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You don’t have to spend a lot to make a big difference in your workplace. Many of the ideas below show how effective HR can be by simply helping employees relax, connect and enjoy each other’s company. And the end result….happy people are productive people.
1. Give Employees a Voice
For some companies, boosting morale and encouraging teamwork are orchestrated parts of a specific plan to give back to the community. Other companies simply gather volunteers and go for it—they hold events with the primary aim of letting employees have fun and enjoy each other’s company.
Employees at one company volunteer to serve on an engagement committee. In the past, they have proposed a variety of events, including collecting food for local charities, decorating the lobby for holidays and holding a Halloween costume contest.
Don’t let managers do the event planning. Let employees make the decisions as that helps them feel listened to.
Employees at this organization have been receptive and this has even had a positive impact on their clients. These events have reduced employee turnover to 22 percent from 36 percent in six months.
2. Encourage Friendly Competition
They’re energetic employees, and sometimes they need to blow off steam. So why not have a tug-of-war?
That’s what Symplicity Corp. in Arlington, Va., invites its employees to do periodically throughout the year.
About 30 employees gather in the parking lot, and the tug begins. They pull, they huff, they puff. Or they collapse in laughter. The game is a great diversion and has been a hit with employees.
Symplicity’s tug-of-war isn’t competitive. (Well, maybe a little bit.) Nor is it expensive: The thick, braided rope cost $70, she says, and has been re-used numerous times.
Other inexpensive events include:
Employees also are invited to movie nights, live music events and camp-outs.
The events are orchestrated by Symplicity’s “party people group,” about eight to 10 volunteers who get together each February to brainstorm events for the year.
3. Promote Healthy Living
A San Diego hotel group relayed the importance of healthy eating to its housekeeping staff by providing nutritious snacks, including apples, frozen fruit trays, salad and healthy burritos every Friday.
The hotel partnered with a community program, Live Well @ Work, to teach about nutrition in fun, positive ways.
The hotels arranged to help employees understand the ins-and-outs of nutrition labels and demonstrated, for example, how much sugar is in a bottle of soda. The organization tapped community groups and the American Red Cross to provide free recipe books and pedometers. The hotels also scheduled occasional exercise sessions for some pre-work stretches.
“Fruit Fridays” has proven to be an extremely successful program and very low-cost. Not only has it helped increase employee engagement but has definitely improved morale and provided a short break from the normal day.
4. Get Employees Moving
Talk about throwbacks. Scranton Gillette Communications runs a Tour de France tricycle race for employees. No, that’s not a typo. Tricycle race.
For the past two summers, the company’s HR department has rounded up donated tricycles and scheduled a fairly slow “race” around the office parking lot.
As employees tackle each 50-yard race to make it to the next round of competition, their colleagues staff hydration stations. To top it off, the winners take home small trophies.
The company is big into fitness programs and cheerleads for other events, too. It runs a summer challenge encouraging employees to count their steps. HR team members keep a spreadsheet to log their steps over a four-week period. Prizes are given for the most overall steps, the most improved participant and the first to reach a personal milestone, such as 50 or 75 miles.
Their HR team also sponsors a “stairmageddon,” calling on its 130 employees to count the number of stairs they climb in a day. The person who takes the most flights wins a gift card.
Other fun events include a mini-golf tournament (played in the office hallways), a Wiffle ball home run derby (scheduled to coincide with the start of baseball season), and a paper airplane contest which has employees launching their creations into an atrium from the second floor.
It’s not all about fitness, though. Employee appreciation is also shown on Strawberry Shortcake Day and Root Beer Float Day with low-cost (if not low-calorie) treats.
Employees also enjoy no-cost activities such as designated days to wear their favorite sports team jerseys.
Each employee who participates receives a raffle ticket. At the end of the month, one employee wins a $20 gift card and is featured in the next employee newsletter.
5. Communicate Clear Goals
Games and fun events can do more than just bring people together.
