hazards, and inequities in their workplaces will be considered out of compliance with the law and, depending upon the agency and the substantive law it is enforcing, subject to remedial action. But employers, unions, and others who follow the Department’s “Plan/Prevent/Protect” strategy will assure compliance with employment laws before Labor Department enforcement personnel arrive at their doorsteps.

13. DOL’s “We Can Help” Campaign: Hotels/Motels in the Cross-Hairs “Today’s event marked the beginning of the “We Can Help” nationwide campaign. The effort, which is being spearheaded by the Department’s Wage and Hour Division, will help connect America’s most vulnerable and low-wage workers with the broad array of services offered by the Department of Labor. The campaign will place a special focus on reaching employees in such industries as construction, janitorial work, hotel/motel services, food services and home health care. It also will address such topics as rights in the workplace and how to file a complaint with the Wage and Hour Division to recover wages owed.” Sec. Hilda Solis (4 /1/10)

14. U.S. Department of Labor Enforcement What’s Next and What You Can Do

15. Wage and Hour Division Presented By: Alfred B. Robinson, Jr. (Washington, D.C.)

16. Wage & Hour Targets the Hospitality Industry • US Department of Labor & Wage and Hour Division (WHD) • Leadership • National • Regional • Priorities • Enforcement, enforcement, enforcement … • Resources

17. Wage & Hour Targets the Hospitality Industry • WHD Investigations: Types • Complaint Cases • Initiatives (Directed Cases) • FY 2010 • FY 2011 • History with Hospitality Industry

18. Wage & Hour Targets the Hospitality Industry • WHD Investigations: Process • Advance Notice or Scheduling • On-Site: Opening Conference • “Desk Audit” • Employee Interviews • Closing Conference and Findings

19. Wage & Hour Targets the Hospitality Industry • WHD Investigations • Common FLSA Violations • Misclassification of Exempt Employees • Retail Sales (Section 7(i)) • Off-the-Clock Work • Compensation – Regular Rate • Child Labor

20. Wage & Hour Targets the Hospitality Industry • WHD: Plan/Prevent/Protect • Spring 2010 Regulatory Agenda • Sub-regulatory Agenda • Administrator Interpretations • Fact Sheets

21. Office of Federal Contract Compliance Programs Presented By: Leigh M. Nason (Columbia)

22. Affirmative Action • One aspect of the federal government’s efforts to ensure equal employment opportunity • Legally mandated for nonexempt federal contractors and subcontractors – Executive Order 11246, Rehabilitation Act, VEVRAA • Helps prevent discrimination • Targets outreach to underutilized groups of minorities and women • Measures good faith efforts in making progress toward goals for minorities and women

23. Compliance Basics • Are you a federal contractor? Subcontractor? • Provide meeting space or lodging for government agency • Catering banquet or function for government agency • YES  Do you have a single contract of at least $50,000? • YES  Do you have 50 employees? • YES  • Written affirmative action programs (AAPs) • Subject to OFCCP compliance reviews (“audits”) • Subject to sanctions for noncompliance • Technical violations  No $$$$$ • Discrimination  $$$$$ and other obligations

24. New Leadership – New Focus

25. OFCCP Resources & Priorities • 25% budget increase for 2010 • 200+ new compliance officers • 20% more compliance reviews • Committed to resolving 77% more discrimination cases (45  80) • Priorities include: • Wages • Individual and systemic discrimination • Hiring/Testing • Compensation • Veterans and disabilities issues • ANPRM published July 23 • Enforcing Executive Order 13496 employee notice posting requirement

26. Focus on . . . • Consistent, well-documented policies and procedures • Selection procedures – especially for service workers • Compensation decisions • Recordkeeping  generally, 2+ years • Hard copy? • Electronic? • “Affirmative action” efforts

27. Focus on . . . • Selections • Know your process and follow it! • Data integrity is key • Consistency and documentation is critical • Conduct impact ratio analyses • Job group OR job title OR requisition? • Not just “minority vs. nonminority” • Testing and Compensation • Adverse impact and recordkeeping • Test validation, if necessary

28. OFCCP’s Audit Focus Under Active Case Management* • 92% of audits with findings of discrimination involve findings of hiring bias • 8% of audits with findings of discrimination involve findings of discrimination in compensation • 0% of audits find discrimination in promotions • 0% of audits find discrimination in terminations *Source: A Review Of OFCCP Enforcement Statistics: A Call For Transparency In OFCCP Reporting, Center for Corporate Equality (March 2009) (Data based on FY 2007 Compliance Evaluations)

