WHISARD Compliance Action Report U.S. Department of Labor Wage and Hour Division Case ID: 1639212 WHMIS Case Number: Registration Date: 12/08/2011 Assignment Date: 12/15/201 1 Employer Information Trade Name:OutsI'de Magazine Address: 400 Market St. Santa Fe, NM87501 Investigation Information Recommended Action: Local Filing Number: 2012- 105%" Originating District: Investigating. District: Albuquerque NM District Office Lead Investigator: Albuquerque NM District Office Legal Name: Marlah Media Network, LLC em: County: Santa Fe NAIC Code: 511 120 No. Of Employees: Period Investigated From: 04/09/2010 To: 04/03/2012 Investigation Type: Investigation Tool: Limited Investigation Compliance Status: Refuse to Comply BNPI: Reinvestigation: Recurring Violation: Future Compliance Agreed: Involved in AC: DDEICI v' la Violationl Compliance Status BWs Computed EEs ATP BWs Agreed CM Failure to pay Minimum Wage Refuse to 28 $171,716.25 0 $0.00 Comply aw Totals: 23 3171, 716.25 0 Date: 06/20/2012 8:31 :11 AM Case ID: 1639212 Page 1 WHISARD Compliance Action Report CMPs computed do not necessarily indicate CMPs assessed. Unduplicalcd Employees Found: 28 Unduplicaled Employees Agreed: 0 Total Amount Computed: $171,715.25 Total Amount Agreed: $0.00 Conclusions Recommendations: 101.25 hrs. Enterprise coverage persec of the Act. Vias ofsec 6 1 1. EE's failed to pay MW to 28 interns. ER also failed to maintain time records for interns. ER RTC. Beck wages never discussed. No history in whiz. . Recommend 16(b) letters sent to employees found due ac wages. 05/03/2012 5' Reviewed By: Date: 06/20/2012 8:31:11 AM Case ID: 1639212 Page 2 Mariah Media Network, LLC EIN: d/b/a Outside Magazine Case Id: 1639212 400 Market St. Local Filing:2012-105-00214 Santa Fe, NM 87501 Contact: Julie Fritsch, attomey FLSA ADDENDUM NARRATIVE REPORT A Joint Review Committee was held by George Watkins, Theodore and It was Recommendation: Employees found due back wages should be 29 USC ?216(b) letters advising them of their right to private action. Wage and Hour Investigator 06/07/2012 FLSA NARRATIVE HISTORY: The employer has no prior history in Whizard. COVERAGE The business a publications firm whose primary product is a magazine sold throughout the United States. The business is a limited liability company. The legal name of the establishment is Mariah Media Network, LDC d/b/a Outside Magazine (Outside) and was organized in the State of New Mexico on May 28, 2009. Prior to this date the business was operated as Mariah Publications Corporation, a Delaware Corporation from May 9, 1975 until May 20, 1994 when the corporation name was changed to Mariah Publications Corporation. The officers of the firm are as follows: Angelo Gaziano, Executive Vice President, Chief Operating Officer Scott Paramelee, Vice President, Publisher Anne Mollo-Christensen, Vice President, Business Development and- are the Fair Labor Standards Act (FLSA) employer: ENTERPRISE COVERAGE: The establishment has an annual dollar volume of_ in 2010, -- as Mariah Media Network, LDC and -3 as Mariah Media Mariah Media Network, LLC d/b/a Outside Magazine Case Id: 1639212 400 Market St. Local Filing:20l2-I05-00214 Santa Fe, NM 87501 Contact: Julie Fritsch, attorney Corporation in 2009. Multiple individuals work on computers manufactured out the state. As a result the establishment is covered as an enterprise under 29 USC (Exhibit C-22 thru C-24) INDIVIDUAL COVERAGE: Individual coverage was not fully developed, considering the enterprise coverage has been established. The interns are engaged in interstate commerce, through the use of e-mail, telephones, and intemet as part of their daily work requirements SCOPE: This is a limited investigation of the location listed in the head note above. The investigation was limited to the interns. This investigation was conducted by WHI James Massengale of the Albuquerque District Office. MODO: The main office of the business is located in Santa Fe, New Mexico. which is in the Albuquerque District Office. A MODO has been set up and the case has been associated. PERIOD OF INVESTIGATION: April 9, 2010 through April 8, 2012 IONS EXEMPTIONS: The employer claims approximately 60 exemptions from the overtime requirements of the FLSA. No exemptions were not tested as part of this limited investigation. The firm