One of the most important things a company can do is let employees know what’s expected of them. But that wasn’t happening at Hi-Grade Welding and Manufacturing in Schaumburg, Ill. So the HR team sought ways to improve communication between managers and the company’s 116 employees.
Changes began with the purchase of two $500 televisions, one for the shop floor and another for the lobby. Each department’s goals are displayed on the TV screens, along with numbers reflecting the amount of rejected products. The quality of work has improved (and the amount of rejected products has been reduced) since the statistics have been shared openly. That simple change helped motivate and engage employees in a friendly competition with other departments to improve quality, she adds.
6. Help the Community
One of Symplicity’s most popular events is a program coordinated by the company that enables employees to volunteer at a local food kitchen.
Employees also take paid time off from work to read to children and participate in Earth Day cleanups.
7. Say Thank You
Two years ago, Jennifer, an HR assistant manager at Enertech Global LLC in Mitchell, S.D., was looking for a way to recognize the company’s 116 employees.
She glued a penny to a piece of card stock and added the words, “Just like finding a penny is good luck, we are lucky to have YOU. Thank you for everything you do every day.” As an extra touch, the plant manager signed each card.
There are people that have theirs hanging up which proves that at the end of the day, we all just want to feel wanted and appreciated.
That’s why the HR team at Clarus tries to do something special when employees are working on major projects and under a lot of stress. The HR professionals hand out small gifts along with notes expressing their thanks.
The gestures help maintain morale and let “employees know we appreciate all they’re doing for us.”
The HR team also tries to introduce a little levity into their messages to lighten the workers’ mental load. In the past, employees have received a bag of microwave popcorn with a note: “Bursting with excitement you’re on our team!” or a Mounds candy bar with the message: “Thank you for the mounds of work you’re doing!”
Other small gifts to show gratitude include:
When the company wants to commend employees for a specific effort, they place messages on an employee’s desk before they start the workday. The surprise gesture helps them start their day off on a positive note.
Seasonal office parties, complete with decorations and costumes, can be a great opportunity for employee engagement, communication, team building and simply having fun with co-workers.
However, we should recognize that things can go awry and people may have other concerns that will need to be addressed. Not all employees want to participate in decorating the office, wearing a costume or attending a party, or want to deal with decorations, costumes and behaviors that are inappropriate.
As leaders, we need to maintain professionalism in the office, even during Halloween. Workplace rules and dress code policies still need to be enforced. Here are some tips to communicate the organization’s expectations and hold everyone accountable.
The Departments of the Treasury, Labor, and Health and Human Services (the Departments) released information regarding the individual coverage HRA (ICHRA) notice requirements earlier this year.
The notice, which must be sent to all eligible employees 90 days before the benefit is offered, is primarily intended to inform eligible employees of how the ICHRA affects premium tax credits. This information will help employees make an informed decision on whether to participate in the ICHRA or opt out. It also notifies employees that a benefit is being offered and what they can expect from the ICHRA.
This highlights everything your ICHRA notice needs to include so that you’re offering the benefit in a compliant way.
When offering an ICHRA an employer must provide a notice including the following:
Note: Per the Departments, for ERISA-covered plans, other disclosure requirements may require participants to be provided with a reasonable opportunity to become informed of their rights and obligations under the ICHRA.
For new ICHRAs, including those starting January 1, 2020, businesses must adhere to a 90-day notice requirement. That means that 90 days before the ICHRA’s start date, they must send employees a notice including each of the components above and notifying them of their eligibility for the benefit. For a plan starting on January 1, 2020, businesses must provide notice to employees on or before October 3, 2019.
The 90-day notice must provided every year your business chooses to offer the ICHRA.
For newly eligible employees (newly hired employees or employees who gain eligibility after the initial start of the plan year), the timing is different. Your business can provide the notice up until the first day the employee’s ICHRA coverage begins. It’s best to provide notice as soon as possible, so the employee has ample time to review coverage options and enroll in a plan.
