Presentation to

by

www.padgett-cpa.com

2011 Texas Nonprofit SummitHR Compliance and Enforcement for

2011

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Introductions

• Human Resources Consulting Group• Padgett, Stratemann & Company, L.L.P. • Address agency representation

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Agenda

• I-9s and E-Verify• Department of Labor

―Employees, Interns, Volunteers

―Independent Contractors

―Exempt vs. Non-exempt

―ERISA

―OFCCP

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ICE

• Immigration Customs Enforcement (ICE)• Principal investigative arm of the U.S. Department of Homeland

Security • 2nd largest investigative agency in the federal government • More than 20,000 employees in offices in all 50 states and 47

foreign countries • Annual budget of more than $5.7 billion dollars

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Headlines

• For the current fiscal year (October 2010), ICE has audited 2,338 employers

• On Wednesday, June 15, 2011, 1000 employers in US notified of I-9 inspection

• Enforcement strategy has shifted to employers

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Headlines – National

WHO: Abercrombie & Fitch

WHAT: Settlement for more than $1.04 million

WHERE: Michigan

WHEN: September 2010

Things To Consider:―Technology related deficiencies in electronic I-9 system

―No instances of knowingly hiring unauthorized individuals

―Employment verification process serious

* Source: www.ice.gov/new/releases

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Headlines – Texas

WHO: Lone Star Bakery

WHAT: 200 of 500 employees laid off at 2 plants due to not having proper documentation

WHERE: China Grove, TX

WHEN: February 2011

Things to Consider:―Several employees had been with the company 15 years

―Social security numbers not matching to names

―Impact on company business

* Source: Express News

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Recent Changes To The I-9

• New I-9 Form ―Revision date of 08/07/09

―Expiration date of 08/31/12

• Modification to I-9 Form (Final Rule Implemented 4.14.11)―All documents must not be expired

―Documents containing no expiration are deemed to be expired

―Changes to list of acceptable documents

―Adds a 4th box to the form – Non-citizen nationals of the US

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Recent Changes To The Handbook

• Purpose of Handbook: Help employers understand the Form I-9 process

• Purpose of Handbook Revision to address the following:―Regulations regarding electronic storage and retention of forms

―Questions regarding processing an employee with “complicated immigration status” (USCIS)

• Revised “Handbook for Employers” (M-274) as of 1/5/2011 ―Last update occurred in July 2009

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Recent Changes To The Handbook

• What’s New:―Visual aids for completing the Form I-9

―Examples of USCIS documents

―Expanded guidance on processing employees in H-1B status or H-2A status

―Expanded guidance on extensions of stay for employees with temporary employment authorization

―Additional Q&A

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Things to consider

• Every organization, regardless of status, has exposure• It’s not just about hiring undocumented workers, it is also about

completing the I-9 form timely and correctly• Sometimes the attempts a correction make things worse

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E-Verify

E-Verify is an Internet based system that compares information from an employee’s Form I-9, Employment Eligibility verification, to data from the U.S. Department of Homeland Security and Social Security Administration records to confirm employment eligibility.

• Requirement for certain employers (and in certain states)• Specifically designed to verify employment authorization • Does not provide protection from worksite enforcement (ICE)• Different than the SSNVS and the TNEV• According to ICE – more than 225,000 employers use E-Verify,

with about 1,000 new businesses signing up each week.

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E-Verify

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E-Verify

• Why?―Deters document and identity fraud

―Helps maintain a legal workforce

―Protects jobs for authorized workers

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E-Verify

• Who?―As of September 8, 2009, federal contractors with contracts

containing E-Verify clause must use E-Verify Prime contracts contain FAR E-Verify Clause

• Value above $100,000• Period of performance of 120 days or more • At least some of the contract work performed in US • Clause flows down to all tiers of subcontractors • Prime is responsible for ensuring clause is included in qualifying subcontracts

Subcontracts • Value of more than $3,000 • Contract is for commercial or noncommercial services or construction

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E-Verify

• When?―Timeframes of enrollment vary

30 calendar days of Contract Award Date or Contract Modification Date

• Enrollment decisions―Who will sign the MOU

―Which hiring sites, company locations

―Who will have access

―Who will be designated program administrator

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E-Verify

• Determining who to verify―Existing employees – entire workforce

―All new hires and existing employees assigned to the contract

• When to verify―Begin entering Form I-9 information within 90 calendar days of

enrolling or updating organization designation

―If entire workforce within 180 calendar days of enrolling or updating organization designation Once beginning to enter Form I-9 information for new hires, enter no

later than the 3rd business day after the employee’s start date

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E-Verify

• Unless you are a Federal Contractor with FAR E-Verify Clause only use E-Verify to verify new hires

• For a contract with the FAR E-Verify clause awarded on or after September 8, 2009 ―Verify all existing employees working on the contract

―Verify all new employees hired after the date of enrollment in E-Verify

OR

―Verify entire workforce

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E-Verify

• Important Take Aways―Doesn’t cost to participate, but….

