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IADA FAQ Chapter Nine

EMPLOYMENT LAWS AND REGULATIONS


Compliance with federal wage and hour laws represents one area in which the Association has received many inquiries. Requirements of the federal wage and hour laws are technical and many times overlooked. The following discussion provides help to ease the compliance burden.

We have also enclosed the reference materials regarding the federal and Illinois wage-hour law procedures. We call your attention to the enclosed section entitled "Department of Labor Audit Compliance Recommendations". This review is what you can expect when your dealership faces an investigation. Most important of all is to maintain and keep adequate records, and to pay overtime to those employees who work more than 40 hours in any work week who do not come under the overtime exemption.

Specific questions of an individual notice should be addressed to your nearest Wage and Hour office or to the regional Wage and Hour office, 230 South Dearborn, Chicago, Illinois 60604. IADA has published a new dealer-member service developed as a result of the volume of inquiries from IADA members. Our employment law service consists of Employee/Personnel manuals that are tailored to fit the needs of your dealership, including job applications, performance review forms, job description manuals and a more detailed overview of state and federal laws affecting employment. For more information about this service, IADA members are encouraged to call the IADA office at (800) 252-8944.

Minimum Wage

The federal Wage-Hour Law requires that each employee receive compensation equal to or exceeding the product of his total number of hours worked during each week multiplied by the statutory minimum hourly rate, which, as of the date of the publication of this Dealer Reference Manual, is $7.25. However, because the Illinois minimum wage is higher, it trumps the federal minimum wage. As of the date of the publication of this Dealer Reference Manual, the State minimum wage is $8.25.

Thus, to calculate compliance with minimum wage requirements, the total hours worked during the workweek should be divided into total compensation received by the employee. The resulting rate should be compared with the statutory minimum rate; if the hourly rate falls below the minimum, the dealer must adopt the minimum in computing wages due to employees.

Overtime Computation

Unless specifically exempted by the overtime exemptions discussed below, employees covered by the federal wage-hour law must receive overtime pay for hours worked in a workweek in excess of 40 at a rate not less than one and one half (1 1/2) times the regular rate of pay. Thus, before overtime can be computed, it is necessary to determine the employee`s regular rate of pay.

While the law does not require dealers to compensate employees on an hourly basis, the "regular rate" is a rate per hour. Earnings may be determined on a piece-rate, salary, commission, or other basis, but the overtime pay due must be computed on the basis of the hourly rate derived from such earnings.

The "regular rate" may be more than the statutory minimum (currently $8.25 per hour) but it may never be less than the minimum wage required by law. It includes all remuneration paid to the employee during the workweek except for statutory exclusions, deemed not to be included in the regular rate, such as the following.

  • Gifts, Christmas, and special occasion bonuses such as a reward for career service.
  • Discretionary bonuses where the bonus is paid solely in the employer`s discretion and not pursuant to any contract, agreement or promise causing the employee to expect the bonus regularly; however, nondiscretionary bonuses must be included in regular rate of pay computations regardless of the method used to compensate the employee.
  • Contributions irrevocably made by the dealer pursuant to a bona fide plan for providing old-age, life, accident or health insurance, or retirement (such as NADA`s Retirement Trust).
  • Payments made by the dealer on behalf of an employee to a bona fide profit-sharing, thrift, or savings plan.
  • Payments made for occasional periods when the employee is not at work due to vacation, holiday, illness, or failure of the employer to provide sufficient work.
  • Reimbursements for expenses incurred on the employers behalf.
  • Extra compensation provided by a premium rate of at least time and one-half which is paid for work on Saturdays, Sundays, and holidays and other "special" days. If the premium rate is less than time and one-half, the extra compensation paid must be included in determining the regular rate of pay and cannot be credited toward statutory overtime due.

The regular hourly rate of pay of an employee is thus determined by dividing the total remuneration for employment (except the statutory exclusions) in any workweek by the total number of hours actually worked in the workweek.

The following examples illustrate the above principle and its relationship to computing overtime compensation:

Hourly Rate Employee: If more than 40 hours are worked, overtime must be paid at the rate of time and onehalf (1 1/2) each hour worked over 40 hours.

Example: An employee is paid $8.25 an hour and works 44 hours in a workweek. He is entitled to at least $12.38 for each hour worked over 40 (one and one-half times $8.25). His pay for the week should total $379.52  ($330 for the first 40 hours plus $49.52 for the four hours of overtime).

Salaried Employee: There is no exemption from minimum wage or overtime provisions simply because an employee is paid on a salary basis. Unless one qualifies for an exemption discussed below, a salaried employee must be paid overtime and the regular hourly rate may never be less than the minimum wage required by law.

When a salaried employee is paid on other than a weekly basis, it must be converted into its weekly equivalent in order to compute the regular rate and overtime pay. A monthly salary would be multiplied by 12 and the product divided by 52 to get the weekly equivalent; if the salary is paid twice a month, multiply it by 24 and then divide by 52. A short form, suggested by the Federal Wage and Hour Division, which may be used to convert to a weekly equivalent is to multiply a:

  1. semi-monthly salary by 0.4615, or
  2. monthly salary by 0.2308, or
  3. yearly salary by 0.01923

Example: An employee`s monthly salary of $1,429.80 is for a work week of 40 hours. The weekly equivalent is $330 ($1,429.80 x 12 months divided by 52 weeks = $330, or $1,429.80 x 0.2308 = $330) and the regular rate of pay is $8.25 an hour ($330 divided by 40 = $8.25). If the employee were to work 42 hours in a workweek, the pay should be $24.75 for the two overtime hours ($8.25 x 1 1/2 x 2 hours = $24.75) in addition to the salary.

There is also no federal requirement that overtime compensation be paid weekly. The general rule is that overtime pay earned in a particular workweek must be paid on the regular payday for the period in which the workweek ends.

If the correct amount of overtime pay cannot be determined until some time after the regular pay period, the employer must pay the overtime compensation as soon after the regular pay period as practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment, and in no event may payment be delayed beyond the next payday after such computation can be made.

Exemptions: As stated above, the federal wage-hour law applies generally to all motor vehicle dealers. The law, however, contains various exemptions from these basic standards for specific types of businesses and particular categories of employees. Further, dealers have been successful in securing and maintaining certain historic exemptions for salespersons and mechanics from provisions of the overtime requirements.

Some of the exemptions discussed below are from both minimum wage and overtime requirements while others are from overtime only. Dealers are advised to carefully determine which exemptions may be applicable to employees within their dealership operations.