The Departments have provided a model notice that employers can use as a template for their notice. It’s not required that you use the model, but the Departments have advised use of the model is sufficient for good faith compliance of the requirements as long as it’s provided within the correct time frame. Whether you use the model or not, be sure to include each of the requirements listed above and send the notice within the 90-day notice period.
Prior to each year’s Medicare Part D annual enrollment period, plan sponsors that offer prescription drug coverage must provide notices of creditable or noncreditable coverage to Medicare-eligible individuals.
The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the federal Centers for Medicare & Medicaid Services (CMS) model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 15, 2019.
Group health plan sponsors that provide prescription drug coverage to Medicare Part D-eligible individuals must also disclose annually to the CMS—generally, by March 1—whether the coverage is creditable or noncreditable. The disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to disclose annually to individuals eligible for Medicare Part D whether the plan’s coverage is “creditable” or “noncreditable.” Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare’s standard Part D coverage and noncreditable when it does not provide, on average, as much coverage as Medicare’s standard Part D plan. The CMS has provided a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.
Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period. Individuals who do not enroll in Medicare Part D during their initial enrollment period (IEP), and who subsequently go at least 63 consecutive days without creditable coverage (e.g., they dropped their creditable coverage or have non-creditable coverage) generally will pay higher premiums if they enroll in a Medicare drug plan at a later date.
Who Gets the Notices?
Notices must be provided to all Part D eligible individuals who are covered under, or eligible for, the employer’s prescription drug plan—regardless of whether the coverage is primary or secondary to Medicare Part D. “Part D eligible individuals” are generally age 65 and older or under age 65 and disabled, and include active employees and their dependents, COBRA participants and their dependents, and retirees and their dependents.
Because the notices advise plan participants whether their prescription drug coverage is creditable or noncreditable, no notice is required when prescription drug coverage is not offered.
Also, employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to individuals who are eligible for the EGWP.
The Medicare Part D annual enrollment period runs from Oct. 15 to Dec. 7. Each year, before the enrollment period begins (i.e., by Oct. 14), plan sponsors must notify Part D eligible individuals whether their prescription drug coverage is creditable or non-creditable. The Oct. 14 deadline applies to insured and self-funded plans, regardless of plan size, employer size or grandfathered status
Part D eligible individuals must be given notices of the creditable or non-creditable status of their prescription drug coverage:
According to CMS, the requirement to provide the notice prior to an individual’s IEP will also be satisfied as long as the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period.
Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website. Plan sponsors that choose not to use the model disclosure notices must provide notices that meet prescribed content standards.
Notices of creditable/non-creditable coverage may be included in annual enrollment materials, sent in separate mailings or delivered electronically. Plan sponsors may provide electronic notice to plan participants who have regular work-related computer access to the sponsor’s electronic information system. However, plan sponsors that use this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.
Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor’s electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent. Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure. In addition to emailing the notice to the individual, the sponsor must also post the notice (if not personalized) on its website.
Plan sponsors that offer prescription drug coverage will have to determine whether their drug plan’s coverage satisfies CMS’s creditable coverage standard and provide appropriate creditable/noncreditable coverage disclosures to Medicare-eligible individuals no later than Oct. 15, 2019.
The suspense is over – the Department of Labor announced yesterday the revised Overtime Rule, which will set the minimum salary threshold for the Fair Labor Standard Act’s white-collar exemptions at $684 per week, or $35,568 per year. The rule, which will expand overtime pay obligations to an estimated 1.3 million additional workers, will take effect on January 1, 2020. The big question is what do you need to know about this breaking news?
