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Minimum wage increase still pretty “minimal,” but impact on businesses may be great

July 23rd, 2009  |  Lucas Otto

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On Friday, July 24, 2009, the federal minimum wage increases to $7.25 per hour, and with that increase, millions of citizens will see a boost in their weekly pay. That’s the good news. The bad news is that this increase does not even begin to raise working families above the poverty threshold, and many businesses may view this as just another cost that will inevitably eat away at their already struggling profit levels.

No one will ever turn a blind eye toward more money; in fact, while this increase is federally mandated, many businesses already offer higher minimum wages to their employees. Yet, it is impossible to ignore the fact that if an employee works 40 hours a week at $7.25 an hour, they will make $290.00 a week, or $15,080 a year (before taxes). Factor in higher gas prices and other bills, and a family of three is still well below the federal poverty guideline of $18,310, so any expectation of an “up tick” in the economy due to this increase seems more wishful thinking rather than reality.

But it isn’t just workers who will be feeling this increase. Employers, both big and small, will either have to bump those employees making less up to the minimum, or they will have to give small increases to those already making more, because they can’t pay existing employees the same as those just beginning their employment. The problem is, with decreased revenues due to the current economic downturn, this increase could not come at a worse time. Since the increase is so minimal, employers probably aren’t figuring that it will lead to greater consumer spending by the very employees getting the increase, which is the hope of many employers as wages increase.

To many employers, the math adds up as follows:

Hourly wages raised + continued economic downturn + continued downward trend in consumer spending = potentially less money coming in while more money goes out.

No one generally knows what this means for business, but if one could speculate, it could mean the loss will be passed on to consumers in the form of higher-priced products. In addition, it could mean fewer workers hired, or more workers fired, or an across-the-board reduction in hours. The fact is, an increase in the minimum wage was needed, but the amount will do little to change many families’ fortunes, whereas it may do a great deal to change how businesses hire and deal with employees and hours.

It remains to be seen what the trickle-down effect of this increase will mean to employees, businesses and consumers. Those who feel that the increase is bad for the economy and those who feel it is positive have both stated their cases (see video below). However, with the economy in a condition of instability, the road to economic recovery might get a little bumpier.

Video Discussing Pros and Cons of Minimum Wage Increase
(Opinions expressed in video are not those of CCH Workday)

For further analysis, read Don’t believe the hike, say opponents of minimum wage increase.


Gunfight at the OK Stripmall

July 22nd, 2009  |  Matt Pavich

>Arizona is the latest in a growing number of states that have restricted an employer’s right to maintain a firearm-free place of business. In enacting the new law, S. 1168, the Grand Canyon State legislature is the latest such body to put gun rights ahead of both the property rights of employers and the safety rights of just about anyone who happens near those establishments.

But the Arizona law, which forbids Arizona property owners, tenants, public and private employers and business entities from prohibiting firearms in vehicles that enter their property, is not even the most egregious example of the gun lobby’s power.

An Oklahoma law makes it unlawful for employers, private or public, to even ask employee applicants whether they own or have guns. A Florida law allows employees, including those at daycare centers, to have their guns in their car during the workday. In the battle between the business lobby and the gun lobby, it’s the National Rifle Association that is number one with a bullet.

The NRA has, in recent years, made these laws a priority and this trend should concern employers. This isn’t a case of a legislature rightly informing employers that they cannot discriminate in their hiring practices or mandating certain accommodations for persons with disabilities. These laws tell employers that they cannot enact safety measures that might step on the tender toes of the all-powerful American gun lobby.

And, have no doubt, keeping businesses gun-free is a real and serious safety issue. A 2005 survey in the American Journal of Public Health found that gun-friendly workplaces were five to seven times more likely to host workplace homicides than safety-friendly workplaces. The same survey found that 60% of major employers stated that disgruntled employees had threatened senior managers with serious physical harm. One doesn’t have to take a giant leap to imagine the potential disasters that could arise, should an unstable employee with a pistol in his trunk be given his walking papers.

Don’t these laws implicate the OSHA-mandated responsibility of employers to maintain a safe workplace? Of course they do, but in upholding a different Oklahoma law that prohibited employer gun bans, the Tenth Circuit found insufficient evidence that guns on company property constituted a real threat. In Ramsey Winch v Henry, 555 F.3d 1199 (10thCir. 2009), the court found that OSHA only requires employers to keep their workplaces free of “recognized hazards.” Because OSHA hasn’t promulgated standards prohibiting guns in the workplace, reasoned the court, guns in the workplace must not constitute a “recognized hazard.”

It’s the judicial-ese equivalent of “guns don’t kill people, people kill people.” And it completely ignores the political reality facing OSHA, a government agency, accountable to politicians who, more often than not, face intense pressure from the NRA.

