Coyote Blog

Earlier today I posted that:

People often think of the minimum wage as a restriction on employers — that they cannot pay less than a certain number for a job.  But it is also equally a restriction on job seekers — my son cannot legally offer to take a job for less than $7.25, even though he would probably gladly do so.  For teenagers, just gaining the experience of working and building basic skills (like showing up on time, following procedures, interacting with customers and fellow employees) has enormous value, such that even a nominal payment of a few dollars an hour would more than compensate him for his labor.

Ann Althouse has found the Fair Labor Standards Act (FLSA), which contains the minimum wage, also can lead to restrictions on employee behavior:

Everyone at The University of Wisconsin will have their pay cut by about 3% and will be “furloughed”—told they do not have to work—for a corresponding period of time. But it turns out that we not only don’t have to work, we are being told we cannot work. The guidelines ban any kind of work during furloughs, anywhere. This means that even if you are at home you are not supposed to read professional material, get and send emails, make calls, use a smart phone, etc. Employees who violate the work ban can be disciplined.

She goes on to describe her voyage of discovery as to why so irrational-sounding a policy might exist, but I alredy knew.  To furlough exempt (meaning exempt from hourly bookkeeping) workers, they must become non-exempt.  And non-exempt workers have to be paid for time worked, even if the time worked was not ordered by the employer and even if the time worked was against the wishes of the employer.

We face this situation all the time.  We have hourly workers in campgrounds.  Unlike in a factory (for which the FLSA was written and where there are fairly strict controls on how people work), my campground workers have a lot of leeway to set their own schedule and determine their work patterns.   But I have to set very clear guidelines – “at the end of the day you have to get x and y and z  done and you are not authorized to work more than t hours doing it.”

But we nearly always have folks who want to go do whatever they want to do.  I had an employee who loved to arrange river rocks around camp sites as borders after he had finished his other work.  His work looked really nice.  But I could not afford to pay him to arrange river rocks around camp sites.  His manager told him to stop.  He kept doing it.  You know what?  I still had to pay him for his time to arrange river rocks, despite the fact the company had specifically told him not to and despite the fact that this time exceeded the guidelines I gave him  (once his work exceeds X hours, he has to get management permission to work more in a certain time period).  In fact, the only way I eventually was able to stop paying him to arrange river rocks at work was to fire him.

Megan McArdle has a good post and excerpts from Adam Shepard, who set out with $25 to see how hard it was to escape from poverty.  I won’t re-quote that post here, you should see her site, but I wanted to comment on one thing Shepard says about his early days trying to convince supervisors they should hire a homeless guy:

So, he gave me the secret. To paraphrase, he told me to go to these
managers and tell them who you are, that you are the greatest worker on
the planet and that it would be a mistake not to hire you. If they take
you on, great. If not, move on down the line. By day’s end, you’re
gonna have a job.

So I did. The next day, I went to see Curtis at Fast Company, a
moving company where I’d already applied. “Curt!” I said. “I’m Adam
Shepard, and I’m the greatest mover on the planet. It would be a
mistake for you not to hire me.” He looked at me across the table and
smiled, knowing I was lying like hell to him. But he liked my attitude
– especially after I offered to work a day for free – so he hired me on
the spot.

This is very normal — if you want someone to take a risk, you try to reduce the cost for him.  Not sure you want to try our product?  We’ll give you a free sample.  In this case, he agreed to work for free to convince the manager he was a good worker.  This makes sense — to emerge from homelessness and to get a job with no skills and no work history, one needs to be willing to give a bit of a discount on your labor, at least at first, to get someone to give you a chance.

But here is the interesting part — the arrangement Curtis and Adam Shepard made is ILLEGAL.  The Fair Labor Standards Act, which includes Federal minimum wage law, does not allow Curtis to accept unpaid labor and does not even allow Mr. Shepard to offer it.  The fact that the deal makes so much sense and it so clearly is in the mutual best interest of both parties is absolutely irrelevant under the law.  Fast Company could be busted, should the DOL choose to focus its attention their way.

When people argue that the minimum wage is most harmful to the poor, because it prices the first rung of the labor ladder beyond what their minimal skills can justify, this is what they mean.

Today, Kevin Drum quotes Obsidian Wings as saying:

The men in my family of my father’s generation returned home after serving
their country and got jobs in the local steel mills, as had their fathers and
their grandfathers. In exchange for their brawn, sweat, and expertise, the steel
mills promised these men certain benefits. In exchange for Social Security taxes
withheld from their already modest paychecks, the government promised these men
certain benefits as well.