It seems an eternity ago when President Obama directed the U.S. Department of Labor (USDOL) to revise the regulations governing the outdated white-collar exemptions of the Fair Labor Standards Act (FLSA). The proposal eventually released by the USDOL would have radically altered the federal compensation rules. Most notably, the agency would have more than doubled the salary threshold and applied, essentially, a formula to update the amount every three years. This minimum threshold was set to become effective on December 1, 2016, and the “updating” would begin, ironically, on January 1, 2020.
But concerned states and business groups sought to block the rule from taking effect, and, at the last minute, a federal court issued a preliminary injunction preventing the rule from being implemented on a nationwide basis. Since the Texas court put the final nail in Overtime Rule 1.0’s coffin by striking down the rule once and for all in August 2017, employers have been patiently awaiting a revised rule.
Under the current administration, USDOL leadership indicated that it would no longer advocate for the $913 per week proposal but would instead undertake further rulemaking to determine what the salary level should be. In what seemed like a painstakingly long process, the agency held public forums, issued a request for information, and sought comments on a proposed rule that, like Overtime Rule 1.0, focused solely on the pay component but without completely overshadowing the duties tests. After all, the FLSA authorizes the agency to define and delimit the executive, administrative, and professional exemptions – not supplant them. Today, finally, all of the work culminated in the release of Overtime Rule 2.0.
After the drama surrounding the last-minute injunction blocking the 2016 proposal, it would be natural for employers to feel gun-shy about adjusting to these changes. After all, isn’t there a chance that another court will once again block these changes and put us in yet another state of limbo? While there is always a chance for litigation to unfold in such a way that it would impact the implementation of this rule, there are several reasons why you should be preparing as if this rule will go into effect as planned on January 1, 2020.
First, while there is no magic number for setting the salary threshold (that’s the whole point), there is something to be said for certainty. The new rule skirts some of the more problematic areas that existed with the first attempt at revisions. The $684 per week threshold will require the reclassification (or pay increases) of some employees, but a far less significant portion than would have seen increases had the $913-per-week proposal of three years ago was adopted.
Second, while the rule contains some of the same flaws as Overtime Rule 1.0, they generally are not the kinds of concerns that were previously raised in lawsuits. Employer advocates will have more difficulty taking the position that this particular threshold eclipses the duties tests. Likewise, while employee advocates might feel that the threshold is set at too low a level, meeting the pay component does not make someone exempt in and of itself, so this argument is more philosophic in nature and may not warrant the rule being blocked.
Finally, the USDOL must be well prepared at this point to defend the rule. Even aside from the litigation, it has received voluminous public feedback on an increase from $455 per week numerous times, including those shared in 2015, 2017, and 2018. So, while litigation seems inevitable, employers should not be idle in preparing for this rule to take effect.
As recounted above, the drama surrounding Overtime Rule 1.0 was a painfully long process for employers as they waited to see what might happen. The best practice, though, is to assume Overtime Rule 2.0 is the real thing. That said, you should not run out tomorrow and make immediate changes to your compensation structure. Instead, you should use this time to start evaluating not just whether changes will be necessary, but how best to make those changes (timing, communications, etc.).
If you made changes in 2016 in anticipation of the $913 per week threshold, you are certainly ahead of the curve. If you did some of the work but decided to wait to implement once the preliminary injunction was put in place, you also have a great head start. Nonetheless, in both cases, you must keep in mind that three years have passed and it is possible that an employee’s work has changed in the interim.
It is imperative to confirm your prior findings at least for any employee that might receive a salary increase to qualify for exempt status under Overtime Rule 2.0. No employee is automatically entitled to be treated as exempt; in contrast, increasing the salary for an employee that does not meet the duties tests can only make matters worse.
Right now, you should begin:
Health Reimbursement Arrangements (HRAs) are account-based health plans funded with employer contributions to reimburse eligible participants and dependents for medical expenses. Prior to the Affordable Care Act, HRAs were not uncommon.
After the ACA, however, HRAs – which were classified as group health plans (GHPs) – had to satisfy the ACA’s market reform requirements, such as the prohibition against annual limits. Thus, unless an HRA was integrated with a GHP, HRAs usually could not satisfy these requirements alone.
