WHISARD Compliance Action Report U.S. Department of Labor Wage and Hour Division 1566265 Case ID: Originating District: Manchester NH District Office Local Filing Number: 2010-245-00078 Investigating. District: Manchester NH District Office WHMIS Case Number: Lead Investigator: Registration Date: 12/03/2009 Assignment Date: 12/03/2009 Ex 7(c) Employer Information Trade Name: Sebasticook Lumber Address: SKILLS, Inc. 01-0272879 Somerset 446 Hartland Road, PO Box 65 Legal Name: EIN: County: Saint Albans, ME04971 NAICS Code: 62431 E No. Of Employees: x 7( e) Investigation Information 12/28/2007 12/27/2009 Ex 7(e) Full Investigation Agree to Comply BNPI: Reinvestigation: Recurring Violation: Future Compliance Agreed: Involved in AG:     BWFS:  RO/NO Review:  CMP:  Follow Up Investigation:  Litigation:  Other Action:  Civil Action:  Denial of Future Certificate:  Criminal Action:  BW Payment Deadline: 08/20/2010 Submit For Opinion:  Trailer forms attached:  Period Investigated From: To: Investigation Type: Investigation Tool: Compliance Status: Recommended Action: CL Violation / Compliance Status Violations EEs ATPBWs Computed BWs Agreed LDs Computed LDs Agreed No Violation found for this act / Compliance (no violations found) 1 / 0 $0.00 $0.00 $0.00 $0.00 CL 0 0 $0.00 $0.00 $0.00 $0.00 Totals: Date: 06/19/2017 11:18:15 AM Case ID: 1566265 CMPs* Page 1 WHISARD Compliance Action Report EEV Violation / Compliance Status Violations EEs ATPBWs Computed BWs Agreed LDs Computed LDs Agreed ESA 91 Form Processed / Compliance (no violations found) 1 / 0 $0.00 $0.00 $0.00 $0.00 EEV 0 0 $0.00 $0.00 $0.00 $0.00 Totals: CMPs* FLSA Violation / Compliance Status Violations EEs ATPBWs Computed BWs Agreed LDs Computed LDs Agreed No Violation found for this act / Compliance (no violations found) 1 / 0 $0.00 $0.00 $0.00 $0.00 FLSA Totals: 0 0 $0.00 $0.00 $0.00 $0.00 CMPs* SMW14 Violation / Compliance Status Violations EEs ATPBWs Computed BWs Agreed LDs Computed LDs Agreed Failure to pay commensurate rate / Agree to Comply 5 / 5 $3,743.57 $3,743.57 $0.00 $0.00 SMW14 Totals: 5 5 $3,743.57 $3,743.57 $0.00 $0.00 CMPs* * CMPs computed do not necessarily indicate CMPs assessed. Unduplicated Employees Found: Total Amount BWs Computed: Total Amount LDs Computed: Date: 06/19/2017 11:18:15 AM 5 $3,743.57 $0.00 Unduplicated Employees Agreed: Total Amount BWs Agreed: Total Amount LDs Agreed: Case ID: 1566265 5 $3,743.57 $0.00 Page 2 WHISARD Compliance Action Report Conclusions & Recommendations: Ex 7(e) FC wi exec dir. Tom Davis, HR Mgr. Kathleen Fox, and mill mgr. Vernon Martin. Sec. 14 violations for failure to pay proper commensurate wages due to improper time studies and PW surveys. Er ATC, ATP. Admin. closing is recommended. Pubs: Poster, FLSA, HRG, 516, 785, WH-1325, CL-101, fact sheets 17A, 39B, 39D, 39E, 44. 06/18/2010 WHI Signature:__________________________________Date:__________________ Reviewed By:____________________________________Date:__________________ Date: 06/19/2017 11:18:15 AM Case ID: 1566265 Page 3 Case ER: Case ID: 1566265 Sebasticook Lumber (SKILLS, Inc.) 446 Hartland Rd., PO Box 65 St. Albans, ME 04971 File # 2010-245-00078 EIN # 01-0272879 NARRATIVE COVERAGE Reason for Investigation: Ex 7(e) Prior History: A 2007 FMLA investigation found a violation for failure to reinstate an employee. BWs of $11,002.20 were found. Whisard ID 1478364. The firm has not been the subject of previous FLSA or Sec. 14 investigations. SKILLS, Inc. began operations in 2005 through the merger of two non-profit corporations which provide services to persons with mental retardation, Sebasticook Farms and Ken-A-Set. A 2001 investigation of Sebasticook Farms found an improper piece rate time study which resulted in BWs of $165.70 for one worker. A second investigation found no violations. Whisard IDs 1127623, 1129674. Investigations of Ken-A-Set in 1992 found Sec. 14 violations at the LC Dill Adult Development and Training Center (39 workers due $6,710), the Municipal Recycling Program (7 workers due $17,883) and the Wyandotte Recycling Program (5 