has employees engaged in executive, administrative, creative, and outside sales capacities. Additionally some of the employees appear to meet the highly compensated employee exemption. STATUS OF COMPLIANCE PAYROLL PRACTICES: Employees are paid bi--weekly. The work week is Monday through Sunday. Employees are paid with a company check or direct deposit on Thursday following the end of the pay period. Hourly employees record their total hours on a time card. Employees interviews suggest the hours documented are an accurate account of what each employee actually works. Exlzibit B-1 -- B-15 Employees, on a daily basis, are required to report to work based on their assigned schedules. Employee interviews are consistent and support the arrival and departure practices. It appears. based on employee interviews, that they are being compensated properly for this time. Exlzibit B- I - B-15 The employer makes no improper deductions from the employee's pay. Exhibit B-I -- B-I5 Mariah Media Network, LLC EIN: d/b/a Outside Magazine Case Id: 1639212 Market St. Local Santa Fe, NM 87501 Contact: Julie Fritsch, attorney There are three types of internships; editorial, art and online. Intems are college graduates not currently enrolled in an educational program. No records of intern's hours are kept. Interns receive no pay only a small stipend, typically $250 per months. The stipend is not intended as wages and is made clear to the intem it is not intended to be wages. They typically last six months however some have last almost two years and some have been as short as a month. Edit interns duties include fact--checking, reporting, research, proofreading, and assorted support chores for the editorial department, all of which is daily work of the magazine which must be preformed. Art interns assist in magazine design and layout. Online interns prepare the print edition for online publication, image acquisition, image management, copyediting, fact-checking, and research. The internship involves some initial training however it is not decisively different from on the job training provided by most employers. Six criteria derived from the Supreme Court's decision in Walling v. Portland Terminal Co. 330 US 148 (1947) are as follows: 1. The training, even though it includes actual operations of the facilities of the employer, is similar to that which would be given in a vocational school; 2. The training is for the benefit of the trainee; The trainees do not displace regular employees, but work under close observation; 4. The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer's operations may actually be impeded; 5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and 6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for time spent in training. It is not clear if the first condition is met. Outside's contention is that the training meets the first condition. Interviews of the interns suggest that the training occurs over the first two days but little training takes place after this initial period. The second condition is clearly met; the interns derive a benefit from the training. The third and fourth conditions do not appear to be met; Outside states it feels all the work could be done by reorganizing the existing staff. However Chris Keyes, Editor of Outside Magazine stated he would probably have to use less senior editors and have more junior editors if the interns were not utilized. Exhibits B-6 Intern statements suggest there is no way the existing staff could perform all the work done by the interns due to its tedious and time consuming nature. This likely causes the displacement of regular workers. declares in a statement provided to the Department of Labor that "the interns provide a benefit to the Mariah Media Network, LLC EIN: d/b/a Outside Magazine Case Id: 1639212 400 Market St. Local Santa Fe, NM 87501 Contact: Julie Fritsch, attorney magazine in that they assist with completing the online work more quickly than might otherwise the Case." Exhibits B-9 -- D-2a. The fifth condition may be met; the interns are not entitled to job however eight of the last twenty five interns have gone on to work for the position. Also there is unwritten understanding if the interns do a good job they may be asked to stay on. The sixth condition is met; the intems understand they