 

White-Collar Exemptions: The federal wage-hour law specifically provides that neither minimum wage nor overtime pay applies to any employee employed in a bona fide executive, administrative, or professional capacity or in the capacity of an outside salesperson.

Whether an employee falls within the meaning of these terms is not to be determined by the employee`s title or compensation, but rather by the actual activities of the employee and whether he/she meets the tests under the law. Thus, an employee may not become an "executive" merely by being given the title of "Assistant Manager"; conversely, the fact that an employee`s job title is not executive in nature would not be controlling as to whether or not he/she falls within the executive employee exemption.

Each exemption is narrowly defined under the regulations of the federal wage-hour law and dealers are advised to carefully check its exact terms and conditions before applying the exemption. The following are brief summaries of the basic requirements for the executive, administrative, professional and outside salesperson exemptions:

Executive Employee: An employee may be exempt from the minimum wage and overtime provisions of the federal wage-hour law by satisfying the following requirements for executive status:

  • If the employee is compensated on a salary basis of not less than $455 per week before December 1, 2016 and $913 per week on or after December 1, 2016, he/she is an executive;
  • His/her primary duty consists of the management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;
  • He/she customarily and regularly directs the work of two or more full time employees therein; and
  • He/she has the authority to hire or fire other employees or his/her suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight. 

The executive exemption would typically apply to the sales manager, parts manager, service manager, and shop foreman if the employee meets the above test. It would also apply to service writers, service advisors, service managers, or service salesmen whose primary duty is to record the condition of a vehicle and write up a report indicating the parts and mechanical work needed.

Further, an office manager would not qualify for this exemption if his/her primary duty was bookkeeping and not management of the office.

Administrative Employee: An employee may be exempt from the minimum wage and overtime provisions of the law by satisfying the following requirements for administrative status.

  • He/she is compensated on a salary or fee basis of not less than $455 per week before December 1, 2016 and $913 per week on or after December 1, 2016;
  • His/her primary duty is the performance of office or nonmanual work directly related to management or general business operations of the employer or the employer`s customers; and
  • His/her primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The administrative exemption would typically apply to an executive assistant who meets the above tests or to an office manager who performs clearly exempt duties such as executing the employer`s credit policy, managing the company`s traffic, purchasing, and other responsible office work requiring the customary and regular exercise of discretion and judgment.

The exemption would not apply, however, to an office manager whose main duties were bookkeeping, payroll preparation, or sending out monthly statements of account; nor would it apply to a person performing routine clerical duties such as a secretary.

Further, dealership audits from regional U.S. Wage and Hour Divisions have questioned the use of the administrative exemption for Finance and Insurance ("F and I") employees. The Department of Labor views the work of "F and I" employees as routine clerical and sales work which lacks the necessary exercise of discretion and independent judgment required by the federal regulations to satisfy the administrative exemption.

If, however, the primary duty of the "F and I" employee is to decide whether credit is to be granted, the exemption could be successfully asserted as the regulations have recognized credit managers as a "typical" example of an employee satisfying the requirements for the administrative exemption.

Professional Employee: An employee may be exempt from the minimum wage and overtime provisions of the law by satisfying the following requirements for status as a learned professional.

  • He/she is compensated on a salary or fee basis of not less than $455 per week before December 1, 2016 and $913 per week on or after December 1, 2016;
  • His/her primary duty is the performance of work requiring advanced knowledge, defined as work that is primarily intellectual in character and that includes work requiring the exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning; and
  • The advance knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
The learned professional exemption would typically apply to controllers, accountants, and attorneys who meet the above tests who perform clearly exempt duties. The exemption would not apply to an office manager whose main duties were bookkeeping, payroll preparation, or sending monthly statements of account.
 
White collar salary threshold
Beginning December 1, 2016, up to 10% of the salary threshold may be met by the payment of nondiscretionary bonuses and incentives, including commissions. Nondiscretionary bonuses are compensation that is promised as an incentive to work more efficiently and remain with the dealership. Discretionary bonuses where the decisions of whether to award a bonus or the amount of a bonus is solely at the discretion of the employer do not satisfy the salary threshold for the white collar exemptions.

7(i) EXEMPTION

On a weekly basis, Section 7(i) of the Fair Labor Standards Act provides an overtime exemption for an employee of a retail or service establishment "if (1) the regular rate of pay is in excess of one and one-half times the minimum hourly wage and (2) more than half his compensation for a representative period (not less than one month) represents commissions on goods and services. In determining the proportion of compensation representing commissions, all earnings resulting from the application of a bona fide commission rate shall be deemed commissions on goods or services without regard to whether the computed commissions exceed the draw or guarantee.". This exemption generally applies to F&I Managers.

Outside Salesperson: If an employee qualifies as an outside salesperson, he/she is exempt from the minimum wage and overtime requirements of the law. The term "outside salesperson" for purposes of the exemption means any employee:

  • Whose primary duty is making sales, or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  • Who is customarily and regularly engaged away from the employer`s place or places of business.

EXAMPLE: An employee sells outside and also sells on the floor with inside salesperson who work 40 hours a week. As inside sales are considered nonexempt work, he/she may not work more than 8 hours per week on the floor if he/she wishes to maintain his/her outside salesperson status.

 

OVERTIME PAY EXEMPTION FOR SALESPERSONS AND MECHANICS

Complete exemption from the overtime pay requirements of the federal wage-hour law is granted to any salesperson or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he/she is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.

The enactment of this exemption was an implicit recognition by Congress of the incentive method of remuneration for salespersons and mechanics employed by automobile dealerships.

This overtime exemption applies:

  • Regardless of the annual dollar volume of sales of the dealership; and
  • Whether the salesperson or mechanic works in the dealership`s principal building or in physically separate buildings or areas; and
  • Whether, through working in the principal building of the dealership, his/her work relates to the work of physically separate buildings or areas, so long as he/she is employed in a department that is functionally operated as part of the dealership.

Thus, a mechanic in the service department who repairs both new vehicles and trade-ins, later sold at a physically separate used car lot operated by the dealership, may be exempt.

To be exempt, however, it is necessary that all of the following requirements be met:

  • The salesperson or mechanic must be "primarily engaged", i.e., spend over 50% of his/her time in selling or servicing automobiles, trucks, or farm implements. Thus, as long as an employee spends over 50% of his/her time in exempt work, he/she is entirely exempt from the overtime provisions even though he/she may perform other non-exempt work subject to overtime; and
  • The dealership must be "primarily engaged" in the business of selling automobiles, trucks, or farm implements to ultimate purchasers. As applied to the dealership, the term "primarily engaged" means that over half of the dealership`s annual dollar volume of sales made or business done must come from sales of automobiles, trucks, or farm implements; and
  • The salesperson or mechanic must be employed in a department that is functionally operated as part of the dealership.