On June 13, the Departments of Treasury, Labor, and Health and Human Services issued final regulations regarding HRAs, which will be effective on January 1, 2020. The regulations discuss two types of HRAs: (1) the individual coverage HRA (ICHRA); and (2) the expected benefit HRA.
An ICHRA can satisfy GHP requirements by integrating the HRA with individual market coverage or Medicare. The expected benefit HRA permits an employee to obtain excepted benefits like dental, vision, or short-term limited-duration insurance with an HRA. This article will focus on ICHRAs.
In order to offer an ICHRA, employers must ensure that a number of requirements are satisfied. For example, all individuals covered by the HRA need to be enrolled in individual health insurance or Medicare. Additionally, before any reimbursements are made, the employer must substantiate such enrollment with documentation from a third party or the participant’s attestation. An attestation, however, must be disregarded, if the employer has actual knowledge that the individual is not enrolled in eligible coverage.
Additionally, HRA coverage must be offered uniformly on the same terms and conditions to all employees in the class. Classes will be discussed in more detail below, but the regulations permit an employer to increase the maximum benefit for (1) older participants if that increase applies to all similarly aged participants in that class, and (2) participants with more dependents.
Further, being covered by an ICHRA will make an individual ineligible for a Premium Tax Credit (PTC). For this reason, the regulations have numerous notice requirements. First, employers must provide notice to eligible ICHRA employees 90 days before the beginning of a plan year that their participation in the ICHRA will make them ineligible for a PTC. For newly eligible employees, the notice must be provided no later than the date they are first eligible to participate. Moreover, there must be an opt-out provision at least annually and upon termination.
The ICHRA regulations make it possible for employers to offer an HRA to a certain class of employees and a traditional GHP to another class. It is important to note that an employer may not offer the same class of employees the option of an ICHRA or a traditional GHP.
The regulations also provide strict rules regarding how to define classes. The classes must be of a minimum size based on the number of employees the employer has:
Additionally, the classes must be based on named classes in the regulations which are based on objective criteria:
The regulations also clarify that employers may still offer retiree-only HRAs and they will not be subject to the ICHRA rules.
Given that there is a notice requirement and that open enrollment for plans that begin January 1, 2020 will generally begin in the fall, employers that would like to implement an ICHRA would likely have to start making plan design decisions soon. Even though the concept of an HRA may be familiar to many employers, these new regulations are nuanced, and employers will likely need assistance to navigate them.
The federal government’s Form I-9, used by HR departments across the country to verify workers’ employment eligibility, is expiring at the end of this month.
The Department of Homeland Security (DHS) is expected to extend the current version of the form (marked 8/31/2019) without changes, although minor clarifications will be made to the form’s instructions. The agency has directed employers to continue using the current version of the form despite the expiration date until a revised version is available.
Here are three of the proposed revisions:
The U.S. Department of Labor (DOL) is suggesting changes to the forms employers commonly use to administer the Family and Medical Leave Act (FMLA). The DOL said its goal is to make the optional forms easier to understand, but some management attorneys worry doctors will be confused by the revisions.
The department is seeking comment on the proposed revisions through Oct. 4th. It noted that the proposed changes would include:
The proposed revisions are an improvement, but most still view the forms as lengthy. The increased reliance on check boxes would avoid the confusion that results when a health care provider filling out a medical certification has poor handwriting.
“Physicians do not like completing FMLA forms as a general rule,” said Scott Eldridge, an attorney with Miller Canfield in Lansing, Mich. “Employers should therefore welcome attempts to simplify the process for employees and their physicians.”
While health care providers often provide narrative responses to the questions on the current forms, the responses don’t always clearly indicate whether the health care provider thinks the employee has a serious health condition. This usually ends up with the the employer being left to surmise as to the doctor’s intent or go back for a clarification. The new check boxes would help minimize the need for clarification.
