The Advantage

January 2002

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How Do We Get Selected for an AAP Audit?

The Equal Employment Data System (EEDS) belongs to an organization in Virginia called the Joint Reporting Committee. If you have ever completed a Standard Form 100 (EEO-1, EEO-2, EEO-3, EEO-4, EEO-5, or EEO-6) you would have mailed it to this organization. Actually, the Joint Reporting Committee is a unique organization. It is a group of people working to enter the EEO reports into a database that is named EEDS. Both the Equal Employment Opportunity Commission (EEOC) and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) contribute parts of their budget to make this data-loading process work. It's what happens to the information after it arrives in the database that is of interest.

Standard Form 100
EEO-1	All employers covered by Title VII that have 100 or more employees and by government contractors covered by Executive Order 11246 that have 50 or more employees and government contracts of $50,000 or more. Annual filing required.
EEO-2	Joint labor-management committees that have five or more trainees in their programs and at least one employer having 25 or more employees and one union sponsor having 25 or more members covered by Title VII. Annual filing required.
EEO-3	Local unions that have had 100 or more members at any time since the previous December 31. An international union is not required to file a report unless it operated a local union under a trusteeship or other arrangement or performs any functions of a local. Annual filing required.
EEO-4	State and local governmental jurisdictions with 100 or more employees. Annual filing required.
EEO-5	Public elementary and secondary school system or district, including every individually or separately administered district within a system, and every separately administered school with 100 or more employees. In addition, selected schools with 15 or more employees will be required to file the form biannually, with the determination of which schools are being selected being the responsibility of the School Reporting Committee.
EEO-6	Colleges and universities with 15 or more employees. Was required every two years. Now discontinued. EEO-6 has been incorporated into a Department of Education report.

The interesting thing about an EEO-1 report, for example, is that it requires information about employees based on a physical street address. Let's say that your company has been growing steadily over the past few years and you have outgrown the space you originally used at your first location. The Accounting Department moved across the street to new quarters and the extra room they originally enjoyed has since been used up with that department's growth. Another expansion moved the sales and marketing departments into a third building just down the street. Still, everyone is fairly close and documents can be walked back and forth if necessary. With the latest expansion, you just passed the 100 employee mark, so must now undertake the filing of EEO-1 reports each year. You will be required to file a separate EEO-1 form for each of your building addresses. Standard Form 100 is based on a physical location, not a function.

Even though your company only expanded to other quarters due to needs for more space, and that space is all within walking distance, the government will require a separate report on each address.

So you file the reports by the end of September as you are required to do.

The following year you sign your first government contract for provision of goods and services totaling more than $50,000 and - bingo - you are now a government contractor that meets threshold requirements for a written affirmative action plan.

Your affirmative action plan may well cover the entire "complex" or "campus" of addresses you have employees housed within. You would recruit from the same geographies, your hiring authority would oversee the entire complex, and for all other purposes you would operate the complex as though every employee were housed at the same street address even though they are not. So, one affirmative action plan for the enterprise - meaning your company has only one affirmative action establishment.

Now the big question. How are you selected for an affirmative action audit?

The federal government is required to use an impartial method of selection to determine which contractors will receive compliance reviews. That means local OFCCP officials, and even national OFCCP officials in Washington, DC, may not make an arbitrary decision to select you for review. Your selection, when it happens, must be due to an impartial system that has caused your company name to come to the surface. Think about jury selection and how county computers use drivers' license records and voter registration records to establish a database from which potential jurors are selected. The OFCCP has determined that the EEDS database will be its impartial selection system, even though it was created in the late 1970's and intended to serve for only a year or two. EEDS is still with us and is the tool OFCCP continues to use in selecting contractors for compliance review.

But, remember what goes into the EEDS system? Standard Form 100 reports that are based on a physical street address. So, your number comes up for the marketing offices down the street from your primary "headquarters" location. It was the EEO-1 report you filed on that address that eventually was selected by the computer's random number generator.

Yet, your affirmative action plan covers not only marketing but the Accounting Department across the street and all of the other groups at your "headquarters" address. What will be reviewed during the audit?

The answer is: Whatever is included in the establishment you have described in your affirmative action plan. So, even though only one of your three EEO-1 reports "popped out" of the EEDS system, your entire enterprise will come under scrutiny during the OFCCP compliance review.