The above tests for exemption also apply to salespersons selling trailers. The exemption, however, does not apply to mechanics servicing trailers nor to mechanics employed by an establishment primarily engaged in selling trailers.

Whether a mobile home qualifies as a "trailer" within the meaning of the exemption depends upon the function for which it was designed and manufactured. The critical factor is whether the mobile home was designed and manufactured to be a vehicle or moving conveyance or a permanent home. Mobile homes of any type may be considered "trailers", if they are designed to be transported from place to place as a trailer, e.g., they have their own wheels and suspension system and can be towed behind a powered vehicle and they can be easily emplaced after parking and then readily detached and moved to another area.

The following are brief summaries of the terms "salesperson" and "mechanic" as they relate to the overtime provisions of the federal wage-hour law:

Salesperson: A salesperson is an employee who is employed for the purpose of and is primarily engaged in making sales or obtaining orders or contracts for sale of automobiles, trailers, trucks, or farm implements. Work performed incidental to and in conjunction with the employee`s sales or solicitations, including incidental deliveries and collections, is regarded as within the exemption.

The Wage and Hour Division has also recognized that, in general, service salespersons come within this overtime exemption. While this represents a change from previous interpretive regulations, it is consistent with numerous federal court decisions. The following is a statement from the Department of Labor concerning service salespersons:

"Our present position is that employees variously described as service writer, service advisor, service manager or service salesperson whose primary duty is to record the condition of a vehicle and write up a report indicating the parts and mechanical work needed for restoration qualifies for this exemption."

An employee primarily engaged in vehicle leasing, however, is not deemed a salesperson within the meaning of the overtime exemption. The Department of Labor regards the exemption from overtime unavailable to leasing establishments on the grounds that they are not selling vehicles to ultimate purchasers despite the fact that the lessee may have an option to purchase the vehicle upon expiration of the lease agreement. However, work performed in connection with a sale of the vehicle at the expiration of a lease agreement may come within the scope of this exemption.

Mechanics: A mechanic is an employee primarily engaged in doing mechanical work and would include "get ready" mechanics, automobile, truck, or farm implement mechanics, body or fender mechanics, used-car reconditioning mechanics, and wrecker mechanics.

The term "mechanic" does not include employees primarily performing such nonmechanical work as washing, cleaning, painting, polishing, tire changing, installing seat covers, dispatching, lubricating, rustproofing, or other nonmechanical work. However, if the employee spends over 50% of his/her time in exempt mechanical work (such as replacing mufflers and tail pipes, replacing brake shoes and tune-up work), he/she would qualify for the overtime exemption as he/she would be primarily engaged as a mechanic.

Similarly, the Department of Labor has ruled that body shop painters are not considered mechanics unless they are engaged in the combined function of mechanic and painter and spend over half of their time repairing or replacing body and trim parts in the preparation of vehicles for painting.

OVERTIME PAY EXEMPTION FOR COMMISSION EMPLOYEES

In addition to the specific exemptions granted to salespersons and mechanics from the overtime requirements, the federal wage-hour law has a general provision extending overtime exemption under certain circumstances to employees who are paid primarily by commission and are employed by retail or service establishments.

This provision is not limited to salespersons and may be applied to any employee who is compensated by commission for either sales made or services performed. Thus, this basis for overtime exemption may be used for dealership employees compensated on a commission incentive basis such as body shop painters, lube men, and "F and I" employees.

In order to qualify an employee for the exemption, the following tests must be met:

  • The dealership must qualify as a "retail or service establishment". A dealership should meet this requirement unless it derives over 25% of its gross annual volume of sales from wholesale selling, fleet selling, sales made pursuant to formal bid invitation or heavy sales, or any combination of these types of sales; and
  • The employee`s regular rate of pay must exceed 150% of the applicable minimum hourly rate for the work week the exemption is being sought; and
  • The employee must derive more than half of his/her compensation over a representative period (not less than a month) from commissions on goods or services.

If the employee is paid on a commission basis, the fact that he/she receives a salary or draw against such commission would not deprive him/her of the overtime exemption unless his/her commission seldom or never equaled or exceeded the amount of the draw or guarantee. In that case, the commission plan would not be regarded as bona fide and the exemption would not apply. The exemption would also not apply if the employee received a flat salary and commissions, which represented only 50% or less of his/her total earnings.

SUGGESTIONS AS TO SALESPERSON ADVANCES AND SETTLEMENT PERIODS

Salespersons are normally employed on a commission basis. However, when compensating commission salespersons who qualify for the overtime pay exemption, dealers must adopt a pay arrangement whereby such employees are guaranteed not less than the applicable minimum wage for each hour worked during a settlement period by way of commissions or a subsidy by the employer.

As stated above, the law does not require payment of minimum wage at any specific time as long as some regular pay period (such as weekly, biweekly, or monthly) is established and the employee receives "prompt payment" of the minimum wage covering all hours worked during the pay period. The Wage and Hour Division has stated, however, that the validity of settlement periods which exceed one month may be questioned as to whether such settlement periods are an attempt to circumvent the provisions of the federal wage-hour law.

As no specific time is required for minimum wage payment, dealers should thus simply advance certain sums or "draws" to their salespersons weekly and then settle with them as to their commissions on a regular weekly, biweekly, or a three-week or four-week basis. Where the dealer has in fact established a settlement period, draws against commission earnings within the settlement period need not provide the minimum wage for the portion of the pay period covered by the draw.

The dealer may then credit the draw or advance against commissions when settling the amount due the employee at the end of the period for which the commissions were earned, as long as the settlement results in payment of the minimum wage for all hours comprising the settlement period.

Suggestions on Commission Salespersons

If your salesperson's average as much as $1,650 in commissions in the average 4-week period, your minimum wage payments will be covered for this period, assuming he/she works 200 hours or less during the period. (200 x $8.25 = $1,650)

Example of Salesperson`s pay schedule:
 

 

Hours Worked

Minimum Wage Due Commission Earned Owe Sales-person
Week I 45 $371.25 $425.00  
Week 2 50 $412.50 $500.00  
Week 3 55 $453.75 $425.00  
Week 4 50 $412.50 $405.00  
  200 $1,650.00 $1,755.00 $1,755.00

In the illustration above, the salesperson earned $105.00 more in commissions over the 4-week period than you were obligated to pay him in minimum wage. You, therefore, pay commissions. In the event commissions would have been less than the minimum wage obligation, you would have to make up the difference. Every salesperson should be required to submit and sign weekly time sheets which the dealer should maintain in the employee file. This example assumes a 4 week settlement period.