workers due $1,009). Whisard IDs 106919, 106920 and 106921. Nature of Business and Sec. 3(d) Employer: The subject firm is a Maine non-profit corporation which provides services to persons with mental retardation including residential facilities, day programs, and work programs. The firm is run by a Board of Directors. See exh. C-3. There is no President of the Board of Directors. The CEO of SKILLS is Tom Davis. He is a member of the Board of Directors. He runs the operation and is an employer within the meaning of FLSA sec. 3(d). The firm maintains offices Page 1 Case ER: Case ID: 1566265 at 461 Hartland Rd., St. Albans, Maine and at 10 Quarry Rd., Waterville, Maine. Sebasticook Lumber produces hardwood lumber at random lengths. The lumber is used to build furniture, flooring, stair treads and banisters. Week ending 12/27/2009 Sebasticook Lumber employed 22 nondisabled workers and five workers paid special minimum wages. During the period of the investigation the firm employed 32 nondisabled workers and seven workers paid special minimum wages. The firm used to employ workers at special minimum wages to make wooden pallets for Wood Products Manufacturing in St. Albans but that business has closed. Sebasticook Lumber mill manager Vernon Martin said the firm has not operated Wood Products Manufacturing since 2004. SKILLS, Inc. employs workers at special minimum wages in the following additional facilities: Dill Center, Skowhegan, Maine (workers sort donated goods for a thrift store); Classic Cleaners (janitorial work in the community run under the umbrella of the Dill Center); the Ervin Center, Waterville (workers sort donated goods for a thrift store); SKILLS Recycling, Watervillle (workers sort plastic goods); E-Waste, Waterville (workers recycle computer parts); and SKILLS Employment Services, Pittsfield (workers mow lawns and do assembly work for Perfect Fit and New Balance). In addition, the firm runs day programs for persons with mental retardation and operates approximately 20 group homes in Newport, Skowhegan, Waterville, Fairfield, Athens, Palmyra, Hinckley and St. Albans. Altogether the enterprise employs approximately Ex 4 workers, 100 of whom are paid special minimum wages. FLSA Coverage: Workers at Sebasticook Lumber handle lumber which is shipped in interstate commerce. Mill manager Vernon Martin says that while the firm has an occasional Maine customer, almost its entire product is shipped out of state to customers from Pennsylvania to Montreal. The largest customer is Menuiserox of Beauceville, Quebec, Canada. All workers including workers paid special minimum wages are subject to FLSA individual coverage. ADV figures off SKILLS, Inc. Statements of Activities showed Sebasticook Lumber's ADV was $Ex 4 in 2008 and $Ex 4 in 2009. Exh. C-2. Since Sebasticook Lumber is operated for a business purpose, employees of Sebasticook Lumber are subject to FLSA enterprise coverage. Sec. 16(b): The firm is not aware of any private lawsuits alleging violations of the FLSA. Period of Investigation: 12/28/2007 to 12/27/2009 Page 2 Case ER: Case ID: 1566265 EXEMPTIONS Sec. 13(a)(1): An executive exemption was allowed for manager Vernon Martin, sal. $Ex 4 biweekly. Mr. Martin supervised all workers for Sebasticook Lumber. Review of records. No other exemptions were given or claimed. Sec. 13(a)(7): Exemptions were allowed for seven workers paid special MWs during the period of the investigation. Review of records. STATUS OF COMPLIANCE Sec. 6: All non-disabled workers were paid equal to or greater than MW. Review of records and exh. B-1 to B-3. Sec. 7: The employer paid T ½ after 40 hours in a workweek to nonexempt employees. Review of records and exh. B-1 to B-3. Sec. 11: No RK violations were found. Review of records and exh. B-1 to B-3. Sec. 12: No CL violations were found. The employer does not employ workers under age 18. Review of records and exh. B-1 to B-3. Sec. 14(c) Misclassification: Workers employed at special minimum wages by Sebasticook Lumber are consumers with mental retardation. This was documented