That can lead to problems during the review. Your Compliance Officer will be expecting to see an affirmative action plan that contains numbers totaling the same as on your EEO-1 report. You know that the EEO-1 form is only one portion of your overall employee base as reflected in the affirmative action plan. Now you have to help your Compliance Officer understand how your numeric employee headcount differences are due to a legitimate reason. If you pull all of the EEO-1 reports you submitted, and adjust for any hires or terminations, you should be able to reconcile your EEO-1 reports to your affirmative action Workforce Analysis and Job Group Analysis reports. If they don't reconcile, you may have other problems and will want to investigate further.

So, in the final analysis, you will be selected for OFCCP audit based on your EEO-1 reports, even though they may have no direct relationship to the configuration of your affirmative action plan.

California Overtime Requirements - An Overview

Of all the questions we receive from employers and employees alike, most have to do with the issue of overtime requirements in California. Since the level of interest (and confusion) is so high, it seems appropriate to review the basic requirements.

Here is how you can conduct your own internal audit of the jobs in your organization. Remember, overtime eligibility under the labor code, is dependent on job content rather than incumbent qualifications. What counts is the job responsibility level not employee skills, academic degrees or experience. Job titles don't count either. You can label a job by any title, but that won't have any bearing on its exempt/non-exempt classification. You have to look at the job content to properly classify each position.

Step #1: Determine if job is exempt or non-exempt from overtime requirements.

The Fair Labor Standards Act (FLSA) is the foundation for making this determination nationwide. And the terms "exempt" and "non-exempt" refer to whether or not a job is exempt from the overtime requirements of this federal law. State laws and labor codes sometimes offer additional guidance in making the determination.

In California, several exemptions are possible. An Executive exemption can apply to management jobs with two or more subordinates (direct reports) for whom the manager has hiring and firing responsibility. An Administrative exemption can apply to jobs that have executive-level authority delegated by virtue of their work-related relationship with actual organizational executives. Secretaries and administrative assistants generally do not fall into this category due to the tasks they perform on the job. They are nearly always non-exempt. A Sales exemption can apply to both inside and outside sales people who have a substantial portion of their income determined by sales results. A Professional exemption applies generally to jobs that require a substantial portion of time be spent using independent judgment. Licensed attorneys, physicians, and dentists are examples. Pharmacists and nurses are no longer considered automatically exempt by California law. Finally, a Computer-related exemption can apply to a job if it meets certain income requirements and has responsibility for major decision-making regarding systems, software, architecture, etc. You can find more information about how to apply these exemptions, and the tests each job must pass before receiving such classifications, by visiting our web site at www.hrwebstore.com . Look in the "FREE Stuff" department and you will find a report on determining overtime requirements in California.

Every exempt position must be paid on a salaried basis, not on an hourly basis. No job that is paid an hourly wage may be exempt. And, some jobs paid on a salaried basis may be non-exempt. Salary alone is not the determining factor. Exempt jobs may not be paid in less than whole-week increments under both federal and state rules. If an exempt employee works only one hour in any workweek, the entire weekly salary must be paid. Exempt employees may not have pay deducted for disciplinary or other reasons in increments of less than one whole week. Violate any of these requirements, and the job can be reclassified as non-exempt by enforcement authorities. The problem is that such a reclassification carries with it an obligation to pay for overtime worked during the past three years. And, that can be a substantial amount of money. Be sure you classify your jobs properly.

Step #2: Determine what Industrial Welfare Commission Wage Order applies to your organization and follow those rules.

The California Industrial Welfare Commission (IWC) publishes 17 different wage orders. Some of them changed in 2001. Employers are required to have the wage order appropriate for their industry posted in every one of their work places. Employees are entitled to read the wage order at any time. Failure to post the proper wage order, or to have the current wage order, can result in financial penalties assessed by the California Labor Commissioner. The fine can be as much as $7,000. If you don't have the current IWC order in your workplace, you can get a copy from the HR Web Store at www.hrwebstore.com in the "FREE Stuff" department.

For the sake of an example, we will use Wage Order Number 4: Professional, Technical, Clerical, Mechanical and Similar Occupations. Most office-based service organizations fall into this category.