Drawing account salespersons can be handled with proper mutual understanding, and bookkeeping, so that your records reflect they have been paid the required minimum wage out of the draw with the balance being shown each week as an advance against commissions to be earned, and settled off on a regular settlement period.

NOTE: Furnishing of a demonstrator to a salesperson cannot be considered as a part of the minimum wage.

Miscellaneous Requirements

All persons, except executives and administrative personnel, must keep a daily time record, showing the time worked each day by starting time and quitting time. This applies to salespersons. Preferably all time reports for the day or week should be signed by the employee.

Christmas bonuses can be paid separate from wage calculation.

Incentive bonuses paid for a given effort must be considered as a part of basic wage or salary for the period involved, and as such would require a recalculation of overtime pay.

Child Labor Prohibitions

In general, the federal wage-hour law sets a 16-year-age minimum for employment in all occupations unless otherwise provided by regulation. The law, however, contains the following exceptions and conditions:

Employment of Minors Between 14 and 16 Years of Age: Regulations permit the employment of minors between 14 and 16 years of age in a limited number of occupations where the work is confined to periods that will not interfere with their schooling and under conditions that will not interfere with their health and well-being. Working time is specifically limited to:

  1. Employment outside of school hours and between the hours of 7 a.m. and 7 p.m., except during the summer (June 1 through Labor Day) when the evening hour will be 9 p.m.; and
  2. Employment for not more than 3 hours a day nor more than 18 hours a week when school is in session; and
  3. Employment for not more than 8 hours a day nor more than 40 hours a week when school is not in session.

Further, permissible work must be deemed nonhazardous and is restricted in retail establishments to work such as the following:

  • Office and clerical work (including the operation of office machines);
  • Cashier and selling;
  • Assembling orders, packing and shelving parts (but not if involving the operation or tending of hoisting apparatus or of any power-driven machinery);
  • Errand and delivery work by foot, bicycle, and public transportation;
  • Clean-up work, including the use of vacuum cleaners and floor waxers;
  • Maintenance of grounds (but not including the use of power-driven mowers or cutters);
  • Car cleaning, washing and polishing;
  • Dispensing gasoline and oil (but not the use of pits, racks and lifting apparatus or the inflation of any tires mounted on a rim equipped with a removable retaining ring).

Employment of Minors Between 16 and 18 Years of Age: At 16 years of age, minors may be employed for any number of hours and during any periods of time in any occupation other than those declared hazardous by the Department of Labor.

Where the occupation is considered particularly hazardous (as for example, any occupation involving driving on any public road or riding on a motor vehicle on a public road outside the cab to assist in transporting or delivering goods) the employee must be at least 18 years of age. However, the Department of Labor has ruled that it is not particularly hazardous for a minor between the ages of 16 and 18 to operate automobiles or trucks if:

  1. The automobile or truck does not exceed the 6,000 pounds gross vehicle weight (which includes the truck, chassis with lubricants, water and full tank or tanks of fuel, plus the weight of the cab or driver`s compartment, body and special chassis and body equipment, and payload); and
  2. The driving is restricted to daylight hours; and
  3. The operation of the automobile or truck is only occasional and incidental to the child`s employment;

    driving would be "incidental" if it is limited to no more than 20% of the minor`s work in any workday and not to exceed 5% of the minor`s work time in any workweek when performed; driving would be "occasional" if the minor drove (a single episode of operating a motor vehicle on public roads or highways as part of his or her employment) on average no more than once in a workweek or no more often than four times in a calendar month.
  4. The child driver holds a state license valid for the type of driving involved in the job which he/she performs and has completed a state approved driver education course; and
  5. The vehicle is equipped with a seat belt or similar device for the driver and for each helper, and the employer has instructed each child that such belts or other devices must be used; and
  6. The occupations do not involve the towing of vehicles.

Thus, the driving of automobiles or trucks that meets the above definition by minors between 16 and 18 years of age on dealership premises for purposes such as courtesy service, storage, and servicing is permissible.

Employment of Employees 18 Years of Age or Older: An employee who is 18 years of age or older may perform any job, whether hazardous or not, for unlimited hours during any periods of time.

Parental Exemption: A parent, or a person standing in place of a parent, may employ his/her own child or a child in his/her custody under the age of 16 in any occupation other than those deemed to be particularly hazardous or detrimental to the health or well-being for children between the ages of 16 and 18 years. The exemption applies only in cases where the child is exclusively employed by his/her parents, i.e., not where a child simply assists a parent in his/her work for the parent`s employer.

State labor laws vary regarding employment of minors. Dealers should consult with their private attorneys depending on the circumstances to ensure the state does not impose a higher standard than that under federal law.

DEPARTMENT OF LABOR AUDIT COMPLIANCE RECOMMENDATIONS

THE INVESTIGATION BEGINS. Most investigations are done by prior appointment; however, some may be conducted without any advance warning. Usually one or more Labor Department investigators will appear at the office of an employer and indicate that they have been assigned to conduct an audit of payroll records, to ascertain whether the employer is complying with the Fair Labor Standards Act (FLSA), the federal minimum wage and overtime pay law.

SHOULD THE REQUESTED PAYROLL DATA BE SUPPLIED? If an employer refuses to voluntarily supply its payroll records, or fails to give the agents reasonable cooperation, he/she is making a serious mistake. The Secretary of Labor has broad subpoena powers to inspect the books and records of all those who are or who may be subject to the FLSA. If necessary, the Secretary may secure a federal court order to compel production of employment records and payroll books. Failure to obey such a court order may result in a fine, as well as public embarrassment. Possibly more significant is the fact that an uncooperative employer creates a hostile attitude in the investigators, which inspires them to work extra hard to uncover FLSA violations and generates an unfavorable atmosphere for a reasonable settlement.

WHY WAS THE EMPLOYER SUBJECTED TO AN INVESTIGATION? Employers are always curious to know why they were selected for investigation. Compliance inspectors are forbidden by Labor Department regulations from divulging the names of informants or from revealing sources of information. In the vast majority of cases, however, it is safe to assume that the investigation was launched by a complaint filed by a disgruntled employee or former employee, or perhaps by a labor union.