by psychological evaluations. Exh. E-3. No misclassification violations were found. Commensurate Wages: No Adjustments to established prevailing wage rates were due as a result of the federal MW increases on 7/24/2007, 7/24/2008, and 7/24/2009. The state MW was higher than the increased federal MW at the time of each federal MW increase. The employer failed to conduct prevailing wage surveys 30 to 60 days following Maine MW increases on 10/1/2007, 10/1/2008, and 10/1/2009. See exh. D-8. The firm's PW survey in 2007 was conducted between 3/12/2007 and 5/9/2007. The firm conducted its 2008 PW survey on 7/29/2008, so BWs for the period 12/28/2007 to 7/29/2008 were increased by the 10/1/2007 3.704% state MW increase. The firm conducted its 2009 PW survey on 3/26/2009, so BWs for the period 10/1/2008 to 3/26/2009 were increased by the Page 3 Case ER: Case ID: 1566265 10/1/2008 3.572% state MW increase. The firm did not conduct a survey after the 10/1/2009 increase, so BWs from 10/1/2009 to 12/27/2009 were increased by the 10/1/2009 3.449% state MW increase. BWs due to failure to conduct PW surveys in a time manner were $91.01. Exh. A-1 to A-5, E-4. Sec. 14(c) BWs were computed for five workers due to the failure to pay commensurate wages. Review of records and exh. A-1 to A-5. Three factors played a role in the violations. First, the employer's prevailing wage survey used improper data and one source contradicted the employer's survey. Second, the firm did not adjust wages the first pay period after each evaluation of a worker's productivity. Third, the employer used improper factors in evaluating the quality of the work when it conducted productivity evaluations. Workers paid special minimum wages worked as stackers on the saw mill's green chain. Boards cut in the sawmill come through a conveyor to the green chain. Workers take the lumber off the green chain and stack it based on grade and length. The wood must be stacked neatly in squares. The length of the boards and grade must be properly marked on the stack. Exh. B-3. The employer's standard for stacking on the green chain by a non-disabled work is 165 boards for a 50 minute hour. The investigator timed mill manager Vernon Martin on 1/13/2010 for a 10 minute evaluation. He stacked 69 boards which equals 345 boards over 50 minutes, exceeding the standard. He appeared to work at a steady pace which could be maintained all day. A disabled worker stacked 19 boards over 10 minutes, which would have resulted in a commensurate wage rate of $5.38 per hour. Exh. D-4. The worker's actual wage rate is $6.41 per hour. Review of records. The employer conducted prevailing wage surveys to set commensurate wages in 2007, 2008, and 2009. Exh. D-8. The 2008 prevailing rate was not properly computed. The employer contacted two employers on 7/29/2008 who said the wage for experienced stackers was $9.50 per hour. Exh. D-8. The assistant to the mill manager, Ex 7(c) conducted the surveys. She told the investigator she realized she was supposed to contact at least three employers, so she used her contact to Parker Lumber on 2/26/2009 to complete the prevailing wage survey for 2008. On this basis she said the 2008 prevailing wage was $9.17 per hour. Exh. D-8. The employer's statement casts doubt that the employer even considered the prevailing wage in 2008, because it did not compute the $9.17/hour rate until 2009. The investigator discussed the issue with Regional Sec. 14 Specialist Margaret MacDonald on 1/6/2010. Ms. MacDonald said the 2009 survey response should not have been used to compute the 2008 prevailing wage. She said the prevailing rate should be based on the rates from the survey responses actually received in 2008. Therefore the prevailing wage rate used in 2008 was $9.50 per hour. See exh. E-2. Page 4 Case ER: Case ID: 1566265 The investigator contacted the sources of the firm's prevailing wage surveys in 2009 to confirm the accuracy of the survey. Two of the employers said the wage listed in the employer's survey were accurate. Exh. D-5. The third employer in the