Step #3: Be sure you are computing overtime correctly for all non-exempt workers.

The basic rules are these:

• Base pay rate includes shift differentials, hazard pay, and other differential pay. It does not include bonus pay, stock options (although this is currently being debated in Congress), benefit equivalents, and the like.
• Overtime must be paid for hours worked in excess of 8 hours in any workday and for hours worked in excess of 40 in any workweek. The rate of pay for the overtime hours is 1.5 times the base pay rate. FLSA only requires overtime for over 40 hours in a workweek, but California law has a daily requirement as well.
• Overtime must be paid for hours worked in excess of 12 hours in any workday and for hours worked in excess of 8 on the seventh consecutive workday at a rate of 2.0 times the base pay rate.
• There is no requirement for an additional overtime payment for work on Saturday, Sunday, or holidays.
• Compensating time off (Comp time), if used, must be taken according to California rules. The Labor Commissioner's office can give you more information. Comp time must be given to employees at the same 1.5 or 2.0 rate as if they were being paid in cash. Each hour of overtime will therefore yield 1.5 or 2.0 hours in compensating time off. Allocating only straight time can land an employer in hot water with the Labor Commissioner.

Step #4: If you have been doing it incorrectly, take the time to calculate what employees are owed and issue a check.

Acknowledging incorrect treatment will cost you in terms of back pay. If your CEO says he or she would rather not spend the money to correct such a problem, remind him or her that additional penalties can be added by the Labor Commissioner if an employee complaint is filed and the enforcement folks conduct an audit of your payroll records. They are likely to make your liability retroactive for four years rather than three years in the bargain. So it is less costly to correct the problem yourself before the Labor Commissioner gets involved. You can make retroactive overtime payments into a positive relationship builder with your employees by pointing out the unilateral nature of the action. By doing it before you are forced to do it, you can be a hero in the eyes of employees.

In summary, employers should be mindful of the expensive remedies they will face if they attempt to shortcut overtime payments to eligible employees. More and more employees these days are knowledgeable about their rights, and when it comes to money, they have little hesitation about filing a complaint with the state so they can get what they think they are due. Employers need to take these changing attitudes into consideration before saying, "I'll take the risk."

OSHA Update - Handling Suspicious Packages & Targeted Workplace Inspections

OSHA has published guidelines and recommendations for handling suspicious letters and packages as a result of the recent Anthrax infections on the East Coast.

Anthrax organisms can cause infection in the skin, gastrointestinal system, or the lungs. To do so, the organism must be rubbed into abraded skin, swallowed, or inhaled as a fine, aerosolized mist.

Here is what OSHA now recommends for the American workplace:

• Be observant for suspicious envelopes or packages.
• Open all mail with a letter opener or method that is least likely to disturb contents. Do not use hands.
• Open packages/envelopes with a minimum amount of movement.
• Do not blow into envelopes.
• Do not shake, pour out contents.
• Keep hands away from nose and mouth while opening mail.
• Wash hands after handling mail.

• Discoloration, crystallization, strange odors or oily stains.
• Envelope with power or powder-like residue.
• Protruding wires or aluminum foil.
• Excessive tape or string.
• Unusual size or weight given size.
• Lopsided or oddly shaped envelope.
• Postmark that does not match return address.
• Restrictive endorsements such as "Personal" or "Confidential."
• Excessive postage.
• Handwritten, block-printed or poorly typed addresses.
• Incorrect titles.
• Title but no name.
• Misspellings of common words.
• No return address.
• Addressed to individual no longer with organization.

• Stay calm.
• Do not shake or empty the contents of any suspicious package or letter.
• Keep hands away from mouth, nose and eyes.
• Isolate the package or letter.
• Gently cover the envelope or package with anything available nearby (e.g. clothing, paper, inverted trash can, etc.) and do not remove cover.
• If an unknown substance spills from the package/envelope, do not try to clean up substance.
• Avoid creating air currents.
• Do not handle package/envelope any further.
• If material spills on floor avoid stepping near it. Avoid tracking any spilled materials to other locations.
• Wash hands with soap and water.
• Do not remove any potentially contaminated items from area.
• If contaminated, keep movements within the building to a minimum. This will keep contamination of building to a minimum. Remove heavily contaminated clothing as soon as possible and gently to minimize dispersal. (If shower facilities are available, remove clothing in shower under water stream. Place clothing into a plastic bag or other container that can be sealed. This bag should be given to responders for proper handling.)
• Notify supervisor or designated responders.

