July 2002 Trade Winds
Full Length Articles
Use the links below to read a specific article
from the July 2002 Trade Winds.
Overtime Liability Can it Blowup
in Your Face?
Why Couldn’t You Sell Outside the
Changes Not Friendly to our Northern Neighbors
What Was The Best Investment Of The Past
Overtime Liability Can it
Blowup in Your Face?
By: Michael A. Holzschu Ó
Unpaid overtime to workers who have been misclassified as
exempt employees is a ticking financial bomb just waiting to
explode. A worker earning $65,000 a year, who worked 50 hours a
week for three years - just 10 hours of overtime a week - will
be due $146,250 if the unpaid overtime is doubled as a penalty
for "willful violation" of the law. (The two-year
statute of limitations is also extended to three years for
This explosion could cost a company "thousands or even
millions of dollars" depending on the company size and
number of violations. It only takes one disgruntled employee to
file a complaint with the Wage and Hour Division of the US
Department of Labor or the State Department of Labor to open an
investigation into your classification system.
In the past five years, more than 450 class-action
"wage-and-hour" lawsuits have been filed throughout
the nation and companies continue to be "inundated"
with them. Executives shouldn't expect a receptive ear in court,
either, as overworked judges "bond" with overworked
employees who are seeking payment for overtime.
The quality of life issue has created an environment where our
society is angry about the amount of hours that are worked. The
backlash, especially in times of reduced staffing, causes
employees to respond in ways that are normally not seen such as
contacting government agencies to "get even" for the
perceived company indifference.
Companies hit by such lawsuits read like the Fortune 500.
Settlements so far, include Starbucks paying its store managers
$18 million, Pacific Bell paying engineers $35 million and $27
million to its sales managers, and Farmers Insurance paying $130
million to claims adjusters. Wal-Mart has 28 separate lawsuits
pending against it. Although the list looks like all of the big
companies, small and medium sized organizations need to be
vigilant and proactive in their pay structures and overtime pay
One would think that these companies would have a staff that
should know what they are doing. If those kinds of companies can
be hit with a class-action overtime suit, what's to say that
your organization cannot also be hit with an overtime
class-action suit? Or at minimum a visit from the Wage and Hour
Human resource professionals need to review the job
responsibilities of everyone at the company and compare that
information to the exemptions contained in the Fair Labor
Standards Act (FLSA) to determine if the exempt workers are
Many CEO’s and HR professionals mistakenly believe that if an
employee is salaried, then he or she is correctly classified as
exempt, but much more information is needed to make a proper
determination. An executive, for example, must have management
as his or her primary duty, supervise two or more
full-time-equivalent employees, exercise independent judgment
and discretion, and earn at least $250 a week. These are the
bare bones areas needed to qualify as exempt. The FLSA also has
different requirements for various other job categories such as
administrative, professional, inside or outside salespersons and
If a company believes it has misclassified workers who are
due overtime pay, it should first survey its employees to ask
them to list their overtime hours for the past two years (the
federal statute of limitations) - and then pay them while having
them sign a legal release. You have a legal obligation to pay
them the money. There is no legal way around that.
Moreover, if your CEO or CFO do not appreciate your concern,
a you should determine the extent of the company's liability as
a way to get their attention. A worker earning $65,000 a year,
who worked 50 hours a week for three years - just 10 hours of
overtime a week - will be due $146,250 if the unpaid overtime is
doubled as a penalty for "willful violation" of the
law. (The two-year statute of limitations is extended to three
years for "willful violation.)
With these types of dollar amounts you will have your
executive's immediate attention. You are talking about serious
The statistics for 2001 covering all areas of investigated
complaints for Michigan are:
Fiscal Year 2001 Summary for the Wage and Hour Division of
CIS in Michigan
Investigated 5826 Complaints
Collected just over 2.8 million dollars, up 37% from fiscal
So the activity is not solely resting on large companies when
it comes to filing complaints.
If the executive staff ignores the situation, somewhere along
the line if the issues are investigated, there will be someone
that will be the "scape goat" for the organization.