WHEN THE INVESTIGATION IS COMPLETED. The investigation may last one day or less or several weeks or more, depending on how many employees are involved and on the conditions of the employer`s payroll records.

IF VIOLATIONS ARE FOUND. If the investigator believes that there are violations, there should be no attempt to argue with him/her. When an employer tries to argue his or her own case with the wage and hour investigator, the employer frequently makes serious, damaging statements that may be later used against him or her.

RECOMMENDATIONS. If the investigators inform you that their inspection discloses violations, immediately request a conference with them at which your counsel should be present. Tell the investigators that you do not wish to discuss the matter further without counsel.

THE CONFERENCE. At such a conference, the Labor Department agents will disclose the exact nature of the violations they claim to have found. They will probably suggest methods of achieving future compliance with the FLSA. If the Labor Department agents claim that back wages are due to present or former employees, they will request payment of the back wages during this conference.

In such an event, they should, in most cases, upon request, furnish the employer with a form entitled:

"Summary of Unpaid Wages". This summary lists, in alphabetic order, those employees who are entitled to back wages, together with their addresses, the dates covered by the investigation and total amount due. Insist upon being furnished with a copy of such a summary. The investigator may refuse if the employer does not, at that time, agree to comply in the future with FLSA. Such assurance of future compliance should not be given unless the employer understands fully the possible implications of such a pledge.

IF BACK WAGES ARE CLAIMED. Many employers are under the mistaken impression that when a Department of Labor investigator says back wages are owed to employees, there is no choice but to pay. They equate a request for payment of back wages with an Internal Revenue Service tax deficiency notice or with a Federal Trade Commission "Cease and Desist Order". This misunderstanding has frequently cost employers large sums of money that they might have saved. Unlike the numerous other federal agencies, the Department of Labor does not have the authority in wage and hour cases to issue Cease and Desist Orders. The Department of Labor cannot order anyone to make back wage payments. Only a court of law can compel payment of back wages.

When a Labor Department agent tells an employer that he or she owes back wages, all that the agent is saying is that in the Department`s opinion, back wages are due. If a back-wage claim is made by an investigator, the employer is NOT automatically obligated to make the payments. If the employer feels that the investigator is mistaken, he or she usually has the opportunity to take the matter up with the higher officials of the Labor Department, and ultimately he or she can defend his or her position in a court of law.

As a matter of fact and experience, wage and hour investigators may arrive at mistaken conclusions about the payment of back wages. Following are some examples of the more common errors made by Labor Department agents:

  1. INACCURATE COMPUTATIONS. In making their payroll record examinations, wage and hour agents transcribe payroll information onto official "computation sheets". These computation sheets show exactly how much is alleged to be due to an employee and how the figure was computed. The agent will permit the employer to examine the computation sheets and to copy them.
  2. THE STATUTE OF LIMITATIONS. The statute of limitations for innocent violations of the FLSA is 2 years. Under the FLSA Amendments, for willful violations, the statute of limitations is 3 years. The statute of limitations does NOT stop running because of an investigation. The only circumstances that stop the running of the statute is the filing of a court suit or a written waiver agreement by the employer. If the investigator claims back wages for any period of time that is barred by the statute of limitations, they need not be paid.
  3. EXEMPTIONS. The FLSA provides for a number of total or partial exemptions. For example, the act allows a complete exemption for "outside salespersons", and for "executive", "administrative" and "professional" employees who must meet certain well-defined and strictly interpreted tests. Similarly, overtime (but not minimum wage) exemptions are allowed for certain classifications of employees - for example, interstate truck drivers. Wage and hour investigators often neglect to allow such exemptions. (In Illinois, these exemptions do not apply to minimum wage).
  4. COVERAGE. Not every employee is covered by the FLSA. By the same token, some companies are wholly or partially exempt from FLSA coverage. Again, investigators customarily assert coverage on a broad brush basis, bending every fact in favor of coverage. The investigator`s attention should be directed to any facts or circumstances that may establish that the employer or some of its employees are not subject to the FLSA.

Suppose that after the conference with the agent, he or she persists with the view that the employees are entitled to back wages. Is that the end of the matter? Generally, the answer is "no". After discussions with the field investigator have been completed, the employer may normally take the case up to higher levels of authority in the Labor Department.

  1. THE FIELD OFFICE SUPERVISOR. If the employer and its counsel are not successful in persuading the field investigator on any differences of opinion they may have had with him or her, a conference with the investigator`s immediate superior, the field office supervisor, should be requested. The field office supervisor is generally located conveniently in the same geographic vicinity as the company. Frequently, field office supervisors are highly experienced personnel who are far more knowledgeable than the investigative staff. The field office supervisors often overrule or modify the findings of the investigators, and may properly compromise claims if there is a reasonable basis for doing so.
  2. THE REGIONAL DIRECTOR OR HIS/HER REPRESENTATIVE. If the employer does not prevail with the field supervisor, usually there is an opportunity to confer with the Wage and Hour Division`s Regional Director for the particular geographical area involved. The regional offices are located in major cities throughout the United States. If it is inconvenient to confer personally with the Regional Director, written briefs and arguments may be submitted. However, experience has demonstrated that a personal discussion is more effective in achieving the desired results. The expense of making the trip to the Regional Office is usually an excellent investment.
  3. THE NATIONAL OFFICE. The Wage and Hour Division`s principal headquarters, the National Office, is located in Washington, D.C. Because the National Office is very top level, its officials have the widest authority to compromise and settle cases. Those unable to resolve their controversies at the Regional Office, may ask that their cases be referred to the National Office for administrative ruling, the final step in the administrative process. Generally, such requests are granted. Once clearance is given to present a case to Washington, it may be done in writing and/or in person. Personal conferences are almost always more effective and produce far better results.

CAUTION: The administrative process usually takes months, perhaps years. Consideration by the National Office is the most time-consuming step. Therefore, before clearance is given for consideration of your case by the National Office, the Regional Director may ask that you waive the statute of limitations. In other words, the Regional Office may demand that you sign a document which would void the statute of limitations and permit the Department of Labor to sue you for these back wages regardless of how long it takes to get a Washington ruling. You should not agree to sign such a waiver without first consulting your counsel. AN ILL-ADVISED WAIVER OF THE STATUTE OF LIMITATIONS COULD BE A SERIOUS AND COSTLY ERROR.

AFTER DISCUSSIONS WITH THE LABOR DEPARTMENT ARE FINISHED.