So if OSHA won’t act and state legislatures insist upon allowing guns into every inch of the American fabric and the courts refuse to intervene, what can employers do? The answer is, currently, not much. Employers need to ensure that their HR policies reflect the current, dismal reality. Don’t prohibit or ask about guns in these states. And consider stocking up on Kevlar.


“ICE, ICE baby”… please don’t come knocking on my door!

July 20th, 2009  |  Deborah Hammonds

>In late April, the Obama Administration announced a refocused worksite enforcement strategy aimed at reducing the demand for illegal employment in the US and protecting employment opportunities for the nation’s lawful workforce. Unlike the Bush Administration’s worksite enforcement policy, which focused on large-scale raids designed to arrest and deport undocumented workers, the Obama Administration’s intention is to prioritize criminal and civil actions against employers that knowingly hire undocumented workers over actions against the illegal workers themselves. Little was said, however, about how the strategy would be implemented, but it is clear now that the Obama Administration means business.

On July 1, the Department of Homeland Security’s enforcement arm, Immigration and Customs Enforcement (ICE), launched a new initiative, investigating compliance with employers’ Form I-9 obligations, issuing an unprecedented 652 Notices of Inspection (NOIs) to businesses nationwide. The number of NOIs issued by ICE on this one day was more than the 503 total number of NOIs issued by ICE in all of Fiscal Year 2008. This action by the Obama Administration signifies that ICE will be inspecting employers’ hiring records to determine whether or not they are in compliance with US immigration law.

All employers are required to prepare and retain (for three years after the employee’s date of hire or one year after the date that the employee is discharged) the Form I-9, Employment Eligibility Verification, for each new employee they hire, regardless of that individual’s citizenship. The employer must examine the new hire’s identity and employment authorization document(s) to determine whether they reasonably appear on their face to be genuine and relate to the person presenting them. Once the employer has accepted the documents, the information is recorded on the Form I-9. Form I-9s can be retained in paper, microfilm, microfiche or electronically.

Employers have at least three days after receiving a NOI to provide the inspecting office with the requested Form I-9s for all employees employed during the period covered by the audit at the location where the office requests to see them. If it is more convenient, employers may waive the three-day notice. In addition, employers may also request an extension of time to produce the forms. The requesting office will likely also ask to review payroll or personnel records. Although no administrative subpoena or warrant is necessary to inspect Form I-9s, an employer can insist upon such a document before granting ICE access to other personal information. Note that a refusal or delay to the presentation of the Form I-9s for inspection is considered a violation of the Immigration Reform and Control Act’s (IRCA) retention requirements and may result in the imposition of civil money penalties. It is advised that employers obtain counsel prior to the NOI in order to prepare for the external audit. Further, employers should retrieve and reproduce only the documents specifically requested by the inspecting office, review and make corrections to the Form I-9s, where appropriate and abide by IRCA’s antidiscrimination obligations during the audit process.

Remember, an employer’s failure to complete or retain Form I-9s may lead to more serious charges, like knowingly hiring undocumented workers, resulting in significant civil and criminal penalties. In fact, on July 7, Krispy Kreme Doughnut Corporation reached a $40,000 fine settlement with ICE after a Form I-9 audit revealed that the company had employed dozens of undocumented workers at one of their doughnut factories in Cincinnati, Ohio. Los Angeles-based clothing manufacturer American Apparel, Inc received a notice from ICE that the agency has been unable to verify the employment eligibility of approximately 200 current American Apparel employees because of discrepancies in the employees’ I-9 Forms, according to the manufacturer in a July 1 press release. ICE also notified the company that, based upon its review, approximately 1,600 other current employees do not appear to be authorized to work in the United States. This represents approximately one-third of American Apparel’s workforce. The investigation is ongoing.

More information on these matters can be found in a recent white paper published by CCH.


Ricci puts employers between a rock and a hard place

July 17th, 2009  |  Pamela Wolf

>Sonia Sotomayor is undoubtedly not the only person responding to questions about the Supreme Court’s Ricci v DeStefano decision – the 5-4 opinion is surely a “hot topic” for employment attorneys and inside-counsel all across the nation. In Ricci, the Court ruled that a city’s decision not to certify firefighters’ exams, in order to avoid potential race bias claims, was discriminatory. The exams rendered no blacks and at most two Hispanics eligible for promotions. The Court’s decision may have generated many more questions than it answered.

While some US Senators sought to use the case as a litmus test for the qualifications of the Supreme Court nominee, more than a few employers and their legal counsel were likely lamenting the lack of clarity – nothing resembling a litmus test – in the High Court’s opinion as to how to meet the new standard announced for the lawful rejection of a selection procedure that has been determined to have a discriminatory impact on protected members of a workforce.