survey, Pride Manufacturing, was listed with a prevailing wage was $9.50 per hour based on a contact on 3/12/2009. The employer did not list the name of its contact at Pride Manufacturing. Exh. D-8. The investigator spoke with Ex 7(c) , HR Director Ex 7(c) for Pride Manufacturing on 1/11/2010. Ms. said the firm's starting wage in 2009 was $9.69 per hour. After six months, an employee would receive $9.98/hour. Exh. D-5. Using the $9.98/hour wage instead of $9.50 per hour, the investigator computed a prevailing wage in 2009 of $9.33 per hour. See exh. E-2. Instead of evaluating the productivity of workers once every six months, the employer conducted a number of evaluations over a six month period and then averaged the results. See exh. D-6, D-7. For example, in 2008 Ex 7(c) was evaluated on 2/15, 4/12, 6/20, 7/28, and 7/29 (twice on 7/28 and 7/29). The total production was averaged to determine his commensurate wage. Exh. D-6. The employer is required to adjust the commensurate wage the first pay period after each evaluation which results in an increase in the commensurate wage. The employer's practice resulted in back wages when an employee's commensurate wage based on a rating exceeded the employee's actual pay rate. The employer used the 90/10 quantity and quality formula to determine the commensurate wages. The employer took into account improper factors in evaluating quality such as the employee's application to the job, ability to learn, ability to work with others, and attendance and punctuality. The employer did not define the actual quality factors. See exh. D-6, D-7 (quality is shown on the back of the form). Therefore, after consulting with Regional Sec. 14 Specialist Ex 7(c) , the investigator gave workers full credit for the quality standard in computing the commensurate wages due. One worker, Ex 7(c) was paid $3.17 per hour from 12/28/2007 until his rate was increased to $4.44 per hour effective 10/5/2009. The employer's evaluations indicated Mr. Ex h should have been 7(c)per hour after 7/7/2009. paid $4.44 per hour after 7/29/2008, $4.35 per hour after 12/14/2008, and $4.39 Ex Exh. D-7. Back wages of $3,986.01 were computed for Mr. as a result of the violations. Exh. A-5. Mill manager Vernon Martin said there was a wage freeze at7(c) the mill, and for this reason Mr. Ex 7(c) wages did not increase until 10/5/2009. The employer did not intend for the wage freeze to apply to workers paid special minimum wages, but that is the likely reason Ex 7(c) rates did not increase after each six month evaluation period. Violations did not occur for other workers primarily because the employer has a practice of never reducing a disabled worker's pay rate. Many of the disabled workers are long time employees. Based Page 5 Case ER: Case ID: 1566265 on the investigator's recomputed commensurate wage rates, BWs of $391.60 were computed for four additional workers. Exh. A-1 to A-4. Ex 7(c) was paid the lowest wage during the period of the investigation, $3.17 per hour. Certificate Status: Certificate 03-04586-S-020 is in effect for Sebasticook Lumber from 3/20/2009 to 2/28/2011. The certificate was posted at the work site. Certificate 03-04586-S-012 was in effect for SKILLS Lumber Mill (located at 446 Hartland Rd., St. Albans, Maine) for the period 11/30/2007 to 4/30/2009. Exh. C-1. Vernon Martin said Sebasticook Lumber and SKILLS lumber mill are the same business. Workers and their guardians are notified of the terms of the certificate at annual planning meetings. Sec. 14(c) Recordkeeping. The employer kept records on workers' disabilities. See exh. E-3. The employer performed periodic evaluations of productivity. See exh. D-6, D-7. The employer did not complete prevailing wage surveys within 12 months for its 2008 survey. It did not complete PW surveys following state MW increases on 10/1/2007, 10/1/2008, and 10/1/2009. The employer did not keep a record of the individual contacted for prevailing wage surveys and the individual's job title. See exh. D-8. Back Wage Computations: The investigator recomputed the