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wage, hour issues threaten outdoor amusement business

12/2/2009

By Rob Weber

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Perhaps the most important issue facing the outdoor amusement business today is the pay practices for foreign and domestic employees.  Recently, state governments, the federal government, advocacy groups and attorneys have all taken action that could place businesses in grave financial danger or even bankruptcy. The number of carnivals, fairs and concessionaires affected by these actions grows each week.

The OABA sponsored a presentation at the IAFE convention by national workplace attorneys Jackson/Lewis to apprise members and interested parties of the current enforcement situation.  Entitled “Emerging Enforcement Trends: Navigating Pay Practices for Foreign and Domestic Employees”, the session was given before an almost full auditorium.

Paul De Camp, a former Department Of Labor official and Victor Cerda, formerly with immigration enforcement were the two presenters for Jackson Lewis. 

The attorneys said like many business practices, labor issues can fly under the radar screen for many years, practices may seem fine for a long period of time until a government agency or advocacy group takes notice and suddenly those formerly unnoticed business practices become the subject of intense scrutiny and civil or even criminal action.

De Camp said much of the danger facing carnivals, concessionaires and fairs lies not so much in federal law but in state law.  The attorneys then reviewed the recent NY Attorney General Case against Dreamland Amusements.

In 2007 and 2008 Dreamland employed 32 and 22 H-2B foreign workers, respectively.  They stated the workers would earn $8.61 an hour in 2007 and $8.13 an hour and $12.20 an hour in overtime in 2008 on their Department of Labor Certifications. A non-profit immigrant organization referred a complaint to the NY Attorney General stating that employees worked more than 40 hours per week and were not paid for overtime.
 
The AG's office then conducted an investigation of the following issues:

  • False statements to State Of New York regarding wages and hours in support of H-2B applications
  • Non-payment of prevailing wage and overtime
  • Disparate treatment of Mexican workers in housing and other working conditions.

After a quick turnaround, the AG's office found that Dreamland's workers were paid a flat salary of $275 to $350 per week.  By their calculations, this was less than $5.00 per hour for foreign workers in 2007 and 2008 and no overtime was paid.  They also found that there was disparate and sub-standard housing of H-2B workers compared to domestic workers and they failed to maintain H-2B employee records.

As a result of the findings, Dreamland and the AG's office entered into an Assurance of Discontinuance agreement where Dreamland neither admitted nor denied the AG's findings.  Under the agreement, Dreamland had to settle for $325,000, using personal property as collateral. They also had to enhance their notice of rights to their H-2B and domestic workers and provide OSHA training, develop a complaint process and employee handbook and hire an independent monitor to evaluate compliance with the agreement.

Cerda estimated the cost to the show for the workers in 2007 and 2008 approached $500,000.  In addition, he noted the AG's office was now supervising the carnival and they had “a new quality of life”.

Looking at the requirements for H2-B workers, the attorneys noted that an employer must certify and submit a labor application under penalty of perjury to the Department of Labor listing the hours, duties pay and working condition for workers. 

Employers submitting H2-B worker application agree to pay the highest of the prevailing wage, federal minimum wage or local minimum wage.  They must pay all H-2B visa costs and are severely restricted in new government regulations from passing fees back to the employee such as uniforms, tools of the trade, power and transportation expenses, thereby lowering the resulting hourly wage.

Employers agree to provide the same working conditions as U.S. workers, maintain H-2B records and notify the government of terminations or abandonments.  Workers are tied to the applicant's company and notification of termination or abandonment can help exonerate a company from future enforcement action.

The only costs that are clearly deemed to be the responsibility of the employee are passport and related costs.   In the past administration, some employee expenses were allowed under the program to be passed back to the employer but the new administration repudiated the former policy and these “kick-back” expenses are no longer tolerated under the program.

In 2009 the DOL's Wage and Hour Division hired 30% more investigators, bringing the number of investigators to over 1,000.  They conduct 30,000 compliance investigations a year and approximately 80% are initiated by a worker complaint with the balance being initiated by the agency itself.
On the state level, some states have labor departments that vigorously enforce wage and hour laws.  New York, New Jersey and California were especially noted in the presentation.

Under federal law, the minimum wage is $7.25 an hour for non-exempt employees and time and a half must be paid for work over 40 hours.  However, there is a provision that allows someone “employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational conference center” to be exempted from overtime rates.  They must meet one of two criterion: 1) The establishment does not operate more than 7 months in any calendar year, or 2) During the preceding calendar year, the average receipts from any six-month period did not exceed 33 1/3% of the average receipts of the other 3 months.

Many carnivals, concessionaires and fairs meet the exemption, however the regulations also state that no provision in the federal regulations shall excuse compliance with state or local regulations regarding prevailing wages and workweeks.  States have the ability to set their own laws and while most recognize the federal exemption others, such as NY, CT and North Carolina do not recognize the federal exemption and require payment of minimum wage and overtime.

State laws may provide additional requirements such as daily overtime, weekly overtime, mandatory meal and rest periods and other provisions.  When working in these states, companies must be very careful to obey state and local provisions or be subject to enforcement actions. 
To further complicate the issue, advocacy groups are now gathering to hand out information to foreign workers both in the United States and in Mexico.  They attend fairs, interview employees; take pictures and videos of working conditions.

One organization attempted to conduct 100 meetings across the country to, among other agenda items, discuss “carnival stories of struggle”, give a carnival quiz and discuss the recent “victory” in the NY case.  Further, they listed addresses and maps of fairs for additional outreach.
Law firms in Mexico go to employee brokers, get lists of workers and contact them.  During the call, they may encourage workers to file a claim against their employer.

All of this advocacy has reached the attention of lawyers in the United States who are now organizing class action suits against those they allege have not met the promised work requirements.  During the session, it was revealed that several suits have been initiated and it is anticipated more are to come.

In order to protect business, the attorneys recommended taking several actions immediately:

  • Fully understand state and federal prevailing wages
  • Understand H-2B immigration obligations, including recordkeeping
  • Maintain uniform company procedures regarding wages and immigration
  • Avoid civil rights violations, pay domestic and foreign workers uniformly and maintain uniform working conditions
  • Know your H-2B recruiters, you are aligned with their actions
  • Avoid employees kick-backs or expense pass-throughs

Looking ahead, there are several issues that immediately face carnivals and concessionaires.  At the Erie County Fair in Hamburg, NY Labor Department officials conducted extensive audits, fining those with inadequate records or for non-payment of overtime.

Fairs with long days and hours will result in sharply increased costs for carnivals and concessionaires if they are subject to overtime requirements.  They will either have to pay the overtime rate or develop a second shift of workers in order to continue to play fairs with long hours.

While many states have not, and likely will not, initiate aggressive enforcement action, the federal government, several states and private lawyers initiating class actions suits pose a formidable risk to companies in the outdoor amusement business.



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