Take the time to analyze your situation. For help and or a
Compliance Audit for your firm, contact the author at the
Michael A. Holzschu
is the managing principal in the firm of Holzschu, Jordan Schiff
& Associates specializing in Human Resource Systems, with a
special focus on employee handbooks, job descriptions,
performance appraisal formats, training, safety and quality
issues. He can be contacted at (248) 476-6907 or by email at
[email protected] or the company website at www.hjsa.com. The
Company’s client base is primarily small to medium employers
from all types of industries located throughout the United
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Why Couldn’t You Sell
Outside the USA?
By Roger Keranen, © 2002
Ever thought about it? What kept you from setting it up?
Strategic planning is the only way to be called "lucky"
by envious competitors. Your planning for offshore sales takes
careful thought and investigation into the possible pitfalls.
Let’s think like you are an international buyer in a European
based global company for a minute. Under what circumstances would
you buy from a new supplier?
Your current suppliers are ineffective or incapable of meeting
your purchasing needs. Solution: find new sources.
Do you want to make your life easy and require all suppliers to
meet the same set of standards? The obvious answer is
"yes" because it makes sense to have one set of
standards to work with.
With the focus on the requirements for the European Union
standards, companies have no choice but to obtain a CE marking,
which then allows them to move their products freely throughout
the European Union. A CE marking is required on any products that
fall within the scope of any of the European Union's 29 New
"CE" is an abbreviation of the French phrase "Conformité
Européenne." The CE marking on a product is the
manufacturer's assertion that the product complies with the
essential/safety requirements of relevant European regulations.
One of the many aspects of obtaining a CE is that the company
has a quality system to handle problems that occur with ISO 9000
being mentioned in several of the component areas. Plus, in the
USA, a company will have to work with a Registrar organization to
obtain the CE marking.
You need to have trust, from a your remote location, that they
have the quality processes, resource capacity, and timely delivery
strength to make you "look good" to your management.
Solution: Your supplier should be ISO-9001:2000 registered as
it is the internationally recognized Quality Management Standard
that assures that they have quality processes, commitment to
effective resources, and can meet contracted deliveries because
they have Customer Orientated Procedures and a Registrar tests for
compliance every 6 months.
Additionally, ISO-9001:2000 has built in problem solving
processes to prevent failure and, should a problem occur,
processes to react well in the customer’s best interests. ISO
registration better assures your buyer that you will be successful
in protecting his image, initially, and over time.
One of the key essentials in your Strategic Planning process
should be: "Would ISO 9001:2000 give me the edge to compete
in today’s market place and even provide me with an edge over my
Roger Keranen is the Principal
Consultant in the firm of LeanISO specializing in ISO-9001:2000,
ISO/TS 16949:2002, the Skills Management Process, and customized
training. He can be contacted at 1-877-554-7831 or by email at
[email protected] The company’s client base has service
and manufacturing organizations from 15 to 1500 employees.
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Changes Not Friendly to our Northern Neighbors
By: Scott F. Cooper & Michael M. Benchetrit
Canadian citizens and residents are having to bear what would
seem an unfair burden as a result of U.S. immigration policy
changes resulting from the September 11 terrorist attacks on the
U.S. Border controls, visa requirements, and entry documentation
requirements are being tightened with our neighbors to the North
losing privileges and being subject to additional paperwork and
delays in entering. Following are several of the changes and
plans which affect our good friends from Canada.
Department of State Planning Change in Policy
towards Permanent Residents of Canada
Permanent residents of Canada who have a "common
nationality with nationals of Canada" are exempt from the
requirement to obtain a visa to enter the U.S. For example, a
citizen of Australia who is a permanent resident of Canada can
take a worker petition approval notice directly to a U.S. port
of entry without having to first apply for a visa at a U.S.
consul. Such individuals are also passport exempt.
Those deemed to have a "common nationality with
nationals of Canada" are citizens of Antigua and Barbuda,
Australia, Bahamas, The Bangladesh, Barbados, Belize, Botswana,
Brunei, Cameroon, Canada, Cyprus, Dominica, Fiji, Gambia, The
Ghana, Grenada, Guyana, India, Ireland, Jamaica, Kenya,
Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta, Mauritius,
Namibia, Nauru, New Zealand, Nigeria, Pakistan, Papua New
Guinea, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, Seychelles, Sierra Leone, Singapore, Solomon
Islands, South Africa, Sri Lanka, Swaziland, Tanzania, Tonga,
Trinidad and Tobago, Tuvalu, Uganda, United Kingdom (including
colonies, territories, and dependencies), Vanuatu, Western
Samoa, Zambia, and Zimbabwe.
According to Antoinette Marwitz, the new U.S. Consul General
in Toronto, the State Department is planning to change this
policy to require Canadian permanent residents, regardless of
nationality, to obtain nonimmigrant visas to enter the United
States. It is expected that the passport exemption also would be
eliminated, as would the exemption for such nationals resident
This action is only in the planning stage at this point in
time so the exemptions currently remain in place.
Limits Placed on Part-Time Commuter Students
Pursuant to a recent memorandum issued by the
Immigration and Naturalization Service (INS), part-time students
commuting from Canada (or Mexico) are prohibited from doing so
after July 1. This change was not expected by either school
officials in the United States or by commuter students.
According to INS, the action is being taken
to comply with existing statutory and regulatory requirements.
Under federal law, a foreign national coming to the United
States to study may not be classified as a visitor (B-1 or B-2
classification). A foreign national may only be classified as a
student (F-1 classification) if he/she intends to pursue a
full-time course of study at an approved school. However, for a
number of years district offices at border points in the United
States have made exceptions to this rule, mainly for Canadian
An exception is being made for those
part-time commuter students in ongoing programs that began prior
to May 22, 2020. These students are being allowed to enter to
complete their current session of school. Each student is
required to provide proof of enrollment and request
"parole" status each time they apply for admission at
the U.S. port of entry.
Rep. Jim Kolbe (R-AZ) has submitted HR 4967
which will allow Canadian and Mexican citizens to commute to the
U.S. for part-time study under a new F-3 visa category.
Regretfully, permanent residents of Canada and Mexico would not
benefit. Senator Hutchison has submitted a companion bill in the
Senate. A number of representatives from New York and Texas are
co-sponsoring these bills but none from Michigan as yet.
Whether these will be modified to accommodate
permanent residents of both countries or pass in time for fall
enrollments is yet to be seen.
It should be noted that the term "course
of study" implies a focused program of classes leading to a
degree or that teaches a potential vocation. INS recognizes that
casual, short-term classes, such as a single English language or
crafts class would not be part of a "course of study"
and would not be affected by the change in policy.
New Entry Exit System
It may be that Canadians may have to obtain
documentation for any entry to the U.S. in the future. In 1996,
Congress passed the Illegal Immigration Reform and Immigrant
Responsibility Act (IIRAIRA); Section 110 of IIRAIRA mandated,
for the first time, that INS implement an automated
"Entry-Exit Control System." The provision required
that INS collect departure and arrival records to enable the
Service to identify those who had overstayed their visas, and
called for the Entry-Exit Control System to be in place within
two years of passage. However, INS never implemented such a
system, and in 2000 Congress revised the Section 110 mandate,
reaching a compromise that called for INS to create a
centralized database to organize and coordinate entry and exit
data already collected at ports of entry. The compromise
legislation, The Immigration and Naturalization Services Data
Management Improvement Act of 2000 (P.L. 106-215), was enacted
to allay concerns that an Entry-Exit System would cost billions
to implement, and would potentially slow and/or disrupt
cross-border commerce and tourism.
The compromise directed that INS generally
limit the information collected by agents at the ports of entry
to that which is typically collected, such as name, country of
origin, and date of birth. P.L 106-215 required air and seaports
of entry to enter the information into the database by December
31, 2003. The fifty busiest land border crossings were required
to have the system installed by the end of 2004 and the rest of
the crossings by the end of 2005.
After September 11, 2020, Congress returned
to the 1996 requirement for an Entry-Exit system, and in the USA
PATRIOT Act mandated that INS establish an integrated entry and
exit data system to be fully implemented at all ports of entry
"with all deliberate speed and as expeditiously as
practicable." Congress called for the development of the
system to focus on the use of biometric technology and tamper
resistant documents, and for the system to interface with law
This may require all entrants, including
Canadian citizens, to obtain either an Arrival-Departure Form
I-94 or to participate in the Border Crossing Card program (for
frequent entrants). The logistics could be nightmarish and daily
cross-border commercial activity significantly affected.
Businesses in Windsor, Canada noted a considerable drop in
tourist activities as a result of the tightening of border
security and inspections at the Detroit ports of entry after
9/11. The long delays which resulted initially discouraged many
from cross either way over the border and the volume of casual
activities – crossing for retail purchases and entertainment
– is perceived to have never regained pre-9/11 levels. The
delays which could result from having to document every Canadian
visitor could have even greater affect.
Scott F. Cooper,
Managing Director of the Troy, Michigan office, has been a Partner
with the Chicago office since 1990 serving clients in Chicago,
Detroit and other areas in the Midwest. In practice since 1979, he
has served as Chair of the Immigration and Nationality Law
Committee of the Chicago Bar Association and an officer with the
American Immigration Lawyers Association.
Michael M. Benchetrit
is an Associate Attorney with the Troy, Michigan office. He
received his Juris Doctorate degree from the Thomas M. Cooley Law
School, Masters degree in Public Policy and Administration from
the University of Guelph and a Bachelors degree in Political
Science Specialized Honors program from York University in
They can be contacted at 248.649.5404
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What Was The Best
Investment Of The Past Decade?Submitted by: Kenneth W. Peterson Ó
If you were an investor in the 1990s would you have done
better with stock or real estate?
No doubt a lot of money has been made with stocks. At the
same time, the last few years have been a blow-out on Wall
Street. Between dot-coms, cable firms and Enron, predictions
that the Dow Jones Industrial Average would one day hit 36,000
now seem far removed. Indeed, the Dow has fallen nearly 15
percent in the past two years, from 11497.12 at the end of 1999
to 10021.50 at the end of 2001.
But what about real estate? Has it done any better?
Speaking before the National Press Club, Fannie Mae Chairman
and CEO Franklin D. Raines offered this analysis:
It's January 1990. Three individuals have just received a
$10,000 year-end bonus. And they're trying to decide what to do
with the windfall.
John decides to invest his $10,000 in the stock market,
and being conservative with his finances, he puts the money
in an index fund of S&P 500 stocks.
Bill is excited by the possibilities of the Internet and
all the new technology companies, so he puts his $10,000 in
a Nasdaq index fund.
Mary has never invested in the stock market. But she's
tired of paying rent every month with nothing to show for
it. So she put her $10,000 down on a bungalow listing for
It's about 12 years later. Assuming they all had to pay for
shelter every month, how would you say John, Bill, and Mary did
on their $10,000 investment? Who came out better?
Since 1990, the value of the S&P 500 more than
tripled. So from his initial investment of $10,000, John
made about $22,000, pre-tax.
During the same period, the value of the Nasdaq
quadrupled. So Bill's gain was roughly $30,000, pre-tax.
What about Mary? During the same period, home values
increased roughly 4 percent per year nationally. At that
rate, the house that Mary bought for $80,000 is now worth
about $126,000. And if she sold it, she would have a profit
of about $46,000. And that gain would be free of capital
"It is extraordinary," said Raines, "that
after the longest, strongest bull market in history, the average
American built more wealth owning a home than she did in the
"Most Americans invest and earn more in their homes than
they invest and earn from their savings accounts, IRAs, stocks,
bonds or other investments," he said.
"During the past ten years, the average stockholder
earned $23,000 in the stock market, while the average homeowner
earned $44,000 in home equity. Home equity remains the
cornerstone of most family wealth."
But even if the returns from stock market investments and
homeownership were the same, real estate would still yield a
better net result. Why? While profits from the sale of stock are
generally taxable, profits of up to $500,000 for a married
couple (and as much as $250,000 for single owners) are typically
shielded from taxes when a prime residence is sold.
Kenneth W. Peterson ABR is the Broker/Owner of
K.W. Peterson & Associates a Professional Real Estate
Brokerage and Consulting Organization. K.W. Peterson &
Associates can handle all of your residential
real estate needs, including relocation. You can reach him at
248.681.9700, or www.kwpeterson.com
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