The presentation of questions on the existence of a serious health condition are an improvement as well.
The current forms ask if the patient was admitted for an overnight stay or when the patient was treated, whereas the proposed forms ask if the patient has been admitted or is expected to be admitted for an overnight stay and the days they were seen or will be seen. Under the current forms, the health care provider is not encouraged to explain future inpatient status or future treatment. Contemplation of future treatment is critical, since employees are required to report leave at least 30 days in advance when the need for leave is foreseeable.
The revised forms also capture information to support leaves taken for chronic conditions and permanent or long-term conditions, while the existing forms do not.
Incomplete certification forms often delay employers’ designating leave as FMLA. The proposed revisions would reduce follow-up by presenting the questions on intermittent leave in a more organized manner.
Current forms ask for the health care provider to estimate the hours the patient needs care and provide a somewhat confusing and misaligned template to record the frequency and duration. The proposed forms have a tidy template for use to complete the duration and frequency and instruct the health care provider to provide their best estimate.
The proposed revisions also note that some state or local laws may prohibit disclosure of the patient’s diagnosis. This note supports compliance with laws such as the California Family Rights Act and is helpful for employers using a single form to designate federal FMLA and state leave.
The proposed revisions do have some problems, according to Sarah Platt, an attorney with Ogletree Deakins in Milwaukee.
The layout of the proposed form to certify an employee’s serious health condition has check boxes that are likely to be missed, she said. “The new form would call for the health care provider to check a box on the left side of the form for the type of serious health condition at issue, and then also complete check boxes within each category,” she said.
“The forms seem to call for health care providers to make legal conclusions at issue, rather than merely answer questions,” she added. “I would not be surprised if we see health care providers checking boxes in multiple categories on the proposed certification forms.”
While follow-up on FMLA medical certification is common, that often is because a health care provider skips questions on the current forms or writes something vague, such as “unknown.” The new forms will not necessarily eliminate this problem.
The proposed medical certification forms organize the questions around the different definitions of a serious health condition. The existing forms gather the same information but do not include headings highlighting the different definitions.
Platt is concerned that with the proposed revisions, health care providers may answer questions that don’t apply to the circumstances involved in the leave request. “I think it would be helpful to at least have a check box for ‘yes’ or ‘no’ or ‘not applicable’ along the left margin for each section,” she said.
The forms the DOL has proposed updating are:
Since the IRS began enforcing the Affordable Care Act (ACA), it has been lenient in its enforcement of the penalties associated with the ACA particularly with regard to late and incorrect Forms 1094-C and 1095-C. This position appears to have changed with regard to the 2017 reporting season. Recently, a number of employers received a Notice 972CG from the IRS. The Notice 972CG proposes penalties under IRC section 6721 for late or incorrect filings. The focus of this is to explain the Notice 972CG and the basic steps employers who receive this letter should follow.
Typically, the employer received a Letter 5699 inquiring why the employer had not filed the Forms 1094-C and 1095-C for the 2017 reporting season. The reasons the employer had not filed timely have varied but most employers filed the Forms 1094-C and 1095-C with the IRS well past the original due date, but well within the parameters discussed in the Letter 5699. Afterwards, these employers reported they then received a Notice 972CG from the IRS.
The Notice proposes penalties under IRC section 6721 for each late Form 1095-C filed by the employer. For the 2017 tax year, the penalty for each section 6721 violation is $260 per return. Therefore, if an employer filed 200 Forms 1095-C late, the Notice 972CG has proposed a penalty of $52,000.