Disease can be prevented after exposure to the anthrax spores by early treatment with the appropriate antibiotics. Anthrax is not spread from one person to another person.

The Occupational Safety and Health Administration (OSHA) has designated specific employers as inspection targets each year for the past several years. In 2001, employers were chosen for safety inspections based on their responses to a survey sent by the agency in 1999. Year 2000 responses will be used to select inspection targets for 2002.

Results of the 80,000 employers surveys in 1999 show there were three (3) injuries and illnesses per 100 workers on average across the nation. There were 14,000 work sites among those survey responses that experienced eight (8) or more injuries and illnesses per 100 workers. It is those high-rate employers that will be targeted for unannounced inspections by the agency. Nursing homes are among those most likely to receive surprise inspections from OSHA based on their employee injury and illness rates.

If you would like to determine if your industry is on the list go to www.osha-slc.gov/OshDoc/Directive_data/CPL_2-2001_01.html .

OSHA Announces Outreach Effort on Needlestick Prevention

OSHA's bloodborne pathogens standard has changed and the agency is reaching out to educate employers, health care workers and the general public as a result. "Prevention is the best medicine," said Secretary of Labor Elaine Chao. "The more emphasis we place up front on education and prevention, the better able we are to protect workers. By revising this standard, OSHA is giving employers a stronger tool to help reduce serious injuries and illnesses caused by needles and sharps."

OSHA has created a collection of written materials designed to explain specific aspects of the new standard. They are available on the gency's web site at www.osha.gov .

Enforcement of the new provisions began on July 17, 2001. These new safety standards resulted from passage of the Needlestick Safety and Prevention Act. The new law was passed unanimously by Congress and was signed by President Clinton on November 6, 2000. One of the major requirements of this new law is that employers are required to select safer needle devices as they become available. Employers are also required to involve employees in identifying and choosing the devices.

Any employer with 11 or more workers must maintain a log of injuries from contaminated sharps. A number of industries classified as low-hazard-retail, service, finance, insurance and real estate sectors are exempt from most requirements of recordkeeping.

Significant advances have been made in product design for needles in recent years. Self-sheathing needles are now available that can greatly reduce the likelihood of employee injury. Such design changes are referred to in OSHA parlance as "Engineered Sharps Injury Protections."

For more information about the bloodborne standard, you can visit the following web site: www.osha-slc.gov/needlesticks/index.html .

Don't forget that January 1, 2002, is the start date for use of new OSHA recordkeeping forms. If you haven't yet gotten copies of the new forms, you can retrieve them at: www.osha-slc.gov/recordkeeping/RKforms.html . They are available for download in Adobe PDF format. You will need legal-sized paper to print them. They do not fit on a standard 8.5" by 11" letter-sized page.

A Gentle Word on Behalf of Our Business

When you need help developing your affirmative action program, give us a call. We specialize in AAP development, implementation training and compliance review support for clients all over the country. Find out more about our AAP development service by looking at our sample agreement and other information. You will find it all at http://www.management-advantage.com.

You wouldn't go to an IRS audit alone. Why think about going into a Department of Labor compliance review without professional support? The stakes are just as high either way.

We are ready to give you the support you need.

And while you're at it, think about ordering a copy of our reference and training book on preparing affirmative action plans and managing compliance reviews. You will find it an invaluable resource at a price that just can't be beat.

Secrets of Affirmative Action Compliance, new 5th edition, contains over 480 pages of the latest and current regulation requirements and practical suggestions for your organization. Includes new Federal Regulations. $99.95 plus $7. shipping/handling and CA sales tax for CA destinations. Credit Card Orders ... Call Toll Free:

We can help with your other human resource management needs as well. Think of us the next time you need:

• Employee Handbooks
• Management Training in Compliance Issues
• Affirmative Action Plan Development
• Affirmative Action Statistical Analysis
• Disparate Impact Testing for New Hires, Promotions, Transfers, Terminations
• Expert Witness
• Books, Software or Other Support Materials for HR Professionals

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