will not be paid any wages and the employer does not intend for the stipend to be wages. The Field Operations Handbook 1()b11 Trainees and student-trainees states if all six of the criteria apply, the trainees or students are not employees within the meaning of the FLSA. All six criteria have not been met and the interns are in fact employees of Outside. Outside's position is the courts have generally declined to adopt an "all or nothing" approach in which an individual must be classified as an employee unless each of the six factors is definitively met. Outside cites Reich v. Parker Fire Protection Dist., 992 F.2d 1023, 1026-27 I Cir. I 993) and Marshall v. Regis Educ. Corp., 666 F.2d 1324, 1327 Cir. I 98 I). EMPLOYMENT RELATIONSHIP: The workers in this case were found to be in an employment relationship. The interns were paid a stipend accompanied with a 1099. The interns do not meet the test for independent contractors. VIOLATIONS Section 6(a) - Minimum Wage: The employer failed to compensate the intems at least- per hour for all hours work. Hours were reconstructed based on interview statements and information the employer provided at average 40 hours per week. Computations: 40 -- TOTAL DUE THIS SECTION: $171,716.25 Section 7(a) -- Overtime: No violation were found in this investigation. Section 11 -- Recordkecping: The employer was unable to provide accurate time records for the interns covered by the FLSA in accordance with 29 USC 516. Section 12 (C) - Child Labor: No child labor violations were found in this investigation (Exhibit Bl-2). The employer was given a copy of Child Labor Regulations for Non-Agricultural. Exhibit B-1 -- B-15 Mariah Media Network, LLC EIN: d/b/a Outside Magazine Case Id: 1639212 400 Market St. Local Santa Fe, NM 87501 Contact: Julie Fritsch, attorney CMPS Reg. 578 The employer has no previous Fair Labor Standards Act history of minimum wage and overtime violations (See History Above). The employer is currently in compliance and no CMP's are recommended at this time. DISPOSITION A conference was held on April 16, 2012 at the Albuquerque District Office of Wage Hour. Present at the conference was Julie Fritsch, attorney for Outside. Representing the Department of Labor was Wage and Hour Investigator WHI answered questions and discussed the applicable provisions of the FLSA. Enterprise coverage and individual coverage under the FLSA were discussed as well as the period of investigation with the Mrs. Fritsch. Each of the six factors was discussed in detail with Mrs. Fritsch. Mrs. Fritsch said she would have to discuss the finding with her client and would provide an answer on future compliance on April 24, 2()l2. On April 24, 2012 Outside Magazine provided an additional response stating they are currently in compliance with the FLSA. Additional Outside states the Department's audit procedures are not be followed. It should be noted that the procedures reference are from the Department of Labor Office of Inspector General. On April 25, 2012 WHI -- spoke with_ via telephone and infonned her, the procedures she referred to were not part of Wage and Hour and further explain future compliance with her and that back wages could not be discussed without an agreement for future compliance. WHI Massengale informed her that going forward the interns would need to be paid as employees, time records for their hours must be kept, and the intems would have to be paid minimum wage and proper overtime when it was worked. She stated that she would discuss future compliance with the employer. On May 3, 2012 WHI _spoke with Julie Fritsch via telephone who said Outside position remains unchanged. FMLA: Compliance with the provisions of the Family Medical Leave Act was not reviewed. The following publications were given to the employers in this case: Handy Reference Guide. DOL WH Topical Fact Sheet Index 44; DOL WH Topical Fact Sheet Index 71; 29 USC 516, 541, 778, 785; Youth employment for Non--Agricultural Occupations. m~:coMMe~nmo~s: Future correspondence should be sent to: Julie Fritsch Mariah Media Network, LLC d/b/a Outside Magazine 400 Market St. Santa Fe, NM 87501 Wage and Hour Investigator 05/03/2012 BIN: Case Id: 1639212 Local Filing:2012-105-00214 Contact: Julie Fritsch, attorney 4169 Montgomery NE Albuquerque, NM 87109 (505) 944-0033