“[U]nder Title VII, before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action,” wrote Justice Kennedy, joined by four other Justices. Applying this standard, the Court concluded that the city “was not entitled to disregard the tests based solely on the racial disparity in the result.”

But what exactly is “a strong basis in evidence” and how is that standard applied in the real world of employers diligently trying to meet antidiscrimination obligations? As Justice Ginsberg points out in her dissenting opinion, the “barely described” standard “makes voluntary compliance a hazardous adventure.” Given that three of her High Court colleagues agreed with her observation, how difficult will it be for employers to navigate this tricky landscape? How many varied interpretations of this new standard will we see in the coming months and years and will the Supreme Court be required to revisit the issue?

And then there is the tension that Ricci creates between Title VII’s disparate treatment and disparate impact provisions. How will employers seeking to avoid selection procedures that create a disparate impact manage not to invite at the same time a disparate treatment claim? As Justice Ginsburg laments, under the High Court’s ruling, an employer that changes an employment practice in order to comply with Title VII’s disparate impact provision is acting “because of race,” which is generally forbidden under Title VII’s disparate treatment prohibition. The Justice finds this position at odds with congressional intent and the EEOC’s interpretive guidance: “Congress did not intend to expose those who comply with the Act to charges that they are violating the very statute they are seeking to implement.”

Employers are caught between a rock and a hard place with a new standard and a new view of Title VII that likely applies to selection procedures for many other types of employment decisions. For example, consider an employer that out of good-faith efforts to comply with Title VII, performs a disparate impact analysis prior to implementing a reduction in force in order to avoid unintentional bias and associated liability. If the statistics show a disparate impact on a minority group, what should the employer do?

Under Ricci, a statistical disparity alone would likely be insufficient to justify a change in selection criteria. How much and what type of evidence of unreliability must the employer collect before rejecting the questionable procedure and implementing a new one without incurring liability for disparate treatment of non-minority members not initially identified for layoff, but selected under a new procedure?

These and many other questions will likely arise in the aftermath of Ricci. But I predict a surge in reverse discrimination cases that will soon begin to generate some answers.


Signs show move toward stronger, broader OFCCP enforcement

July 15th, 2009  |  Cynthia L. Hackerott

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Although the person who will be the OFCCP Director for the Obama Administration hasn’t been announced yet, signs indicate that the President’s vision for the agency is one that will enhance its enforcement muscle and scope. At this point, we already know that Obama has requested a whopping increase to the agency’s budget and that this increase will be used to beef-up the OFCCP’s efforts to uncover compensation discrimination. We also know that the agency intends to audit significantly more construction contractors than it has in previous years in light of the increase in federal construction contractors resulting from the American Recovery and Reinvestment Act of 2009 (Recovery Act).

Under President Obama’s FY 2010 budget proposal, announced in May, the OFCCP would receive $109.521 million in funding. That amount is a $27.4-million increase over the estimated FY 2009 budget allotment (82.1 million) adopted by Congress – a striking increase of over 33 percent! The Labor Department has stated that this budget request includes $25,600,000 to fund 213 full-time equivalent employees and a new case management system. Moreover, the Labor Department has specifically stated that much of this increase is intended to support enforcement and outreach efforts related to compensation discrimination – including “improving the various approaches and investigative techniques used to evaluate compensation” and to “support litigation to amplify enforcement activities by funding external experts to verify OFCCP’s allegations and assessments to solidify its commitment to strong enforcement.”

The Recovery Act adds $3 million more for the 2009 budget estimate and $5 million more to the 2010 request. Just last week, the OFCCP posted on its website its plan to conduct 450 compliance evaluations (from July 1, 2009 through September 30, 2010) of federal contractors in receipt of Recovery Act funds in addition to roughly 5,000 federal contractors per FY targeted for audits through the agency’s existing Federal Contractor Selection System (FCSS). Although the OFCCP will audit approximately 90 supply and service contractors receiving federal contracts through Recovery Act funding, it will place a special emphasis on the construction industry because the majority (estimated at roughly 80%) of Recovery Act contractors will be recipients of direct or federally assisted funds for construction projects. To this end, the OFCCP will utilize 50 full-time equivalent employees to complete at least 360 compliance evaluations of construction contractors. By way of comparison, of the 4,333 audits the OFCCP completed in FY 2008 under the FCSS, 204 were of construction contractors. These audits were conducted by a workforce of approximately 400 compliance officers who focused primarily on supply and service contractor audits.

These developments indicate that President Obama has indeed started to implement his vision for the OFCCP, but many elements remain a mystery. For example, given that it seems the agency will continue to increase its focus on systemic discrimination (particularly systemic compensation discrimination), does that mean (as it has in the past) a reduced focus on the affirmative action aspects of federal contractor obligations? Or do the increased funding levels signal an intent to intensify the agency’s focus on affirmative action in addition to systemic discrimination?