commensurate wage due each worker should have been paid based on the revised prevailing wages. The commensurate wage was computed for each evaluation, except when the evaluations were within a week to 10 days. Those ratings were averaged. Employees were given full credit for the 10% quality rating. BWs were computed when the recomputed commensurate wage was higher than the rate paid to a worker. Because the employer never decreased wages for employees, employees were generally paid more than their commensurate wages. BWs were increased by the amount of the State MW increase for periods when the employer failed to conduct time PW surveys following increases in the state MW. Exh. A-2 to A-4, E-4. Total BWs of $4,377.96 were computed for five workers. Exh. A-1 to A-5. DISPOSITION A final conference was held at the SKILLS office in St. Albans, Maine on June 18, 2010. Executive Director Tom Davis, HR Mgr. Kathleen Fox, mill mgr. Vernon Martin, and Ex 7(c) WHI participated in the conference. The provisions of the FLSA and Section 14 requirements were discussed. The violations were discussed. The employer assured future compliance. The investigator presented BW findings for sec. 14 violations showing five workers were due BWs of $4,377.96. The employer was Page 6 Case ER: Case ID: 1566265 given copies of the investigator's computations. The June 18, 2010 meeting followed a meeting at SKILLS on Feb. 2, 2010 with the same participants plus program coordinator Ex 7(c) . At the Feb. 2 meeting, the issues concerning the timeliness and inaccurate information in the prevailing wage surveys, the averaging of time study results, and the improper quality assessments for time studies were discussed. At the June 18, 2010 meeting, the employer was told it had to conduct PW surveys within 30 to 60 days after state MW increases, or after federal MW increases if a federal increase results in a MW higher than the state MW. The employer was told that an exemption was allowed for mill mgr. Vernon Martin and that no FLSA violations, beyond the Sec. 14 violations were found. For future compliance, the employer plans to conduct PW surveys in November, because Maine's MW usually goes up on Oct. 1 st each year. The employer will conduct time studies every six months. It will no longer average results. The employer is considering doing re-work to assess quality. The possibility of an installment plan was discussed so as not to diminish Ex 7(c) SSI eligibility. The employer was told that if it wanted to pay by installments, a waiver of the statute of limitations would be required. The employer was told that BWs over 2 years old at the time of the agreement would be dropped. The employer determined that based on his monthly earnings, Ex 7(c) could only receive BWs of $50/month, which was not realistic for paying the BWs by installments. Therefore the employer decided to pay the BWs in a lump sum, which would only effect Mr. Ex 7(c) SSI eligibility for one month. On June 18, 2010, the employer agreed to pay the BWs as computed. The investigator dropped BWs over 2 years old as of June 15, 2010. This resulted in a reduction of $634.39. The employer agreed to pay BWs of $3,743.57 to five workers. At the June 18, 2010 final conference, the employer was given Back Wage Disbursement and Pay Evidence Instructions and back wage receipts for each worker. The employer will pay the BWs by 8/20/2010 and return preliminary proof of payment to the Manchester, NH DO the same day. Recommendation: This is the employer's first sec. 14 investigation. There is no evidence the violations were willful. Certificate revocation is not recommended. No CMPs are recommended. Administrative closing is recommended after the employer submits proof of payment of the BWs. Publications: Posters, HRG, FLSA, 516, 785, WH-1325, CL-101, fact sheets 17A, 39B, 39D, 39E, 44. Page 7 Case ER: Case ID: 1566265 ____________________ WHI June 18, 2010 Ex 7(c) Send future correspondence to: Tom Davis, Executive Director SKILLS, Inc. PO Box 65 St. Albans, ME 04971 Tel. (207)938-4615 Page 8