―Not based on number of employees but amount of contract

―Rules vary for those using E-Verify Documents accepted

• Example – If employee present a document from List B, a document is required with a photograph

Poster requirement

• Should I participate if not required?―Advantages vs. Disadvantages vs. Compliance

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E-Verify – Here and Coming Soon

• E-Verify website redesigned • E-Verify Video – How to run a case, Understanding E-Verify,

Know Your Rights • Passport matching capability• Legislation introduced by Representative Lamar Smith (R-Texas)-

Legal Workforce Act (H.R. 2164)-would improve E-Verify System, make it mandatory for all employers and would repeal I-9 system

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DOL-Fair Labor Standards Act

• The Fair Labor Standards Act-about who is an employee and how you have to pay them

• Employment is defined as “to suffer or permit to work.”• Minimum wage, overtime and child labor

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DOL-Fair Labor Standards ActIntern, Trainee, or Volunteer?• Interns

― DOL Fact Sheet #71 ONLY addresses “For Profit” (except for footnote). To be a trainee and exempt from minimum wage and overtime, ALL the following must be met:

1. Internship, even if though it includes actual operation of the facilities of the employer, is similar to training that would be given in an education environment;

2. The internship is for the benefit of the intern;

3. The intern doesn’t displace a regular employee, but works under close supervision of existing staff;

4. The employer that provides training derives no immediate advantage from the activities of the inter; and on occasion its operations may be impeded;

5. The intern is not necessarily entitled to a job at the end of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spend during the internship.

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DOL-Fair Labor Standards ActIntern, Trainee, or Volunteer?• Volunteer

― DOL indicates : “Individuals who volunteer or donate their services, usually on a part-time basis, for public service, religious or humanitarian objectives, no as employees and without contemplation of pay, are not considered employees of the religious, charitable or similar non-profit organizations that receive their service.

― Examples-Presenting a job skills workshop at a shelter; parents assisting in the school library, driving and delivering food to the elderly; a camp counselor in a youth program

― Volunteers may receive nominal compensation-fee or other compensation cannot be greater than 20% of the amount that would otherwise be paid to a full-time employee

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DOL-Fair Labor Standards Act

Intern, Trainee, or Volunteer?• Conclusions

―We still wait for additional guidance

―Evaluate the work the individual will be doing

―Document the terms of the agreement

―When in doubt, at least pay minimum wage

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Independent Contractor or Employee?

• Misclassification of independent contractors ―TWC selecting accounts for audit

Insure proper reporting of wages and taxes for employment purposes Request to review 1099’s and time cards

―IRS has increased focus Unpaid taxes

―DOL Missed overtime Minimum wage Benefits

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Independent Contractor or Employee?

―Check your independent contractor status Permanency of relationship Degree of control Degree of skill Investment in business Opportunity for profit/loss

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Exempt vs. Non-Exempt

• DOL Fair Labor Standards Act• Employees and classifications -

―Salary test

―Duties test Primary duties Exercise discretion and independent judgment

• Administrative Exemption is most commonly litigated• Bonus and Regular rate of pay for non-exempt employees• Travel and training time

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DOL Agenda

• In 2010 regulatory agenda – proposed strategy to require employers to “find and fix” legal violations

• No longer – “catch me if you can” • Plan – identify and resolve risks of legal violations • Prevent – fully implement plan that prevents legal violations • Protect - objectives to be met on a regular basis for actual

prevention

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ERISA

• Federal law that sets standards for most pension and health plans in private industry (governmental entities, churches are exempt)

• Overarching principal is to provide protection for those in the plan

• Responsibilities include:―Providing participants with plan information to include plan features and

funding; (includes an Summary Plan Description and Summary Annual Report

―Fiduciary responsibilities for those who manage and control plan assets;

―Requires plans to establish a grievance and appeals process for participants to get benefits from their plans;

―Gives participants the right to sue for benefits and breach of fiduciary duties.

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ERISA

• Responsibilities include (cont’d):―*COBRA-20 or more employees

―HIPAA

―Newborns’ & Mothers’ Health Protection Act-requires insurance to cover a minimum 48 hour hospital stay following childbirth

―Mental Health Parity Act-mental health covered to be covered like medical surgical benefits with respect to lifetime and annual limits (doesn’t apply to substance abuse/chemical dependency; doesn’t apply to small employer w/2-50 employees; doesn’t apply if the application of parity increases the cost of the plan by at least 1%)

―Women’s Health and Cancer Rights Act-protections for individuals who elect breast reconstruction in connection with a mastectomy; and must cover certain post-mastectomy benefits

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ERISA

• Responsibilities include (cont’d):

―5500 Reporting Annual Informational report sent to DOL (who also provides it to the

IRS) Required of pension plans, to include 403(b) Welfare benefit plans with 100 or more Self-funded; self insured welfare benefit plans of any size Due by the seventh month following end of the plan year; 2 ½ month

extension permitted (but must apply) Must be filed electronically

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IRS

• National Review Program in 2 year• Additional IRS agents to perform these “reviews” • Reviews will target industry groups to include Non-Profits• Reviews to include:

―Worker classification

―Fringe Benefits

―Officer compensation

―Reimbursed expenses

• Agents taking a HARD LINE approach in enforcement

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OFCCP

• Charged with enforcing the contractual promise of affirmative action and equal employment opportunity required of those who do business with the Federal Government

• General rule for affirmative action plans is 50 employees and $50,000 or more in contracts

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OFCCP

• Increased focus on Veteran’s Affirmative Action Plan―Policies

―Focus on recruitment of hiring of veterans

―Move towards statistical analysis for numerical targets

• Increased focus on Disabilities Plan ―Policies

―Move towards accommodations for applicants – ex. online application system

―Disability outreach

• Increased review on pay equity

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Take-Aways: Doing More With Less

• Invest time in compliance-agencies have increased enforcement activities

• Do it right the first time; there is always a potential cost of mistakes

• Take advantage of what you are already paying for• It may be better to pay now, than pay later• Risk of audit could come from your employees

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Questions

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Contact Information

Cyndi Mergele, SPHR, PIPadgett, Stratemann & Co., L.L.P.

SAN ANTONIO100 NE Loop 410, Suite 1100San Antonio, Texas 78216-4704210.828.6281

www.Padgett-CPA.com

AUSTIN811 Barton Springs, Suite 550Austin, Texas 78704-1149512.476.0717