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FMG Law Blog Line

Archive for May, 2013

I-9 Audits: ICE Targets Restaurants; Administrative Judges Respond by Slashing Fines

Posted on: May 29th, 2013

By: Kelly Moul

The hospitality industry is no stranger to unwanted “special attention” from administrative agencies, including the Department of Labor (DOL) and Immigration and Customs Enforcement (ICE).

In 2012, for instance, slightly more than 38% of ICE audits were directed at restaurants.

Many of these audits resulted in proposed fines from ICE, which the employer restaurants then appealed to the Office of the Chief Administrative Hearing Officer (OCAHO).

Several decisions were recently issued in these cases, significantly reducing the proposed fines.  These cases clearly illustrate that ICE’s proposed fines are usually excessive, and employers can significantly reduce their liability by appealing ICE’s findings after an audit.

Below are a few recent examples of reductions in fines, along with the reasons given by OCAHO for the reductions:

Subway #37616: Reduced from $46,282 à $9,600

  • Small employer (7 employees)
  • No unauthorized workers employed at location
  • No history of violations

Subway ##35029 & 23095: Reduced from $82,280 à $15,800

  • Small employer
  • No unauthorized workers employed at location
  • No history of violations

Black & Blue Steak & Crab: Reduced from $44,165 à $32,850

  • Small employer (despite employing 77 workers)
  • Acting in good faith
  • No unauthorized workers employed at location
  • No history of violations

El Azteca Dunkirk: Reduced from $11,000 à $2,200

  • Small employer (10 employees)

Siam Thai Sushi Restaurant: Reduced from $16,308 à $8,350

  • Small employer (10 employees)
  • No unauthorized workers employed at location
  • S-Corp had lost money in the previous year

In 2013, OCAHO is on track to review four times the amount of cases docketed for 2012.  This increased litigation is likely due to employers realizing that fighting back against ICE’s assessed fines after an audit often reduces their payout significantly.


DOL Issues Model “Notice of Exchange” for Use by Employers

Posted on: May 28th, 2013

By: David Cole

The U.S. Department of Labor recently released new guidance on the “Notice of Exchange” employer disclosure responsibility under the Affordable Care Act, along with two model notices that employers may use to meet this requirement.  Under the Affordable Care Act, all employers who are subject to the Fair Labor Standards Act must give written notice to employees of the availability of insurance through state or federal health exchanges, which are scheduled to open for enrollment on October 1, 2013, for coverage to begin on January 1, 2014.  In a prior post, we reported that the DOL extended the deadline for providing this notice to employees from March 1, 2013, until an unspecified time sometime in the “late summer or fall” of 2013.

Given this prior announcement, the DOL’s publication of the model notices in May is much earlier than expected.  This seems to be the DOL’s response to a large number of requests from employers to provide model notices before then.  Thus, the DOL says the new guidelines are only interim guidelines, but that employers may rely on them and the model notices until it issues final regulations.  Under the interim guidelines, employers must provide all of their employees with the required notice by October 1, 2013, which is the date open enrollment in the exchanges is scheduled to begin.  This applies regardless of full-time or part-time status, and regardless of their enrollment status under existing group plans.  Thereafter, employers must provide notice to each new employee upon hire, which the guidelines define as within 14 days of an employee’s start date.

The DOL’s interim guidance provides two model notices for use by employers – one for employers that offer group health coverage, and one for employers that do not.  Both versions provide the required information about the existence of exchanges and the services they provide, the availability of premium tax credits and cost-sharing reductions, and the potential for losing employer contributions to any health plan sponsored by the employer.  In addition, the version for employers that offer group health coverage contains information about the employer and its group health coverage options in numbered sections that correspond to items the employee will have to complete when enrolling for coverage and/or financial aid through an exchange.  Employers are not required to complete this section unless and until an employee requests the information in order to enroll through an exchange, but supplying the information up front is a good idea because it will let employees enroll through an exchange without seeking individualized help from the employer.

Employers do not have to use the model notices, and are free to instead prepare their own versions of notice, so long as it provides all of the information required by the statute.  In addition, the guidance states that the notice must be provided in writing in “a manner calculated to be understood by the average employee,” a standard which presumably is met by the model notices.   Employers may deliver it by first-class mail, in person at the workplace, or electronically if certain DOL safe harbor requirements are met.



New Limitations to Application of Georgia Restrictive Covenants Act

Posted on: May 23rd, 2013

By: Joyce Mocek

Recently, a Fulton County Superior Court judge, in an unpublished order in the case of Cone v. Marietta Recycling Corporation, limited the application of the Georgia Restrictive Covenants Act, and provided guidance on whether a company could enforce a non-compete covenant against a former employee.

The Georgia Restrictive Covenants Act, which became effective on May 11, 2011 when signed by Georgia Governor Nathan Deal, established significant new guidelines concerning non-compete and non-solicitation agreements.  Since the enactment of the Georgia Restrictive Covenants Act, many employers have taken steps to require employees to sign new covenants so that they can benefit from the Act.