The proposed penalty amounts in the Notice can be smaller than $260 per return if the employer filed the return within 30 days of the original due date (March 31 if the Forms were filed electronically not factoring in the automatic extension). If an employer filed within 30 days of the original March 31 due date, the penalty is $50 per return. If the employer’s returns were filed after 30 days of the original due date but prior to August 1 of the year in which the Forms were due, the employer’s penalty will be $100 per return. Each of these scenarios is unlikely if the employer filed after receiving the Letter 5699 as the IRS did not send these Letters out by the August 1 cutoff to allow employers to mitigate the potential penalties under section 6721.
An employer has 45 days from the date on the notice to respond to the IRS. A business operating outside of the United State has 60 days to respond to the Notice 972CG. If an employer does not respond within this time frame, the IRS will send a bill for the amount of the proposed penalty. Therefore, a timely response to the Notice 972CG is mandatory if an employer wishes to abate or eliminate the proposed penalty.
An employer has three courses of action when responding to the Notice 972CG. First, the employer could agree with the proposed penalty. If an employer agrees with the proposed penalty, box (A) should be checked and the signature and date line below box (A) should be completed. Any employer selecting this option should follow the payment instructions provided in the Notice.
Alternatively, an employer can disagree in part with the Notice’s findings or an employer can disagree with all of the Notice’s findings. If an employer disagrees in part with the Notice, the employer will check box (B). If an employer disagrees entirely with the Notice, the employer will check box (C). If box (B) or (C) are checked, the employer will be required to submit a signed statement explaining why the employer disagrees with the Notice. An employer should include any supporting documents with the signed statement. Any employer who partially disagrees with the Notice should follow the payment instructions provided in the Notice.
An employer checking box (B) or (C) in its response will have to convince the IRS that the employer’s late filing (or incorrect filing) of the Forms 1094-C and 1095-C was due to a “reasonable cause.” The Code discusses what may constitute a “reasonable cause” in exhaustive regulations that must be reviewed thoroughly before any employer responds to a Notice 972CG with box (B) or (C) checked. For an employer to establish a “reasonable cause” the employer will have to establish “significant mitigating factors” or that the “failure arose from events beyond the filer’s control.” Furthermore, to prove “reasonable cause” the employer will have to show that it acted in a “responsible manner” both before and after the failure occurred. An employer should craft its response using the template roughly outlined in the IRS regulations and Publication 1586.
Any employer who receives a Notice 972CG must take action immediately. An employer should consult an attorney or tax professional familiar with its filing process and the pertinent rules, regulations, and publications. Moving forward, it is imperative that employers file the Forms 1094-C and 1095-C in a timely, accurate fashion.
Climate change may make our summers hotter, but the ICEman still cometh. Since late 2017, Immigration and Customs Enforcement (ICE) has significantly increased the number of Notices of Inspections issued to employers nationwide. This spike in I-9 audits has also resulted in an increase in assessed civil penalties and punitive fines to employers with non-compliant I-9s. While ICE audits and fines are on the rise, this article will walk you through options to assist with breaking the ICE and decreasing assessed fines.
What Employers Can Expect In 2019 Through The Election
If your business has not yet had an ICE I-9 Notice of Inspection, consider yourself lucky. However, if you think you are in the clear – think again. In the upcoming election year where politics will be dominated by immigration news, ICE will continue to punish employers for failures to complete I-9s properly and maintain a culture of immigration compliance. Driven by a “zero-tolerance” agenda, ICE will likely push for higher penalty amounts, and have less interest in coming to a reasonable settlement amount with most employers.
ICE assesses penalties after an employer receives a Notice of Inspection and ICE completes its I-9 audit; after that, an employer may receive a Notice of Intent to Fine (NIF). This document title speaks for itself – ICE intends to fine the company a dollar amount.
After receiving a NIF, you have two options: (1) request a hearing before the Office of Chief Administrative Hearing Officer (OCAHO); or (2) agree to pay the fine assessed by ICE. Below we will walk you through these two options and the financial impact each can have on your business.