….These were church-attending, flag-waving, football-loving, honest family
men. They are rightfully proud of providing homes and educations for their
children and instilling the sorts of values and manners that serve them well as
adults. And if I have to move heaven and earth, now that they’ve retired, the
Republican party is NOT going to redefine them as welfare
recipients.

First, I agree, whether I like the program or not, that people who contributed for years and were promised certain benefits should receive them.  The benefits the average retiree gets today were certainly paid for – in fact, over-paid-for given the implied rate of return they got for their forced "savings".  So I won’t argue that these retirees are getting financial welfare.

BUT, I would argue that they are getting intellectual welfare.  Advocates for keeping forced savings programs like Social Security in place as-is by necesity argue that the average American is too stupid, too short-sighted, and/or too lazy to save for retirement without the government forcing them.  Basically the argument is that we are smarter than you, and we are going to take control of aspects of your life that we think we can manage better than you can.  You are too stupid to save for retirement, too stupid to stop eating fatty foods, too stupid to wear a seat belt, and/or too stupid to accept employment on the right terms — so we will take control of these decisions for you, whether you like it or not.  For lack of a better word, I call this intellectual welfare. 

By the way, this is as good an answer as any to Mr. Drum’s earlier question why liberals don’t push the privacy issue harder.  He opines:

Whenever I talk about the underlying principles that should guide liberals, as
I did a couple of days ago, one of the ideas that always pops up is privacy
rights. In fact, it comes up so often that it strikes me that we’re missing a
bet by not making a bigger deal out of it.

I am all for a general and strong privacy right.  I would love to see it Constitutionally enshrined.  But liberals (like conservatives, but I am answering Drum’s question) don’t want it.  They want to allow women to choose abortions, but not choose breast implants.  They want the government to allow marijuana use but squelch fatty foods.  They don’t want police checking for terrorists but do want them checking for people not wearing their seat belts.  They want freedom of speech, until it criticizes groups to whom they are sympathetic.  They want to allow topless dancers but regulate the hell out of how much they make.  Liberals, in sum, are at least as bad about wanting to control private, non-coerced individual decision-making as conservatives — they just want to control other aspects of our lives than do conservatives. 

A true privacy right would allow us complete freedom over who we sleep with, what we do with our bodies, where we work, and what we pay for goods.  And, not incidentally, how we choose to invest for our retirement.  Both parties want the government to control parts of our lives, so don’t expect either conservatices or liberals to be pushing the privacy issue very hard.

Update:  William Mellor of the Institute of Justice has some thoughts related to this topic in The American Lawyer:

Without realizing it, liberals and conservatives are
working from opposite ends of the political spectrum, under opposing
rationales, to reach the same end: expanded government power…

The Framers envisioned a system in which individuals enjoyed
rights equally, and the rights they enjoyed were treated with equal
respect under the Constitution. But in 1938 the U.S. Supreme Court’s
ruling in United States v. Carolene Products Co. (upholding a
Congressional ban on interstate shipment of milk that contained added
fat or oil) created an artificial dichotomy under the Constitution.
Some rights, notably free speech, were elevated to a preferred tier and
now rightly receive vigorous constitutional protection. Rights demoted
to the second tier, specifically economic liberty and property rights,
wrongly receive far less protection….

Liberals, however, tend to reject the notion that the courts
have any role in seriously protecting economic liberty or property
rights. This is remarkable in light of the fact that many liberals
strongly advocate court protection for various rights-such as welfare
or abortion-whose constitutional pedigree is far more questionable than
rights to private property and economic liberties.

Yesterday I mentioned employment at will in this post about police officers who were fired for assaulting a handcuffed man and who successfully sued for wrongful termination.

Via George’s Employment Blawg comes this article on employment at will and things a small business should consider to reduce the possibility that fired employees will sue:

Here’s where things get tricky. In between employment at will and the law is a whole mess of claims, counterclaims, lawsuits, disputations and confusion. It’s enough to make anybody scratch their head.

We have had several instances where employees have threatened legal action over termination.  I have observed at least three reasons for this:

• Employees sometimes have a skewed view of the termination process, thinking that a company must hold to some kind of courtroom "beyond a reasonable doubt" standard in amassing reasons for termination.
• The most inept employees never seem to know that they are inept
• Some employees are far more adept at working the system than they are at their jobs.