In Cone, an employee signed an employment agreement that contained a restrictive covenant on February 25, 2011, before the new law went into effect.  The employee was later fired, and subsequently signed a separation agreement on May 4, 2012.  The separation agreement provided that it “superseded” and “rendered null and void” all prior agreements, except the confidentiality provisions and restrictive covenants from the employment agreement, which “would remain in full force and effect.”   The employer argued that the covenants should be interpreted under the new law because the separation agreement, which post-dated the new law, was applicable by ratification and novation.   Judge Dempsey, Jr. disagreed, stating that the restrictive covenants were not ratified through the separation agreement, and there was no novation. He clarified that the only way the employer could have taken advantage of Georgia’s new law, was to require the employee to execute a new contract with new restrictive covenants having a new effective date after May 11, 2011, or by replacement of the old restrictive covenants with new ones.

Although this unpublished order is not binding on other courts, it provides useful insight into how other judges may determine whether the new law is applicable to a particular agreement, and what will be required to ensure the application of the new law.


FTC Guidance for Online Protection for Children

Posted on: May 14th, 2013

By: Matt Foree

A byproduct of widespread use of the internet is its inevitable use by young children. Today, children have access to the internet through computers, smartphones and countless other electronic devices. To protect the privacy of children online, Congress enacted the Children’s Online Privacy Protection Act (“COPPA”), which provides rules for operators of commercial websites and online services directed to or knowingly used by children under 13. COPPA required the Federal Trade Commission (“FTC”) to issue and enforce regulations concerning children’s online privacy. The FTC’s original COPPA Rule became effective on April 21, 2000.

Significantly, the FTC issued new, stricter rules under COPPA on December 19, 2012, the first time the rules have been amended since COPPA was enacted in 1998. (See video of Chairman John D. Rockefeller IV’s remarks regarding the amendment and the modernization of COPPA here.) Obviously, much of the relevant technology has evolved since COPPA was enacted. The new rules go into effect on July 1, 2013. The new rules can be found here. on the FTC’s website.

The stricter rules under COPPA came shortly after the FTC issued a report entitled “Mobile Apps For Kids: Disclosures Still Not Making the Grade” on the state of mobile app privacy protections for children in December 2012. This report characterized the results of its recent survey on mobile apps as “disappointing,” and noted that the mobile app industry “appears to have made little or no progress in improving its disclosures” since the FTC’s previous report.

Generally, COPPA applies to operators of commercial websites and online services, such as mobile apps, directed to children under 13 that collect, use, or disclose personal information from children, and operators of general audience websites or online services with actual knowledge that they are collecting, using, or disclosing personal information from children under 13. COPPA also applies to websites or online services that have actual knowledge that they are collecting personal information directly from users of another website or online service directed to children. “Personal information” includes, among other things, first and last name, a home or other physical address, a screen or user name, a telephone number, certain geolocation information, a social security number, and a photograph, video, or audio file that includes a child’s image or voice.

The rules provide that operators covered by COPPA must, among other things, post a clear and comprehensive policy describing their information practices for personal information collected online from children, provide direct notice to parents and obtain verifiable parental consent, with some exceptions, before collecting personal information online from children, and give parents access to their child’s personal information to review and/or have the information deleted.

The FTC has recently released a document providing further COPPA guidance.  Entitled “Complying with COPPA:  Frequently Asked Questions, a Guide for Business and Parents and Small Entity Compliance Guide” (the FAQ), this compliance document sets forth 92 frequently asked questions related to COPPA.  As stated in the document, the “primary goal of COPPA is to place parents in control over what information is collected from their young children online.”  The FAQ provides specific guidance about obligations regarding use or disclosure of previously collected information that will be deemed personal information once the amended rule goes into effect on July 1, as well as an explanation of the differences between the new and old COPPA rules.

The new COPPA rules provide pitfalls for covered operators of commercial websites and online services. Covered businesses should review COPPA and the FTC guidance to ensure compliance with COPPA, which authorizes civil penalties of up to $16,000 per violation. COPPA gives states and certain federal agencies authority to enforce compliance.

Cumulative Does Not Always Mean Harmless

Posted on: May 8th, 2013

By: Scott Rees

In Thomas v. The Emory Clinic, Inc. (March 26, 2013), the Georgia Court of Appeals addressed the issue of a trial court improperly allowing hearsay evidence during a trial when that improper evidence is cumulative of other evidence in the case. Typically, allowing inappropriate, but cumulative, evidence is not harmful in terms of a jury verdict, and therefore does not require reversal. However, in this medical malpractice case, the court thoroughly analyzed this issue and determined the trial court committed reversible error in allowing hearsay evidence to be heard by the jury, despite that evidence being cumulative of other evidence. The court determined that because the hearsay evidence went to the core issue of the case (whether the neurosurgeon committed malpractice by leaving too much cotton fiber in the patient’s brain) it was reversible error to allow it, even though it was cumulative of other evidence in the case. Because the plaintiff needed to only prove her case by a preponderance of the evidence, the court reasoned, allowing the improper evidence to bolster the proper evidence could easily tip the scales in the defendant’s favor.