How OCAHO Can Affect Penalty Amounts
OCAHO sits within the Executive Office of Immigration Review of the Department of Justice, where traditionally an Administrative Law Judge (ALJ) is assigned to adjudicate I-9 penalty hearings. The ALJ follows the same statutory regulations that ICE is required to follow, which includes the following five statutory factors to determine penalty amount: (1) the size of the employer’s business, (2) the employer’s good faith, (3) the seriousness of the violations, (4) whether or not the individual was an unauthorized alien, and (5) the employer’s history of previous violations.
Although the OCAHO ALJ and ICE follow the same five factors in determining penalty amount, the ALJ is not bound by ICE fine amounts. Instead, the ALJ has discretionary authority in considering a company’s financial situation when determining the fine amount. This flexible discretion can impact fine amounts dramatically.
ICE “Fine Matrix” Calculating Penalty Amounts
ICE follows a “fine matrix” – entirely an ICE invention and a ridged matrix tying base fine amounts to the violation percentage. The violation percentage is broken into six levels, with the highest base fine amount when a company’s violation percentage reaches 50 percent (meaning 50 percent or more of an employer’s I-9s were found to be deficient).
Next, ICE utilizes its “enhancement matrix,” which will either add or decrease to the base fine based upon its audit findings. The aggravating and mitigating factors are the five statutory factors discussed above: business size, good faith, seriousness, unauthorized aliens, and company history. Each of these five factors has a plus or minus five percent (+/- 5 %) to the base fine amount, making the maximum increase +25 % and the maximum decrease -25%
Unlike OCAHO, ICE does not consider the company’s ability to pay or financial health when assessing fine amounts. Therefore, this ridged formula almost always leads to a hefty fine determination because it artificially inflates the base fine amount. ICE has traditionally demonstrated little interest in whether the fine proposal may have a devastating effect on the company. On the other hand, OCAHO ALJs regularly hold that the I-9 penalty should not be unduly punitive.
A Fine Calculation Example
Let’s assume your company received a Notice of Inspection, then presented 100 I-9 forms to ICE for inspection. During the audit, ICE determined that 50 of the forms presented were defective due to sustentative and uncorrected technical violations (uncorrected errors on the form itself). This would result in your company having a 50 percent violation rate. Using ICE’s fine matrix, it would calculate the fine using the highest base fine amount of $1,862 per defective I-9. Therefore, you would be facing a base fine already at $93,100 before factoring the aggravating and mitigation factors.
After ICE takes into account the aggravating and mitigating factors, the final fine amount will stand somewhere between $69,825 (base fine -25%) and $116,375 (base fine +25%).
This simple example demonstrates how ICE’s unforgiving fine matrix artificially inflates the fine amount by setting the 50 percent violation rate as the threshold for the highest fine amount for each defective I-9 form. Even if your business has less than 100 employees, a small amount of defective I-9s can result in a hefty fine proposal.
OCAHO ALJ Fine Determination History
Unlike ICE, however, OCAHO case law indicates that the ALJ’s fine determination has been far more lenient than ICE’s fine matrix and enhancement matrix. In fact, in a review of the 32 OCAHO I-9 cases from the past four years, not a single OCAHO fine determination resulted in a fine increase. Of the 32 cases, only two cases upheld ICE’s fine proposal without reduction. The other 30 cases allreceived a fine reduction, with the average fine reduction rate at over 40%. By way of example, in the simple example above with your company being assessed a fine from ICE of $116,375, an average OCAHO reduction could reduce this fine to $69,231.
In the most recent 2019 OCAHO case, U.S. v. Intelli Transport Services, the ALJ primarily used the employer’s small size to justify a nearly 80% fine reduction, which reduced the fine amount from ICE’s $21,506 proposal to a mere $4,500. In another 2015 OCAHO case, the dollar amount fine reduction was over $207,000. These cases demonstrate that when ICE’s fine proposal is high enough, there is truly little reason not to push back and litigate the case to the OCAHO.
Article courtesy of Fisher Phillips LLP