29. Our Predictions • More audits + more enforcement actions = more $$$$ spent on affirmative action compliance issues • Compliance officers will be handling more cases and will be under more pressure to find violations or close case quickly • Individual pay claims will be more successful than systemic pay claims

30. Our Predictions • Systemic hiring claims will be more successful than individual hiring claims • Tests and assessments (and validation or lack thereof) will be prime sources of OFCCP scrutiny • Disabled/veterans recruitment will remain a focus

31. Defensive Compliance Strategy • Consistency of policies and practices • Defensible documentation of actions taken • Internal audit – preferably under privilege – of AAP requirements • Updated AAPs • Defensible hiring process? What about tests? • Good faith efforts, especially for vets/disabled • Personnel records available (applications, interview notes, assessments, etc.) • Ensure that adequate records are maintained for adequate time

32. Immigration Presented By: Jay C. Ruby (Atlanta)

33. DOL’s New Plan/Prevent/Protect Initiative & H-2B Guest Worker Compliance • H-2B worker commonly used to supplement an employer’s normal workforce – i.e., seasonal/peak-load housekeepers. Annual quota for “new” H-2B workers or those out-of-country • New H-2B regulations (2009) change employer attestations and create new obligations and risks – Wage & Hour Division (WHD) has power to impose wage payments & sanction/debar H-2B employers • DOL is taking historic action – with H-2B hospitality employers being the focal point of audits • DOL will pursue corporate-wide compliance and penalties/sanctions to deter violations. Low wage hotel workers are “at risk” for abuses.

34. DOL’s New Plan/Prevent/Protect Initiative & H-2B Guest Worker Compliance • WHD focus will not only cover resorts/hotels that directly sponsor H-2Bs, but also those that use contractors who employ H-2B workers • DOL is currently drafting new H-2B regulations to be released in November 2010 • Collective FLSA cases brought by H-2B plaintiffs gaining attention of WHD • Events that cause WHD audits: 1) FLSA complaints; 2) Housing deductions; 3) Failure to reimburse for pre-employment travel; 4) Layoffs and failure to offer return transportation; 5) Benching H-2B workers; and 6) Consulate investigation

35. New H-2B Regulations and Obligations • New Procedure & Forms: DOL & USCIS • Step 1: Application for Temporary Labor Certification filed with DOL • Must request prevailing wage determination from DOL • Must perform pre-filing recruitment campaign • Job order with State Workforce Agency • Two-day ad to include a Sunday • Must include statement attesting/proving temporary need • Must include a statement of recruitment detail methods and results as to each applicant (must retain for three years) • Contractors need to prove temporary need of hotel client and use hotel’s summarized payroll information and attestation that hotel has not displaced any U.S. workers • Steps 2 & 3: USCIS application and consular processing

36. New H-2B Regulations and Obligations • New Employer Attestations (ETA Form 9142) • No recruiter fees paid by H-2B worker (“fees” = any money) • If employee has paid fee – employer has reimbursed prior to filing • 48-hour notice to USCIS if employee is a no-show or absconds or is terminated • No displacement of U.S. workers • Sanctions and WHD enforcement for willful violations • Debarment from H-2Bs and other categories (e.g., H-1B, L-1, permanent resident cases) • Civil fines • H-2B employers have long been required to offer the reasonable return transportation costs to the worker’s home country following an involuntary termination.

37. FLSA Collective Actions by H-2B Workers & WHD Position on FLSA • Recent trend of FLSA collective actions by H-2B workers alleging payment of visa-related costs and travel to the United States drove wages below required wage level. • U.S. Consulates/Embassies now provide handouts to H-2B visa applicants advising them of their wage/hour rights • Arriaga v. Florida Pacific Farms, L.L.C, 305 F. 3d 1228 (11th Cir. 2002): FLSA protection extends to payment for transportation of H-2A farm workers to the United States, immigration fees, and pre-employment expenses that primarily benefit the grower and cannot be counted as wage credits pursuant 29 U.S.C. 203(m). Ct: expenses incurred are de facto deductions from cash wages received on first week of work.

38. FLSA Collective Actions by H-2B Workers & WHD Position on FLSA • Castellanos-Contreras v. Decatur Hotels, L.L.C (5th Cir. 2009) • August 2009: DOL Wage & Hour Division Field Assistance Bulletin “Travel and Visa Expenses of H-2B Workers Under the FLSA”: Employer’s obligation

39. FLSA Collective Actions & H-2B Workers: Take Away Lessons & Best Practices 1) Perform an internal audit to determine current practice/exposure • Identify properties/locations that employ H-2B workers or use 3rd party contractors • Investigate existing and potential H-2B recruiters/agents • Are the properties complying with H-2B recordkeeping requirements and obligations? Did DOL/USCIS petitions cover all locations where H-2B workers physically worked? • Review/modify contracts with H-2B recruiters/agents. Any recruiter fees being paid by the H-2B employees? Any unauthorized deductions from wages? Reimbursement for pre-employment travel costs to United States?

