How You and Your Company Be Sued! Criminally and Civilly!

by?Dr. Di Ann Sanchez ?|?Mar 1, 2022?|?ethics ,?HR Compliance ,?HR Legislative Updates ,?HR Trends

Civil law and criminal law are two main classifications of the law. Civil law regulates conflicts between private parties, such as individuals or organizations, while criminal laws regulate crimes and frauds committed against the government. Typical civil law cases include malpractice or negligence. The criminal cases usually include assault, battery, arson, or murder cases. Civil law cases are filed by private parties and criminal law cases are initiated by the government. The wrongdoer is not punished if s/he commits a civil crime. The person who has suffered in a civil case benefits the law or avoids a loss as s/he gets compensation or restitution for the harm or damage.?It is noteworthy that criminal and civil law do not exclude one another. Thus, it is possible for an individual to be prosecuted for criminal conduct and at the same time face civil litigation.

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1. Cobra Law?– Civil and Criminal Prosecution

COBRA generally applies to all private-sector group?health ?plans maintained by employers with at?least 20 employees on more than 50 percent of its typical business days?in the previous calendar year. Both full and part-time employees are counted to determine whether a plan is subject to COBRA.

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Employers who fail to comply with the COBRA requirements can be required to pay a steep price. For example, failure to provide the COBRA election notice within the period of time needed can subject employers to a?penalty of up to $110 per day?and the cost of medical expenses incurred by the qualified beneficiary.

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2.?Employment Retirement Income Security Act (ERISA) – Civil and Criminal Liability

?Have you heard of Enron? This is how they got into trouble! The?Employee Retirement Income Security Act of 1974?(ERISA)?is a federal law that sets minimum standards for most voluntarily established retirement and?health plans ?in private industry to protect individuals in these plans. What are they??Employer-sponsored retirement plans?include 401(k)s, pensions, deferred compensation plans, and profit-sharing plans. Plans can be either defined benefit or defined contribution plans. ERISA?protects the interests of employee benefit plan participants and their beneficiaries.??

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It requires plan sponsors to provide plan information to participants. Finally, it establishes standards of conduct for plan managers and other fiduciaries. ERISA sets uniform minimum standards to ensure that?employee benefit plans ?are established and maintained. In addition, employers must?provide promised?benefits?and satisfy ERISA’s requirements for managing and administering private retirement and welfare plans.

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What are employers required to do under ERISA?

As with civil penalties, criminal punishments imposed for ERISA violations depend on the nature of the breach and the corresponding provision under federal law. For example, a person who is convicted of backdating paperwork related to a plan — meaning that dates were altered to make it appear that a transaction happened before it did — can face fines up to $10,000 per individual affected by the fraudulent backdating, and for each year the backdating occurred.

It requires plan sponsors to provide plan information to participants. Finally, it establishes standards of conduct for plan managers and other fiduciaries. ERISA sets uniform minimum standards to ensure that employee benefit plans are established and maintained relatively and financially sound. In addition, employers must?provide promised benefits?and satisfy ERISA’s requirements for managing and administering private retirement and welfare plans.

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In 2002, with the passage of the?Sarbanes-Oxley Act ?(due to Enron), maximum criminal penalties for ERISA violations were increased dramatically. Under the Act, individuals may now be fined up to $100,000 and jailed up to 10 years. In addition, companies may also face up to $500,000 in fines for ERISA violations.

1. Fair Labor Standards Act (FLSA) – Civil and Criminal Liability

?Violators of the child labor provisions are subject to a?civil money penalty of up to $10,000?for each young worker employed under violation. In addition, willful violations of the FLSA may result in?criminal prosecution and the violator fined up to $10,000. A second conviction may result in imprisonment.

7 Deadly FLSA Violations

• Misclassifying Employees. Your employees are generally classified as either exempt?(salary) or nonexempt (hourly)?
• Working Off-the-Clock. (working on the computer at home)
• Unauthorized Overtime. (not authorized by a manager)
• Mismanaging Breaks. (did not take breaks mandated by law)
• Inaccurate Time and Payroll Records. (no records of payroll record for exempt and hourly)
• Unpaid Interns. (did not follow the new steps on government regulations for interns)
• Misclassifying 1099’s and employees.?

???4.?Family and Medical Leave Act (FMLA) – Civil Liability and No Criminal Liability??

The Wage and Hour Division investigates complaints related to FMLA. If violations cannot be satisfactorily resolved,?the U.S.?Department of Labor may bring an action in court to compel compliance. An employee can also get a private civil action against an employer for violations. FMLA applies to all?public agencies, including state, local, and federal employers,?local education agencies (schools),?and?private-sector?employers who employ?50 or more employees?in?20 or more workweeks?in the current or preceding calendar year. This includes joint employers and successors of covered employers. Any violations of the FMLA or the Department’s regulations constitute interfering with, restraining, or denying the exercise of rights provided by the FMLA.

Examples of prohibited conduct include:

• Refusing to authorize FMLA to leave for an eligible employee,
• Discouraging an employee from using FMLA leave,
• Manipulating an employee’s work hours to avoid responsibilities under the FMLA,
• Using an employee’s request for or use of FMLA leave as a negative factor in employment actions, such as hiring, promotions, or disciplinary actions, or,
• Counting FMLA leaves under “no-fault” attendance policies.

??5.?????Foreign Corrupt Practices Act (FCPA) – Civil and Criminal Liability?Anti-Bribery prohibits companies from paying foreign government officials to assist or retain business.???This became very relevant with E-Commerce?in?other countries. If you are doing business with other countries, please review this law.

A review of recent enforcement actions demonstrates that how a company responds when suspected violations of the FCPA are discovered has a significant influence on whether penalties are imposed by the SEC and DOJ, rendering early detection and analysis of alleged violations critical.

Criminal penalties for violations of the anti-bribery provisions of the FCPA include?fines of up to $2,000,000 for corporations and other business entities?and up to $100,000 for officers, directors, stockholders, employees, and agents of such entities.

1. Immigration and Reform and Control Act (IRCA) Civil and Criminal Liability

The Immigration Reform and Control Act altered U.S. immigration law by making it?illegal to hire illegal immigrants knowingly and establishing financial and other penalties?for companies that employed illegal immigrants. In addition, for patterns of violations, the law set criminal penalties of a?fine of up to $3,000 for each unauthorized person employed and up to six months in prison.

Penalties for non-compliance:?Civil fines of $100 to $10,000 per violation?for recordkeeping and employment violations. Back pay/front pay and attorney’s fees for discriminatory actions. Criminal penalties may be imposed for repeated violations.

??7.??Occupational Safety and Health Act (OSH Act). Civil and Criminal Liability??The Occupational Safety and?Health ?Administration (OSHA) is a federal agency that establishes on-the-job safety protections for workers.

Any employer who willfully violates any standard, rule, or order promulgated according to section 6 of this Act, or of any regulations prescribed according to this Act, and that violation caused death to any employee, shall, upon conviction, be punished by a?fine of not more than $10,000 or by imprisonment.

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