Social Security Numbers That Don’t Match-Employer Liability

April 26, 2010

The Department of Homeland Security has recinded a 90 day safe harbor for employers who receive a notice from the Social Security Administration that a social security number being used by one of their employees does not match the name on file with the Social Security Administration. The rule would have protected employers for 90 days to try and resolve the issue without incurring any liability for employing individuals who lack authorization to work in the United States. Now if an employer receives a mis-match letter you MUST take affirmative steps to try and resolve the discrepancy.

The problem is once you receive the letter from the social security administration you will be deemed to have “constructive knowledge” that the employee may possibly not be authorized to work. U.S. Immigration & Customs Enforcement (ICE) will expect you to take steps to resolve the discrepancy. As you may recall from previous articles I have told you that ICE has been conducting I-9 audits and they are using other agencies to assist them. The pressure is mounting. Remember, it is a $10,000 fine per individual found not have the proper work authorizations. I have clients who give me “push back” because they have some individuals who are not authorized yet they do not want to get rid of them because “they are my best worker.”  No problem, fines and jail are becoming the option. Personally I love my staff but I’m not going to jail for any of them!

Here’s what you should do. Keep the 90 day benchmark. Advise the employee to go to the social security administration and obtain proof that that their social security number is valid. If there is no resolution using the social security number, you should have the employee fill out another I-9 using documentation other than the social security card. If they cannot produce other supporting documentation you have to make a decision.

By the way, for those employers using “E-Verify” for new hires the window is only ten days because they are new hires. Employees who have been working for awhile are given the additional time because they have already established a “property right” (their job) and are entitled to a longer opportunity.

COBRA Subsidy Eligibility Period Has Been Extended-Again!

April 19, 2010

President Obama recently signed the Continuing Extention Act of 2010 which has now extended the eligibility period for the COBRA subsidy for an additional two months (ending May 31, 2010). As a result,  if you have terminated any employee in April, or if you terminate an individual in May, they will be eligible for the subsidy. The Continuing Extention Act does not change the amount or duration of the subsidy.

Notice of the subsidy must be provided to qualified beneficiaries by June 14, 2010. In addition, the COBRA election period for anyone who had not elected the COBRA coverage must be extended to 60 days following their notification of their right to electing COBRA. For any additional clarifications please discuss this with your broker.

Deducting Partial Days From Exempt Employees-Another Clarification

April 19, 2010

I Read the following article. It’s important to understand that the deductions can only be from vacation and sick leave. The Labor Board just issued another opinion on this issue.

California’s Division of Labor Standards Enforcement recently issued a new Opinion Letter holding that partial day deductions from vacation or sick leave accruals for exempt employees who are absent for a partial day are permissible under California law and do not cause the loss of exempt status for such employees.  In addition, the Opinion Letter makes it clear that employers may deduct leave in less than four hour increments from sick leave and vacation banks. The Opinion Letter notes that in Conley v. PG&E, 131 Cal.App.4th 260 (2005), the court approved partial day leave bank deductions in four hour increments.  However, the Opinion Letter explains that neither Conley, nor any California or federal regulation precludes deductions from vacation or sick leave banks in increments of less than four hours. 

The Opinion Letter cautions that although it is permissible to dock an exempt employee’s leave bank for a partial day absence, it is not permissible to dock an exempt employee’s salary for a partial day absence.  Exempt employees are entitled to a full day’s salary for any day in which they perform work. Therefore, an exempt employee who has no vacation or sick leave may not be monetarily affected if that employee takes a partial day off.

While the Labor Commissioner’s Opinion Letter is limited to the facts and circumstances described in the employer’s request, all California employers can draw guidance, more comfort and direction, when faced with exempt employees taking partial days off of work for personal reasons or due to sickness or the illness of their family members. The new guidance on the subject is consistent with federal law and provides employers more flexibility in making necessary deductions from exempt employees’ vacation and sick leave banks during tough economic times to minimize the potential vacation pay paid out to employees at separation.

Paycheck Fairness Act-Proving Females Are Paid Equally

April 15, 2010

Congress has nothing better to do but create more potential litigation headaches for employers. If Congress passes the Paycheck Fairness Act, it has the potential to cripple small businesses. Let me go back in time for a moment. In 1973 The Equal Pay Act (EPA) was created to ensure that female employees were not paid less than a male employee for “substantially equal work.” The law does not require any showing of discriminatory intent. The EPA permitted an employer to defend unfair pay practices by proving the compensation was based on “any factor other than sex.” Examples included; a seniority system, a merit system, or a system which measures earnings by quantity or quality of production.

