Recent Department of Labor Investigations
Presented by Al Corvigno
J&J Snack Foods
Two federal investigations have found that temporary production line workers at J&J Snack foods Corp., were cheated out of their wages by the company and two staffing firms. The DOL found that J&J Snack Foods in N.J. did not properly pay their employees the minimum hourly wages and overtime. As a result they were fined $ 2.1 million for back wages and liquidated damages to 677 workers.
The department’s most recent investigation found 465 workers at J&J’s Swedesboro facility provided by staffing firm Sebastian and Sebastian LLC were paid straight time for overtime hours worked beyond 40 in a work week, which is in violation of federal law. In response, J&J agreed to pay a total of $1,260,254 in back wages and liquidated damages to the impacted workers.
In addition, the department assessed a $20,000 civil penalty for the willful, repeat nature of the violations found in the New Jersey investigation. Earlier in the year, the department found that J&J and Pennpak, a staffing firm that provided workers at the J&J facility in Chambersburg, Pennsylvania, failed to pay their workers at least the federal minimum wage and overtime. In that case, J&J agreed to pay 212 temporary workers $920,000 in back wages and liquidated damages.
DOL Sues Benefit Plan Providers
The U.S. Department of Labor filed a lawsuit in the U.S. Disrict Court of Maryland against Chimes District of Columbia, Inc., affiliated companies, company executives and employee benefit plan providers over allegations that an employee benefit plan sponsored by Chimes paid millions of dollars in excessive fees.
DOL investigations found that Chimes violated the Employee Retirement Income Security Act (ERISA ) when they caused a health and welfare plan to pay excessive fees. They included those paid to the plan’s third-party administrator, FCE Benefits Administrators, Inc. and another company, Benefits Consulting Group (BCG).
The lawsuit also alleged owners Gary Beckman and Stephan Porter, caused the plan to engage in transactions for their own benefit and exercised control over the plan’s contracts with other service providers to increase FCE’s compensation through undisclosed commissions and fees. All of these actions are violations of ERISA.
FCE and BCG pledged $330,000 to the Chimes Foundation, and during 2009 – 2014 paid another $400,000 while BCG also pledged $282,500. In addition, FCE employed a child of Chimes and had BCG’s owner provide discounts to Chimes on other non-plan work. In connection with those payments and other benefits FCE and BCG were retained as service providers for the health and welfare plans, which violates federal law. Both companies are liable for profits earned as a result.
It is troubling that service providers made substantial payments to the plan sponsor, and not surprising that those services were overpriced. The DOL will act vigorously to protect plans where the integrity of the service provider is compromised by unlawful payments to plan fiduciaries. In addition to having the companies pay back any profits including penalties, DOL is asking for the removal of FCE, Beckman, Porter and BCG as fiduciaries or service providers for any ERISA covered plan in the future. All company officers may also face prison time, depending on the legal outcome.
Investigations are time consuming and complicated. It is imperative your personnel are properly trained in the fundamentals of the SCA and how to handle DOL audits and investigations. If you have any questions or would like additional information, please do not hesitate to contact us.
At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe-benefit obligations and provides your employees with valuable benefits.
Frozen Pipe Prevention
Turn up the heat! Set the thermostat to the same temperature day and night. If you live in an old house built over an uninsulated crawl space turning up your thermostat will increase the air temperature in the crawlspace by projecting heat energy through the floor into the space. Plan on insulating and air sealing the space.
Open the kitchen and bathroom cabinet doors to allow warm air to circulate around plumbing. It’s not unusual for plumbing running to a kitchen sink on an exterior wall to be extremely vulnerable because the wall is not insulated. Open the cabinet doors along that wall to project heat into the space.
Check around the home for other areas where water supply lines are located in unheated areas. Look in the basement, crawl space, attic, garage, and under kitchen and bathroom cabinets. Both hot and cold water pipes in these areas should be insulated.
You can keep unprotected pipes above freezing by simply placing an electric heater near them. Remember, the goal is not to make the space toasty warm and comfortable. It’s to keep the water in the pipe above freezing. Remember to never leave a space heater unattended.
Consider installing specific products made to insulate water pipes like a “pipe sleeve” or installing UL-listed “heat tape,” “heat cable,” or similar materials on exposed water pipes.
If you have an attached garage, keep the doors shut. Wind and cold air drafts increase the likelihood of a frozen pipe.
Turn off the water. In the worst case, turn off the main water valve while the house is unoccupied (such as a vacation home) or while you sleep. If a pipe freezes and breaks, the spillage is limited only to the water in the pipe. If you are going away, shut off the water supply line to your washing machine.
Drain and shut off all outside spigots.
Please refer to the link below if you would like additional information:
What You Need To Know About Crime Insurance
Crime Insurance refers to theft of money and/or securities from a business. There are a variety of Crime Insurance categories including:
Employee Dishonesty: Covers theft of money, securities and other property by an employee. These types of losses are commonly carried out through theft of small amounts over time.
Forgery or Alteration: Pays losses incurred through the direct result of forged or altered checks, drafts or Promissory notes.
Money and Securities: Theft or destruction of cash or securities either at your location(s) or in transit.
Computer and Funds Transfer Fraud: Losses due to money transferred, paid or delivered because of fraudulent computer entry. The impacted computer equipment must be owned or operated by the insured.
Money Orders and Counterfeit Currency: Loss incurred from accepting in good faith counterfeit currency or fraudulently issued money orders.
Client Property: Coverage required by a client for money or property in your possession. Financial institutions will often require this coverage for contractors and vendors.
ERISA Compliance: ERISA requires that 401(k) and other types of employee benefit plans be bonded for an amount not less than 10% of the plan’s assets subject to a maximum of $500,000 ($1,000,000 if employer securities are involved). This coverage can be combined with Employee Dishonesty or written inexpensively on a separate ERISA Bond coverage form.
Exposures to crime losses have changed over time. Electronic transactions have reduced the cash exposure for many types of businesses. However, this transition has increased the risk from fraudulent electronic transactions.
Employee Dishonesty or Theft claims continue to be a serious problem for businesses. These losses are well hidden and typically take place in small amounts over a long period of time. The result can be a large loss once the crime is discovered several years into the process.
An effective risk management approach is to combine internal controls with some level of insurance coverages. Good internal financial controls are the best method for preventing and limiting the loss potential from theft. For example, good controls can reduce the opportunity for employee theft and therefore act as a deterrent. Click here to view a prevention guide offered by Chubb. Insurance coverages should also be considered for additional protection. Crime coverages can also be cost effectively obtained as part of a Package or Businessowner’s policy as well as on a stand-alone basis. Please feel free to contact us with any questions regarding this important exposure consideration.