We do several things to help make things go smoother:

• Unless the violation was outrageous, where we fire on the spot, we try to give employees written warnings and coaching before they get terminated
• Every new employee signs a 60/90 day probationary period letter.  If there are problems, they almost always occur in the probation period — ie they turn up quickly — and the probationary period gives us more leeway to quickly terminate.  Update:  This article says why this policy can be a mistake, or at least you have to be careful with it.  This is less of a problem for us since most of our employees only work a 5 month season anyway.
• We don’t give references.  I have said that this makes me feel guilty, but negative references about fired employees are a big source of litigation, and frankly, I am sorry to admit, the treat of wrongful termination suit is greatly reduced if the ex-employee finds a good job somewhere else.  Kind of the business version of hot potato.
• Being a seasonal business saves us.  For many employee problems, we limp along until the end of the season when we can terminate the person for lack of work, then we make sure not to rehire them in the spring.

Update: Via Overlawyered, this story in the New York Post (gotta love the headlines) about a teacher fired 17 years ago and still filing suits:

But the Clifton, N.J., instructor never got over it. Instead, he has filed 15 lawsuits in Manhattan federal court and three others in Brooklyn and New Jersey courts, seeking reinstatement and millions of dollars in damages.

Each lawsuit has been tossed out as meritless. But a defiant Malley hasn’t gotten the message or doesn’t care.

As with any labor law or legal liability issue, there are probably more ways to trip up than you ever imagined.  This article at Faegre.com, which I found via George’s Employment Blawg, has a nice summary of key issues in five categories.

Because the vast majority of our employees are over 70, and a number of them have disabilities, we have to be very careful in hiring.  Many of our jobs can be physically challenging, and dangerous to perform with some disabilities, so we have to take care to make sure an employee understands the work and that we mutually agree they can do it safely. 

One related area that I am not sure has been tested regards our corporate insurers.  Increasingly, insurers, particularly for our corporate vehicle policies, are refusing to insure over-70 drivers without some kind of letter from a doctor that they are capable of driving safely.  As you can imagine, doctors face liability if they put in writing the employee can drive safely (so the doctor might be liable if there is an accident) or if they write that the employee can’t drive safely (so the doctor might be liable for effectively denying the employee insurance, or even a job).  As a  result, doctors are reluctant to produce such letters. 

It has not come up yet, but what happens if one of my employees is uninsurable for driving, and driving the company vehicle is an essential part of their job?  Do I face an ADA case for discharging them?  What choice would I have in that case?

We also have very severe challenges with off-duty behavior.  Most all of our employees live on the job site (i.e. the campground managers live in the campground).  So, off-duty behavior occurs on the job site.  Until I had this company, I always said that I did not care what an employee did on her own hours at home – but now, what happens on the employee’s own time occurs in front of my customers.

We continue to walk a fine line on this.  To date, we have told employees that even if they are not on the clock, if they are wearing our uniform or verbally representing themself as a company employee, they are subject to on-the-job behavior rules.  Once the uniform is off and they are just "Joe", and not "the manager", they are free to do as they please, though they are still bound both by federal and state laws as well as campground rules. 

Well, just when you think you have seen every way to screw up in a small business, there comes this story.

The owner of a shaved ice business was arrested after two employees claimed he spanked them for making mistakes at work.

And more…

One of the women told police that on her first day at the Tasty Flavors Sno Biz, Levengood made her sign a statement that said: "I give Gene permission to bust my behind any way he sees fit."

Hat tip to Jim Rome, as I first heard this on his radio show, and to the Mises Institute, of all places, where I found the link.  This story has been out and about for a while, but I wanted to give it a few days to make sure it was not a hoax.

To make this more bizarre, I did a Google search to see if anyone had called this out as a hoax, and found that there have been many similar stories in other places, including here and here.

Just added George’s Employment Blawg to my blogroll. As a small business, the biggest shock has been dealing with employment related issues (working for large corporations, this stuff was all invisible to the average general manager – huge departments of HR people just sortof took care of it).

I like what I have seen of this site, and its got some other useful links in the blog roll. It is written from the perspective of the employer (which is actually unusual for labor law sites – most are run by lawyers who represent workers and are mostly instruction manuals on extracting more money from businesses).

As background, state unemployment offices generally give employers a chance to dispute new unemployment claims from ex-employees. In most states, if the employee voluntarily quit or was fired for cause, they are either not eligible or at least the employers experience account is not hit (for each employer, the state keeps a running tally of claims paid to their employees – if the sum is high enough in a given year, the employers rates go up for the next year).

This is all in theory. I don’t know what other employer’s experiences are, but I almost NEVER win one of these disputes. Most unemployment offices are stacked with people who’s bias is always toward the employee. For example, in a recent case, I had documented evidence that an employee was fired for physically attacking a customer! The state unemployment office denied my protest as not sufficient, and to this day I am paying that person’s unemployment. Today, I got notice that California had denied my most recent protest. I had sent evidence that an employee was repeatedly warned and eventually fired for constantly being late – day after day an hour or more late for weeks. Nope, not good enough says California. So, instead of paying this person for showing up late, I am paying them, via the unemployment system, for not showing up at all.