The Paycheck Fairness Act could create a problem in that it would replace the EPA’s “any factor other than sex” defense with a much more demanding requirement. The employer would have to prove the difference in pay was based on a “bona fide factor other than sex” that is “job related” and “consistent with business necessity.” Furthermore, the “business necessity” defense would be unavailable if the female employee could prove that there was an alternative employment practice available to determine her rate of compensation.   

Don’t get me wrong! I do believe everyone should be paid equally but, there are sooooooo many factors that goes into determining compensation. This law would open the door to female employees challenging every raise, every commission structure,  and every bonus. In addition, under the California Labor Code, employers cannot prohibit employees from discussing salaries which means that the office rumor mills will really begin to buzz if this law is passed.

It should also be noted that there are currently laws to protect against gender-based pay discrimination. Besides the Equal Pay Act, there is Title VII of the Civil Rights Act of 1964 and under California we have the Fair Employment & Housing Act. This new act would make it much more difficult to fight off these types of claims which would expose businesses  to unlimited compensatory and punitive damages.

I will update you if this is passed.

Employment Taxes-Beware-IRS Is On The Prowl

April 12, 2010

The IRS has commenced its first Employment Tax Research Project in more than 25 years and has two main goals. The first is to secure statistically valid information computing the difference between the taxes collected and the taxes owed (approximately $200 billion) to the U.S. Government; and the second is to determine the most “noncompliant” employment tax areas.

Do you get the impression the government needs money? Well, the IRS is looking into the extent to which businesses comply with employment law taxes and withholding requirements. Over, and within, the next three years the feds will select 2000 employers for what it describes as a very close look that will initially focus on tax returns from 2007 and 2008.

It is likely that employers who are unlucky enough to be selected will be subject to lengthy, inconvenient and expensive audits.  And, any employers that are audited and that had the misfortune to misclassify employees as independent contractors or failed properly to withhold, will likely be subject to significant tax bills. I have several clients who are currently facing audits from the U.S. Department of Labor and I can tell you they are focusing on the issue of independent contractors and their misclassification. Why, because it is a fact that most employers do not understand the true definition of an independent contractor. One or two pieces of paper where both parties agree that the individual is an independent contractor will not get the job done.

If you receive a notice from the IRS, or the U.S. Department of Labor, that your business has been selected for an audit, please contact us immediately. If you want a current agreement reviewed, or you have a question about the status of an individual, give us a call.

Background Checks and Sex Offender Information

April 5, 2010

Over the past few years employers have been using thrid-party vendors to conduct background and screening services before hiring employees. The practice is a good one because it could eliminate hiring troublesome individuals and prevent “negligent hiring” lawsuits. A recent case, Mendoza v. ADP Screening and Selection, a California court found that ah employment screening company has a right to republish to employers information contained in a “Megan’s Law Website” with respect to sex offenders although there are statutory prohibitions against the use of such information in the employment context.

Let me provide a caution on this issue. This case is appears to be based upon a claim of defamation based on the fact that the screening company provided the information that they found to the emplloyer. They found the applicant’s name on Megan’s Law Website. Employer’s have to be careful. The court’s have previously made it very clear that they do not want employers using the Megan’s Law Website for making hiring decisions. And they certainly do not want employees visiting such sites looking for information on co-workers. We have had some of our non-profit clients who interact with children inquire about after acquired information given to them by either an employee who has visited the ML website or from an “anonymous” caller. I think these employers have a stronger duty toward the protection of the children and should inquire of the employee as to the veracity of the information received. If he admits to falsifying his application (convictions) he could be subject to termination for falsifying a work application. If he is in denial, I think his information should be run through the Department of Justice for a second time. Just for the non-profit to cover their bases.

Technology is changing every day. With it comes the ability to search out individuals on the internet. Employees spend company, and personal time, engaging in such behavior. I believe employers need to have a policy in place cautioning their staff not to participate in office gossip if they find out negative information about co-workers. They may subject themselves to liability (defamation claims) if the information is wrong.