After the administrative process has run its course, what happens if there is a refusal to pay any back wages that are claimed? The answer to this key question frequently depends on whether or not the employer is willing to agree to comply in the future with the FLSA.

IF THERE IS AN AGREEMENT TO COMPLY IN THE FUTURE. If there is an agreement to future FLSA compliance, the employer may be able to persuade the Department to drop the claim for back wages. This solution is reserved primarily for cases where there is some doubt concerning coverage or other legal issues. In some cases when there is refusal to pay back wages, the Labor Department may take no further official action but it will send letters to the employees advising them that they are entitled to back wages.

After the employee is notified by the Department of Labor that he/she is entitled to back wages, the employee (not the Department of Labor) has 2 choices:

     (1) The EMPLOYEE may hire his/her own lawyer and file a private lawsuit against the company. In this lawsuit, the employee can ask for twice the amount of back wages plus the attorney`s fee and court costs. In such cases, the Labor Department WILL NOT COOPERATE WITH THE EMPLOYEE AND IT WILL NEITHER SUPPLY EVIDENCE NOR ANY ASSISTANCE IN THIS PRIVATE LAWSUIT. People who still work for the company (as opposed to former employees) are usually reluctant to start such suits. Sometimes the employer may desire to take a calculated risk that the employee won`t sue for a relatively small amount of back wages.

     (2) The EMPLOYEE can ask the Secretary of Labor to file suit. While these requests are made very often, the Secretary does not always honor them. The reason the Secretary does not agree to file suits in all cases is because of a Department policy against filing actions unless the legal issues involved are of importance.

However, the Secretary will frequently file injunction actions against any employer to enjoin future violations and request back wages as a part of the injunctive relief.

IN THE EVENT THERE IS NO AGREEMENT TO COMPLY IN THE FUTURE WITH FLSA. If an employer still feels he or she is not subject to the FLSA, or refuses to agree to future compliance, the case will be sent at once to the Office of the Solicitor of Labor for appropriate court action. "Appropriate court action" usually means that the Solicitor`s Office will quickly institute a suit in federal court seeking an injunction against the employer. These injunctions are obtained in almost all of the cases started by the Solicitor. The injunction will prohibit the employer from violating the FLSA in the future - and if he or she does so despite the injunction, the federal court may impose heavy fines and other penalties.

The Americans with Disabilities Act (ADA) was signed into federal law during the Fall of 1992. For individuals with disabilities, it provides civil rights protections against discrimination in employment, transportation, public accommodations, state and local government services, and telecommunications. These protections are comparable to those afforded other groups on the basis of race, sex, national origin, age, and religion.

ADA is divided into 2 separate areas: employment and public accommodations/public access.

The following effective dates with respect to ADA requirements apply:

EMPLOYMENT REGULATIONS

  • July 26, 1992 - For employers with 25 or more employees.
  • July 26, 1994 - For employers with 15 - 24 employees.


PUBLIC ACCOMMODATIONS

  • Jan 26, 1992 - Generally.
  • New facilities designed and constructed for first occupancy after January 26, 1993, must be accessible, that is, meet all ADA Architectural Guidelines.

EMPLOYMENT

The employment regulations, issued by the Equal Employment Opportunity Commission (EEOC), make it illegal to discriminate against "qualified individuals with disabilities" in all employment practices. The ADA defines an individual with a disability as a person with a physical or mental impairment that substantially limits one or more major life activities.

EXAMPLE: This would include physical disabilities that affect walking, talking, hearing, or working, mental retardation, history of mental illness, diseases in remission (such as cancer), AIDS, alcoholism, and disfigurements. Note that current use of illegal drugs or abuse of alcohol are not protected disabilities.

Employers must reasonably accommodate the disabilities of qualified employees. Reasonable accommodations consist of modifications or adjustments to a job or work environment that will enable a qualified applicant or employee with a disability to perform essential job functions.

EXAMPLE: This might include restructuring a job, modifying work schedules, or acquiring or modifying equipment.

Individuals who seek the accommodation must be qualified and the disability must be known to the employer. Employers do not have to make accommodations if they would impose an undue hardship on the operation of the employer`s business, such as an action requiring significant difficulty or expense.

Regarding pre-employment practices, employers may not inquire whether or to what extent an individual is disabled. Employers may, however, ask an applicant whether he or she can perform specific job functions. Employers may also establish qualification standards that exclude individuals who pose a direct threat (significant risk) to the health and safety of others; however, the existence of such risk must be based on medically supportable evidence that there is a genuine risk in the work place.

PUBLIC ACCOMMODATIONS

The ADA public accommodations requirements are addressed in regulations issued by the United States Department of Justice. The regulations essentially require that public facilities (including dealerships) be accessible to individuals with disabilities. Businesses must make reasonable changes in policies, practices, and procedures to avoid discrimination.

EXAMPLE: Reasonable accommodations might include the provision of auxiliary aids, such as assistive listening devices, written materials for the hearing impaired, or large print materials for the visually impaired.

Such modifications would not be required if the provision would result in an undue burden upon or fundamental alteration of the business. Additionally, public accommodation may exclude an individual if he or she imposes a direct threat to the health and safety of others that cannot be mitigated by modification in procedures or providing auxiliary aids.

Removal of Barriers in Existing Facilities Physical barriers restricting access must be removed only if removal is readily achievable- which is defined as easily accomplishable and able to be carried out without much difficulty or expense. Modifications that would fundamentally alter business operations or service are not required.

EXAMPLE: Readily achievable modifications might include removal of boxes limiting access to a doorway, ramping of steps, lowering of a telephone, or installation of grab bars where only routine reinenforcement of the wall is required.

There are no requirements that businesses make radical structural changes to existing facilities, such as removal of walls or raising of ceilings. If removal is not readily achievable, alternative steps may be necessary if those alternatives are readily achievable.

EXAMPLE: Alternatives might include assistance to remove or retrieve items from high shelves or curb-side delivery.

New (Post-January 26, 1993) Facilities

With regard to public accommodations and new facilities, any new dealership facilities that opened for business after January 26, 1993 must be in compliance with ADA Architectural Guidelines.

ENFORCEMENT AND PENALTIES

The ADA employment requirements are enforced by the Equal Employment Opportunity Commission. Aggrieved individuals can file complaints with the EEOC. They may also file a private lawsuit. Available remedies to those individuals include hiring, reinstatement, promotion, back pay, and court orders to stop discrimination, as well as award of attorneys` fees.

