Labor And Immigration Audits: What Trainers Need To Know

by | 08.09.2019 | 5:04pm

When news broke earlier this year of trainer Chad Brown's settlement agreement with the U.S. Department of Labor, it was the size of the settlement ($1.6 million) that shocked readers as much as the list of violations. According to a news release, auditors determined Brown failed to pay H-2B visa employees the wages they were promised, collected payment for visa application costs, misrepresented housing availability, and other violations of federal labor law related to H-2B workers.

A subsequent report from the Daily Racing Form indicated Brown wasn't the only New York-based trainer who had been targeted by federal auditors. Kiaran McLaughlin, Gary Contessa, and George Weaver all confirmed to the Form they were dealing with audits earlier this summer. 

According to LJ D'Arrigo, partner and co-leader of the Immigration Practice at the Harris Beach law firm, those trainers are not likely the last to undergo federal audits of their employment programs. D'Arrigo, who spoke at the Saratoga Institute on Equine, Racing, and Gaming Law on Aug. 6, specializes in employment-based immigration, which for horse racing, usually means the federal H-2B visa program. H-2B visas are seasonal visas awarded to temporary workers such as those on the racetrack who may be needed while the stable is based at one meet for a few months. 

For several years now, trainers have complained of a shortage of workers and a shortage of available H-2B visas to hire them. This year, D'Arrigo said there were 96,400 applications for 33,000 available H-2B visas, which meant some employers got shut out of the program entirely. The Department of Homeland Security eventually released an additional 30,000 visas, but demand still exceeded supply. 

D'Arrigo has said for a few years now that the federal government has expanded its focus from simply checking the immigration status of employees at large companies to cracking down on employers using federal visa programs to meet their needs. Unfortunately, there are a lot of detailed requirements about how H-2B workers should be paid, what costs the employer must cover, and what type of records must be kept – it's easy for a trainer working out of a tack room with no human resources department to fall behind. 

“It really is impossible to comply with every letter of the law when it comes to labor when it comes to wages and hours,” he said. “There are so many rules when it comes to this that most employers just don't know what they are.”

There are technically three groups – the U.S. Department of Labor, Immigration and Customs Enforcement, and U.S. Citizenship and Immigration – that can conduct an audit on a trainer's employment records if he has H-2B workers. Generally, if an auditor from one entity finds violations, the other two agencies will show up and conduct audits of their own. 

One aspect that can trip up trainers is pay. Some incorrectly think they can pay grooms differently based on whether or not they're in the H-2B program. In fact, there are minimum requirements about what an H-2B worker must receive as hourly pay, and requirements that domestic workers doing the same job must be paid the same or better. (D'Arrigo said average pay for a groom under the H-2B system is $13.25/hour.)

“It's really a myth that the only reason why an employer would ever hire a foreign worker is because it's cheaper,” said D'Arrigo. “It's just not reality and it doesn't make economic sense. I think that's the prevailing view out there though. If you ask any seasonal business that participates in one of these seasonal visa programs, it really is that they don't feel like they can find qualified, reliable U.S. workers to perform in these skilled positions.”

Some trainers also believe they do not need to pay overtime to H-2B visa holders if they don't advertise it in the job posting, but this is also not true. Trainers also must reimburse H-2B visa holders for travel and visa application fees. 

According to D'Arrigo, the federal agencies have recently hired a number of field workers who may not yet be well-versed on all work program requirements and some have inadvertently spread false information on what is actually required of trainers. 

The biggest problem area for trainers may be time-keeping. Many operations are not rigid about this, and most still keep these records by hand-written sheets, if at all. Several of D'Arrigo's clients have been advised to get electronic time clocks to ensure future compliance. 

“That's really the biggest weakness, I think, in a wage and hour audit,” he said. “It's almost an afterthought. Seeing the trainers who are operating out of a horse stall, they just don't have systems in place.

“We seem to have a number of audits going on in Saratoga right now. It's something that employers need to implement policies now to avoid [problems] later on.”

The penalties for non-compliance, as seen in the Brown case, can be harsh – and pricier than just paying the workers appropriately to start with. And just because Brown settled, D'Arrigo said, doesn't mean he was able to talk down federal agents. D'Arrigo said he is in settlement talks with federal agencies on behalf of a number of other Saratoga-based trainers now. Best case scenario, he can get penalties and fees reduced by 15 percent if the employer settles with the government. 

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