Does anyone know if there are any tricks or techniques to be more successful at this?

This is part 3 in a series of my real-world experience in dealing with the Department of Labor (DOL). If you have not already, you should also check out part 1 and part 2 for background.

In this post, I will show you how we defended ourselves in a case where the DOL was extremely reluctant to grant us a legal exemption to the Fair Labor Standards Act (FLSA). It is highly unlikely that this exemption is relevant to you – it is narrowly directed at seasonal recreation businesses, but I think the process and what we learned from it may help you out in your own interactions with the DOL.

Continue reading ‘Working with the Department of Labor: Part 3’ »

In part 1, we discussed general expectations you should have as a business owner in working with the Department of Labor. In this installment, I will discuss a typical audit and some of the things we did to protect ourselves. In part 3, I will discuss a specific example of how it is possible to win your case with the DOL, but it may take a LOT of effort.

Continue reading ‘Working with the Department of Labor: Part 2’ »

Note that this is part 1 of a three-part series. Here are part 2 and part3.

Over the past several years, we have been audited a couple of times by the Department of Labor (DOL). One of the audits was standard procedure (as a concessionaire to the US Forest Service, audits are sometimes required on certain contracts) and one was based on employee complaints. It never ceases to amaze me that some folks never even bother to call our HQ to complain and try to get it paycheck mistakes fixed — they go straight to the government rather than our labor department if something looks wrong on their check.

Many times I have heard other small business owners say that the DOL is not “fair”. If you were to ask me if I think they are fair, I would answer “yes” and “no”. If you want to know if DOL employees are generally honest, well-intentioned, and law-abiding, my experience is that they are. However, if you expect, as a business owner, that the DOL will act as some kind of neutral court of law, in which you and your workers have equal status and equal rules of evidence, then you are in for a surprise. The DOL is not on the employers side and doesn’t really pretend to be.

This should not come as a surprise to you. Young lawyers out of school generally don’t seek out lower government pay scales with a vision of helping businesses manage their cost structures. They join the DOL because they are interested in defending downtrodden workers against rapacious capitalists who seek to exploit them (etc. etc.) The main mission of the DOL is to enforce labor laws like the Fair Labor Standards Act (FLSA). However, overlaying this mission is a strong institutional culture that mission 1A is to defend workers against employers. This culture will have a number of implications in any dealings you, as an owner or employer, have with the DOL:

1. Workers claims will almost always be believed by the DOL, and the DOL will generally not require much documentary evidence to back up workers claims. The flip side of this is that employers claims that contradict workers will always require extensive documentary evidence. For example, we had several weeks of time sheets burn up in an office fire. In cases like this, the DOL will generally always side with the worker’s recollection of time worked rather than the employers, even if the time claimed is completely inconsistent with hours worked in all other documented weeks. The burden of proof, in almost any dispute, will be on the employer.

2. The DOL’s first answer to any employer’s claims of an exemption under FLSA or other labor laws will be “NO”. Congress has granted a number of exemptions to labor laws for certain business situations. For example, one that applies to our business in some cases is the FLSA has relaxed standards for overtime for “seasonal recreation businesses”. From my experience, the DOL hates to admit that these exceptions apply to your particular situation. Back to the fairness point, they CAN be convinced, but sometimes it takes a lot of work to do so. In part 2 and part 3 of this series, I will give more specific examples of how to do this.

3. The DOL will never point out to you an exemption or saving that you are missing. I know that many people get frustrated with the IRS, but I have actually had experiences where the IRS found a mistake where I had overpaid. I have never had this experience with the DOL. The DOL does not really have very good staff or tools to help employers comply with the law in the most efficient manner. They have LOTS of tools and people dedicated to making sure workers get every bit of what the law guarantees them.

If you recognize this culture and context, and put any frustration that you might have as a tax-paying citizen and business owner aside, you can get a fair shake from the DOL. You just have to be prepared in advance to argue your case and bring lots of evidence to bear. And, if worst comes to worse, and you are willing to pay the attorney fees, you can always refuse the DOL’s finding and take the case to a court of law, where there are much more neutral evidence standards.

The next part of this series will discuss further some examples and lessons learned in making your case to the DOL. Part 3 of the series will include a specific example.

Note: These are my observations as a business owner and are not specific recommendations. I am not a lawyer, and, even if I were, I am not your lawyer.