The public accommodations requirements under ADA are enforced by the United States Attorney General and the United States Department of Justice. Individuals may file complaints with the U.S. Attorney General who is authorized to bring a lawsuit in which courts may award money damages and impose civil penalties. Penalties may not exceed $50,000 for the first violation and $100,000 for any subsequent violations. Individuals may also file private lawsuits seeking injunctive relief (i.e., court order against a business to make facilities accessible, provide auxiliary aids or services, or modify policies) and attorneys` fees. Monetary damages may not be awarded in private suits.

OTHER EXAMPLES

Policy requiring the use of a driver`s license as the sole means of identification when presenting a check for payment may be discriminatory against visually impaired individuals.

A dealership is not required to have Brailled price information so long as policy makes sales personnel or other employees available to read price information or provide price information orally upon request.

A dealership may need to rearrange facilities to permit wheelchair access.

Dealerships are not required to retrofit their facilities to install elevators, unless such installation would be readily achievable, which is unlikely in most cases. Elevators are generally not required in facilities under 3 stories or with fewer than 3000 square feet per floor.

Dealerships are not required to provide access to employee-only work areas.

The following examples may be considered by the Justice Department as readily achievable modifications. The list is not intended to be exhaustive, but rather provides illustrations of barrier removal that could be readily achievable. Whether any of these measures, or others, are readily achievable for a particular dealership facility must necessarily be determined on a case-by-case basis:

  • Installing ramps
  • Making curb cuts in sidewalks and entrances
  • Repositioning shelves
  • Rearranging tables, chairs, vending machines, display racks, and other furniture
  • Repositioning telephones
  • Adding raised markings on elevator control buttons
  • Installing flashing alarm lights
  • Widening doors
  • Installing offset hinges to widen doorways
  • Eliminating a turnstile or providing an alternative accessible path
  • Installing accessible door hardware
  • Installing grab bars in toilet stalls
  • Rearranging toilet partitions to increase maneuvering space
  • Installing lavatory pipes under sinks to prevent burns
  • Installing a raised toilet seat
  • Installing a full-length bathroom mirror
  • Repositioning the paper towel dispenser in a bathroom
  • Creating designated accessible parking spaces
  • Installing an accessible paper cup dispenser at an existing inaccessible water fountain
  • Removing high pile, low density carpeting

FEDERAL FAMILY AND MEDICAL LEAVE ACT OF 1993

Under the federal Family and Medical Leave Act of 1993, any employer with at least 50 employees within a 7.5 mile radius is required to offer unpaid leave of absence to employees to care for a newborn or newly adopted child, to care for a seriously ill family member, for the employee`s own serious illness, or for a "qualifying exigency" arising out of the active military duty or call to active military duty status of a spouse, son, daughter, or parent or to care for a covered servicemember with a serious injury or illness.

To Whom Does the Law Apply?

The law applies to any employer with at least 50 or more employees within a 7.5 mile radius and requires the employer to offer unpaid leave of absence to employees to care for a newborn or newly adopted child, to care for a seriously ill family member, for the employees` own serious illness, or for a "qualifying exigency" arising out of the active military duty or call to active military duty status of a spouse, son, daughter, or parent, or to care for a covered servicemember with a serious injury or illness.

What Are the Requirements of the Law?

The following information summarizes the requirements of the law and its potential impact to employers.

Must Grant 12 Weeks of Leave

An employer is required to grant an employee a total of 12 weeks of (unpaid) leave (26 weeks of unpaid leave for military caregiver leave) in any 12-month period, covering one or more of the following reasons:

  • Because of childbirth and to care for a child in the first 12 months after childbirth. The employer can require that the leave be taken all at one time.
  • Because of a child`s placement with the employee for adoption or foster care, within the first 12 months of the placement. The employer can require that the leave be taken all at one time.
  • To care for a spouse, child or parent who has a serious health condition. This leave may be taken intermittently or on a reduced time basis (e.g., by working fewer days in a week or by working fewer hours in a day), but only if such schedule is needed for medical reasons.  
  • To care for spouse, son, daughter, parent, or next of kin of a covered military servicemember with a serious injury or illness that was incurred in the line of duty and renders the servicemember medically unfit to perform the duties of his or her office, grade, rank, or rating.    
  • Because of qualifying exigencies arising out of the fact that the employee`s spouse, son, daughter, or parent is on active duty or has been notified of an impending call or order to active duty in the National Guard or Reserves (not in the regular Armed Forces).

"Serious health condition" is defined as a health condition that involves (1) inpatient care in a hospital, hospice, or residential medical care facility, or (2) continuing treatment by a health care provider that includes any one or more of the following;

(1) A period of incapacity (i.e., inability to work, attend school or perform other regular daily activities due to serious health condition, treatment therefor, or recovery therefrom) of more than 3 consecutive calendar days, and any subsequent treatment or period of incapacity relating to the same condition, that also involves:

  1. Treatment 2 or more times by a healthcare provider, by a nurse or physician`s assistant under direct supervision of a health care provider, or by a provider of health care services (e.g., physical therapist) under orders of, or on referral by, a healthcare provider; or
  2. Treatment by a health care provider on at least one occasion that results in a regimen of continuing treatment under the supervision of the health care provider.

(2) Any period of incapacity due to pregnancy or for prenatal care.

(3) Any period of incapacity or treatment for such incapacity due to a chronic serious health condition.

The employer can require certification from a health care provider about the family member`s condition, including certification from the provider that the employee is needed to care for the family member and an estimate of the time needed.

      Because of the employee`s own serious health condition, where the employee is unable         to perform his or her job. As with a family member's illness, this leave can be taken
      intermittently or on a reduced time basis if medically necessary to do so.

The employer can require certification from a health care provider about the employee`s condition, including certification that the employee is unable to perform the functions of his or her job.

An employee may elect, or the employer may require, that the employee substitute any paid vacation leave, paid personal leave, paid family leave, or (in the case of a serious health condition) paid medical/sick leave as part or all of the 12-week period, if such paid leave would otherwise be available.

The employee is expected to give the employer at least 30 days advance notice of such leave, to the extent advance notice is practicable. Also, if the leave is for planned medical treatment, the employee is expected to schedule the treatment so as to create minimum disruption for the employer.

Must Return the Employee to Same or Equivalent Position

The employer must agree to return the employee to the same or an equivalent position and employment benefits if the employee returns after the leave. If the employee does return to work, the employee cannot lose any benefits accrued before the period of leave other than any vacation or leave allowance that was used for the leave.

"Employment benefits" includes, but is not limited to, group life insurance, health insurance, disability insurance, sick leave, annual leave, educational benefits, and pensions regardless of whether these constitute ERISA-covered benefits and regardless of whether those benefits are provided by a practice or through a written policy.