40. FLSA Collective Actions & H-2B Workers: Take Away Lessons & Best Practices 2) Implement an H-2B compliance strategy • Work with competent immigration counsel and employment counsel to develop strategy and/or handle/review the H-2B applications. • Identify immigration attorney who has a long successful track record of handling H-2Bs in the hospitality industry and a good rapport with DOL • Require properties to select contractors with expert immigration counsel (not many immigration attorneys successfully represent contractors) • Develop a recordkeeping compliance program that details the pre-filing recruitment efforts and non-displacement records • Require properties that use the H-2B program to offer several housing options or leave housing up to employee

41. FLSA Collective Actions & H-2B Workers: Take Away Lessons & Best Practices 2) Implement an H-2B compliance strategy (cont’d) • Ensure that properties are not deducting (from H-2B worker wages) more than the fair market value of the housing • Ensure that properties pay all costs associated with H-2B process (unless paid by 3rd party contractor) • Do not accept “in-country” H-2B workers from recruiters/agents unless the recruiter/agent ensures: a) no fees charged to the workers and b) the labor certification covers the worksite • Offer the return transportation costs (one-way airline ticket) to H-2B workers involuntarily terminated prior to the end of the H-2B term • Ensure that properties (if not owned by corporate) file in the name of the true owner (FEIN)

42. FLSA Collective Actions & H-2B Workers: Take Away Lessons & Best Practices 3) Offer training so that Human Resources and General Managers understand the new H-2B obligations and risks (including FLSA)

43. Occupational Safety and Health Administration Presented By: Stephen C. Yohay (Washington, D.C.)

44. Occupational Safety and Health Enforcement in the Lodging Industry • OSHA’s “New Sheriff in Town” mentality • Aggressive enforcement for all employers • Higher penalties; nasty press releases • “Regulation by shaming is very effective” says OSHA’s leader, Dr. David Michaels • Intrusive inspections; more “willful” and “repeat” citations • Settlements harder to achieve • OSHA pressuring State plans to become more aggressive • Today – OSHA programs that affect lodging

45. OSHA in the Lodging Industry • The return of ergonomics regulation, but in a new form: • OSHA soon to issue new rule requiring employers to record musculoskeletal disorders (MSDs) on OSHA 300 and 301 injury and illness logs • Definition of MSD is vague (e.g., “back pain,” “tingling”) • New requirement likely effective January 1, 2011 • Prepare now for this new requirement: • Train those who maintain OSHA logs • Get ready to adjust any electronic systems used for recordkeeping • Prepare to train employees to report these kinds of conditions

46. OSHA in the Lodging Industry • OSHA suspects that employers suppress employee reports of injuries, and discourage seeking medical care. • In most inspections, OSHA will review 300 and 301 logs for past five years • You should now review logs; make necessary corrections • OSHA will interview employees to see if they: • Have been told, and know, that they are to report injuries and illnesses • Know they can request medical care, and do not feel inhibited • OSHA skeptical of injury reduction incentive programs • Investigators will interview employees to see if employees are pressured to avoid reporting injuries or illness.

47. OSHA in the Lodging Industry • In the entertainment sector of lodging industry, new attention to basic safety hazards, such as fall protection and electrical hazards • Stagehand fall at Florida resort prompted OSHA’s leader Dr. Michaels to issue statement that agency will enforce rules in this industry • Stagehand accident at MGM in Las Vegas produced local publicity about OSHA enforcement

48. OSHA in the Lodging Industry • OSHA educating multi-cultural workforce on OSHA rights • “Whistleblower” protection • Injury and illness reporting • Multi-lingual training and safety rules • OSHA working with unions in the industry to spread this message • OSHA conducted nationally-publicized Hispanic awareness meeting in Houston (April 2010)

49. OSHA in the Lodging Industry • Do those in charge of your properties know: • What to do if an OSHA Compliance Officer arrives? • Who to call in the company? • What records must be given to a Compliance Officer, and when? • How to ask a Compliance Officer to wait until the company’s safety officer arrives? • How to deal with a Compliance Officer’s inspection of operations while hotel guests or others in the public are present? • It’s a good time to train your managers on OSHA inspections

50. The Wage and Hour Audits Are Coming: Be Prepared Co-Sponsored By: