If you’re like me, picking just one favorite thing is sometimes challenging. [Not challenging at all, nothing is better than a fresh cannoli.] So, for new Frankly Speaking readers, the commentary in [brackets] is channeled from my snarky alter ego. [Snarky? That was uncalled for.] As I thought about what to write, it was difficult to decide which of my favorite topics to focus on, I-9 forms or the Fair Labor Standards Act (“FLSA”). [Wow, you should eat more cannoli.] Then, after sleeping on it, I decided to focus on both! [Oh, lucky us.]
I-9 Forms – Don’t skip this section!
Did I mention that I provided testimony on the I-9 form at a U.S. House of Representatives Committee hearing? OK, I admit, few people get as excited about I-9 forms as I do. [I’ve got $5 that says the number is precisely zero.] But once you learn about the potential for astronomical fines and penalties, you’ll appreciate my borderline I-9 obsession.
First, let’s start with the basics. The expiration date on the most recent I-9 form is 10/31/2022. That’s because U.S. Citizenship and Immigration Services (“USCIS”), the federal agency responsible for the I-9, has not released an updated form. [Shocking, a federal agency can’t get a form out on time; big deal!] While not seemingly important, it could become a significant and unbelievably expensive issue during a future I-9 audit. Call or email me if you want to know more. [How will you ever keep up with all the contacts?] According to the USCIS website, employers should continue to use the I-9 issued on 10/21/2019 (with a 10/30/2022 expiration date) until the new form is available.
Conversely, the Department of Homeland Security published its annual inflation adjustment (increase) to penalties for I-9 errors. Effective January 15, 2023, “civil money penalties” increased to a minimum of $272, up to $2,701 per form containing an error. Fines are assessed based on the percentage of the employer’s forms containing one or more errors. For example, Snarky, Inc. [I know you’re referring to me] has 200 I-9 forms subject to audit. Error-related civil money penalties would be calculated based on the following (estimated based on previous civil money penalty schedules):
- 1% to 9% – $272 per form
- 10% to 19% – $676 per form
- 20% to 29% – $1,270 per form
- 30% to 39% – $1,747 per form
- 40% to 49% – $2,225 per form
- 50% to 100% – $2,701 per form
Here’s the bad news; most employers don’t know whether their I-9 forms are completed correctly. The double dog worse news is that national estimates of employer I-9 error rates are approximately 75% to 85%. However, my decades of experience reviewing I-9 forms have consistently shown error rates of more than 95%. The triple dog worse news is that the civil money penalties can be catastrophic. Using the Snarky Inc. I-9 forms and the range of error rates above as an example – all of which would be charged at the maximum of $2,701 – the penalties for forms containing as little as one error are as follows:
- 75% error rate (150 forms x $2,701) = $405,150
- 85% error rate (170 forms x $2,701) = $459,170
- 95% error rate (190 forms x $2,701) = $513,190
Now, the quadruple dog worse news, [as if a half-million dollars in fines isn’t the worst thing…and STOP with the double, triple, quadruple dog thing!] these penalties can be “enhanced” up to 25%. Enhancements for “aggravating” factors include the business size (5%), bad faith (5%), seriousness of the errors (5%), presence of unauthorized workers (5%), and the employer’s negative history with the agency (5%). However, in the name of full and fair disclosure, the agent in charge may also reduce the penalty amount using the same factors. These so-called “mitigating” factors are also calculated in five percent (5%) increments.
With the potential for financially devastating penalties only a random I-9 audit away, there’s no better time for us to review and help correct your I-9 forms. I promise it won’t cost anywhere near $2,701 – or even $272 – per form! Please email us at email@example.com for more information or to get started.
Fair Labor Standards Act – Overtime Rules
In May, the federal Department of Labor’s (“DOL”) Wage and Hour Division (“WHD”) is expected to release a long-awaited Notice of Proposed Rulemaking (“NPRM”) related to federal overtime regulations. The NPRM will (finally) provide official public notice of the WHD’s proposed increase to the FLSA’s minimum salary threshold for the white-collar – executive, administrative, and professional – exemptions.
The Biden administration has made clear that it believes the current salary threshold – set during the Trump administration at $684/week ($35,568 annualized) – is too low. Similarly, in a December 2021 letter to the Secretary of Labor, more than 100 worker advocacy groups called for more people to be eligible for overtime. According to the letter, these groups want a threshold “substantially higher than” the $913/week ($47,476 annualized) “proposed during the Obama administration.” Long-time readers may remember that a federal judge blocked the implementation of the higher threshold, declaring the rule unlawful.
Although the details are still unknown, experts have opined what they expect when the NPRM is finally issued. Many expect the WHD to propose increasing the weekly salary threshold to somewhere between $900 to $1,000 ($46,800 to $52,000 annualized). There is also talk of the WHD proposing additional changes to the overtime rules, including revisions to the “duties tests,” the addition of automatic increases to the salary threshold, and a boost to the minimum salary for the “highly compensated employee” exemption.
My educated guess is that a threshold increase beyond about $769/week ($40,000 annualized) will likely cause business groups, like the U.S. Chamber of Commerce, to challenge the move in federal court.
Fair Labor Standards Act – Overtime Rules, Part Two
The DOL isn’t alone in its attempt to modify the FLSA overtime rules. For example, Senator Sherrod Brown (D-OH) recently reintroduced the Restoring Overtime Pay Act. This bill, co-sponsored by Senators Chuck Schumer (D-NY), Bernie Sanders (I-VT), and more than a dozen others, and its companion in the House of Representatives (“House”), calls for increases to the FLSA’s minimum salary threshold (annualized) as follows:
- $45,000 – on the effective date of the Act;
- $55,000 – January 1, 2024;
- $65,000 – January 1, 2025;
- $75,000 – January 1, 2026; and
- Annual increases based on market data.
In addition, the Congressional Progressive Caucus (“CPC”) is preparing to present an executive action agenda to President Biden, which includes increasing overtime eligibility for workers. This follows a letter the CPC sent to the Labor Secretary last summer, calling for an increase to the annualized salary threshold from the current $35,568 to $82,732. [Wait, what? That’s a 233% increase!] While, as discussed above, the DOL is expected to publish its NPRM next month, I don’t see any possibility of it following the CPC’s recommendation of an almost 233% increase to a salary threshold of $82,732.
But Wait, There’s More!
After co-sponsoring the House’s version of the Restoring Overtime Pay Act, Congressman Mark Takano (D-CA) recently reintroduced the Thirty-Two-Hour Workweek Act. [Great! I could work less and get paid more!] This bill would make significant amendments to the FLSA:
- Change the statutory definition of a workweek from 40 hours to 32 hours. As a result, employers would be required to pay overtime to nonexempt employees for all time worked over 32 hours in a workweek. [Wait, are you serious? Where do I sign up?!]
- Add an overtime pay requirement when nonexempt employees work more than eight hours in a workday. Four states – Alaska, Colorado, Nevada, and Rep. Takano’s home state of CA – currently have daily overtime requirements. The bill’s authors appear to have based this section on the most generous of the four, CA. According to the bill, an employer must pay employees daily overtime as follows:
a. One-and-one-half (1½) times the employee’s regular hourly rate of pay for all time worked in excess of eight (8) hours in a workday; and
b. Two (2) times the employee’s regular hourly rate of pay for all time worked in excess of twelve (12) hours in a workday.
The Thirty-Two-Hour Workweek Act likely has little chance of passage during the 118th Congress. However, employers – especially small business employers – should hear the message loud and clear; there is a formidable progressive movement to fundamentally change the FLSA and drastically increase the number of employees eligible for overtime.
There are also like-minded efforts at the state level. In NY – outside NY City, Long Island, and Westchester County – the 2023 minimum salary for the executive and administrative exemptions increased to $1,064.25/week ($55,341 annualized). The minimum salary in the greater NY City area remained $1,125/week ($58,500 annualized). The salary threshold in CA is $5,373.33/month ($64,480 annualized). Maine’s minimum salary is $796.17/week ($41,401 annualized), with Colorado’s salary threshold at $961.54 ($50,000 annualized). Finally, WA State is the winner at $1,259.20/week ($65,478.40 annualized) for “large” employers. However, it is worth noting that the state’s “small” business salary threshold is a mere $1,101.80 (57,293.60 annualized).
Maybe I’m getting old [Maybe…getting? No, you’re definitely already old.], but doesn’t it seem that compliance with the myriad of local, state, and federal employment laws has never been more challenging? That’s why my team and I spend the untold hours necessary to keep up with new and changing employment laws and regulations at every level.
Please email us at firstname.lastname@example.org for more information on I-9s, questions about salary thresholds and overtime exemptions, or any other HR compliance-related topic. Remember, when you only have one chance to get it right, you need HR Compliance Experts. [Very punny. I’ll bet you made that one up.]
If you have questions about compliance with local, state, and federal regulations and mandates, or want information on any of the services HR Compliance Experts offers, call us at 585-565-3900 or email HRAnswers@hrcexperts.com.
Posted by Frank Cania, president of HR Compliance Experts LLC.
© 2023 HR Compliance Experts LLC
Disclaimer: This content is for informational purposes only, does not constitute a legal opinion, and is not legal advice. The facts of each situation should be considered and analyzed individually. Therefore, you should always consult with competent employment counsel regarding any issues discussed here.
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