The legislation, however, provides for certain conditions under which an employer does not have to guarantee job restoration: If the employee is a salaried employee who is one of the 10% highest paid employees at a given worksite or within a 75 mile radius, job restoration can be denied if the employee`s absence will cause "substantial and grievous economic injury to the operations of the employer."

Must Continue Health Care Coverage

The employer must continue health care coverage (e.g., medical, dental, vision, hearing, health care spending accounts) to the employee during the leave, on the same basis as if the person had been actively at work. If the employee does not return to work after the leave for reasons other than health conditions or some other reason beyond the employee`s control, the employer is allowed to charge the employee retroactively for the full premium cost of the health care coverage.

The Act specifically states, however, that the Act is not intended to require the employer to give an accrual of seniority or employment benefits during the leave period (other than the health care requirement) or to give any new rights that the employee would not have had if the employee had not been on leave. For example, if the employee would have been laid off if not on leave, the employee`s right to reinstatement would not be any greater because of this legislation.

What Employees are Excludable?

The requirements generally apply to all employees of the employer, except an employer does not have to grant this leave to:

  • An employee with less than 12 months of total service with the employer.
  • An employee who worked fewer than 1,250 hours of service with the employer  in the previous 12 months. These hours are to be counted in the same way as used for Fair Labor Standards Act (exempt/nonexempt overtime) purposes.
  • An employee who works at a given worksite that has fewer than 50 employees, if the total number of employees within a 75-mile radius of that worksite is also less than 50. (This is intended to recognize the business difficulty that employee absences and later job restoration would create at smaller locations).

    What are the Consequences for Noncompliance with the Family and Medical Leave Act?

    An employer who denies these rights to an employee is liable for damages in the amount of lost wages and benefits. If there has been no loss of wages or benefits, damages are based on the amount of actual monetary loss by the employee, up to an amount equal to 12 weeks of wages. Unless the employer can show good faith, a court can, in its discretion, award double damages. Equitable relief such as reinstatement is also available.

    Any questions regarding the Family and Medical Leave Act and its applicability to your dealership can be directed to IADA Legal Counsel at (800) 252-8944.

  • Employment Discrimination-Pregnancy
    Recent amendments to the Illinois Human Rights Act prohibit discrimination against a person on the basis of pregnancy. An employer cannot refuse to hire or act with respect to the terms of employment on the basis of the employee's or prospective employee's pregnancy or medical condition related to pregnancy. Employers must make reasonable accommodations for medical conditions related to pregnancy for all pregnant employees similar to the accommodations required for employees with disabilities, unless the employer can show that the accommodation would impose an undue hardship on the employer. For pregnancy and related conditions, reasonable accommodations include more frequent restroom and water breaks, rest breaks, private, non-bathroom space for expressing breast mild, assistance with manual labor, temporary transfer to a less strenuous or less hazardous position, a modified work schedule, time off to recover from child birth, and leave necessitated by pregnancy, childbirth, or medical or common conditions resulting from pregnancy or childbirth. 
     
    Child Bereavement Act
    The Child Bereavement Leave Act requires employers with at least 50 employees within a 75-mile radius, the same definition of employer as under the Family and Medical Leave Act of 1993, to provide up to 2 weeks (10 work days) of unpaid bereavement leave for an employee to attend the funeral or similar service of the employee's child, to make arrangements necessitated by the death of the employee's child, or to grieve the death of the employee's child. In the event of the death of more than one child within a 12-month period, the employee is entitled to up to 6 weeks of unpaid leave within a 12-month period. Leave taken under the Child Bereavement Act is not in addition to leave permitted by the Family and MEdical LEave Act of 1993. An employee who is entitled to paid leave may substitute that leave for the leave provided under the Act. An employer may not take any adverse action against an employee who takes leave under the Act. An employer who violates the Act is subject to a civil penalty of up to $500 for a first offense and up to $1,00 for a second or subsequent offense.

    Employment Eligibility Verification

    As of March 8, 2013, the U.S. Department of Justice Immigration and Naturalization Service required employers to use a new I-9 Form (Employment Eligibility Verification). The following is intended to update members about the requirements of I-9.

    Why You Must Verify Employment Eligibility of New Employees

    Under certain provisions of federal law, you must verify the identity and employment eligibility of anyone you hire and complete and retain a Form I-9, which can be found at here. You should make sure you have a completed Form I-9 for everyone you have hired since November 6, 1986.

    In addition, the law obliges employers not to discriminate against individuals on the basis of national origin or citizenship, or to require more or different verification documents for a particular individual.

    How To Verify Employment Eligibility of New Employees

    In completing Form I-9, the law requires employers to:

    • Ensure that your employees fill out Section 1 of the Form I-9 when they start to work;
    • Review document(s) establishing each employee`s identity and eligibility to work and fully complete Section 2 of the form within 3 business days of hire. Employees choose which documents they want to present from the lists that appear on the back of Form 1-9;
    • Retain the Form I-9 for 3 years after the date the person begins work or 1 year after the person`s employment is terminated, whichever is later;
    • Make the Form I-9 available for inspection to an officer of the Immigration and Naturalization Service (INS), the Department of Labor (DOL) or the Office of Special Counsel for Immigration Related Unfair Employment Practices (OSC) upon request. Employers will be given at least 3 days advance notice.

    You do not need to complete a Form I-9 for: persons hired before November 7, 1986, who are continuing in their employment; persons who are independent contractors; or persons who provide labor to you who are employed by a contractor providing contract services.

    Reverification of Employment Authorization for Current Employees

    When an employee`s work authorization expires, you must reverify his or her employment eligibility. You may use Section 3 of the Form I-9 or, if Section 3 has already been used for a previous reverification update, use a new Form I-9. If you use a new form, you should write the employee`s name in Section 1, complete Section 3, and keep the new form with the original. The employee must present a document that shows either an extension of the employee`s initial employment authorization or new work authorization.

    Minors (Individuals under Age 18)

    If a minor cannot present acceptable proof of identity, the Form I-9 should be completed in the following way.

    • A parent or legal guardian must complete Section 1 and write "individual under age 18" in the space for the employee`s signature;
    • The parent or legal guardian must complete the "preparer/translator certification" block;
    • You should write "individual under age 18" in Section 2, List B, in the space after the words "document #"; and
    • The minor must present a List C document showing his or her employment eligibility. You should record the required information in the appropriate space in Section 2.