Raided by ICE - Employees Detained

QUESTION 

Our company was raided by ICE last week. Two of our loan officers were taken away in handcuffs. They were not read any rights. They were just taken from their desks, put in cuffs, and walked out. Our HR Department notified their families. 

It was a shock to all of us. I am a loan officer and asked our lawyer for permission to write to you about it. We have no guidelines on what to do if ICE shows up, but we’re trying to figure out what to do if ICE shows up. We do not want any trouble, and there is a lot of fear. 

Our lawyer, compliance people, and HR manager are putting together some guidelines. But many of us here get your newsletter, and we would like you to provide a few guidelines to follow if ICE comes back. 

What should we do if ICE raids our company? 

Do our employees have any rights? 

SOLUTION 

ICE Tune-up® 

RESPONSE 

If ICE raids your company, remain calm and cooperate with the agents. However, you can protect your legal rights and those of your employees. The first action to take is to immediately contact legal counsel and have a designated employee accompany ICE agents during the raid. If you have not selected such an employee liaison, do so now. 

Document everything, including the names of agents, areas searched, and items seized. But, do not obstruct or interfere with the search, and also do not provide false information or hide employees. 

I will offer some suggestions for immediate actions and a few things to consider. The following list is not meant to be comprehensive (and I am not providing legal advice). Facts and circumstances often dictate the response and appropriate legal actions. If you have questions, you can contact us. 

If you want to be prepared for an ICE visit, you should consider our ICE Tune-up®, a mini-audit that determines whether you are ready for such a visit. Our pioneering Compliance Tune-up is in considerable demand. If you need this audit soon, I urge you to contact us to schedule it. 

IMMEDIATE ACTIONS

·    Contact Counsel

I suggest you notify legal counsel about the raid.

 

·    ICE Team

Designating an ICE Team is essential. Whoever has first contact with ICE agents should know to contact the company’s designated ICE Team members so they can start implementing the ICE raid protocols.

 

·    Document

Designate an employee to take detailed notes, including agent names, badge numbers, areas searched, and persons or items seized.

 

·    Stay with the Agents

Select an employee to accompany ICE agents during the search to observe and document.

 

·    Verify Warrants

Request and review any warrants presented by ICE agents. Many ICE raids are being conducted using administrative warrants. Ensure they are judicial warrants (viz., signed by a judge) and understand their scope.

o   Court Warrant – A federal or state court judge issues a judicial (or court) warrant. It gives ICE access to non-public spaces of the facility in accordance with the terms of the warrant. Even if ICE has a court warrant, it is important to review the warrant to ensure it has the correct company name and address, is properly signed and dated by a judge, includes a timeframe within which the search must be conducted, any restrictions, and contains a description of the premises to be searched and a list of items or people to be seized (i.e., equipment, records, workers).

o   Administrative (or No Warrant) – If ICE has no warrant or only an administrative warrant (i.e., signed by ICE on Forms I-200 or I-205), the warrant does not permit ICE to access non-public spaces.

But if ICE proceeds, do not argue with or impede ICE. Instead, document your objections, which can be used later in a court challenge.

Sham Employment

QUESTION
We are the CEO and General Counsel of a regional mortgage banker. We decided to write you about an administrative action that has been taken against us by our state banking department.

The issue involves employer-employee compensation. The banking department claims that we are engaged in “sham employment” in violation of RESPA. We do not want to describe the alleged violation here. 

However, we would like to know some history and context related to “sham employment.” We have already contacted your firm to conduct a risk assessment of our employment practices. 

What is “sham employment?”

ANSWER
To say this area of the Real Estate Settlement Procedures Act (RESPA) is complicated would be an understatement. Thank you for contacting us to assist you. If you or anyone else would like to discuss this subject, please feel free to contact me HERE.

Right from the start, issues involving employer-employee compensation have proved to be one of the more controversial areas covered by RESPA. 

You can go back to HUD’s decision in 1996 to withdraw the employer-employee exemption the Department had promulgated only four years earlier,[i] followed by HUD’s Congressionally mandated postponement of the effective date of the withdrawal.[ii] 

As a result, the 1992 exemption, which states that Section 8 of RESPA does not prohibit an employer’s payment to its own employees for any referral services, remains in effect. That section of the RESPA statute specifically lists several practices that do not violate the statute. 

The statute provides: 

Nothing in this section shall be construed as prohibiting (1) the payment of a fee … (C) by a lender to its duly appointed agent for services actually performed in the making of a loan, (2) the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed … 

The foregoing subsections support the payment of fees by employers to their employees.

In December 2011, when the CFPB republished Regulation X as its own regulation, it removed the unimplemented provisions of the 1996 rule that had remained part of HUD’s Regulation X. Accordingly, Regulation X, RESPA’s implementing regulation, currently allows an employer to pay its own employees for any referral activity. For the most part, this is all most mortgage professionals usually need to know about employer-employee compensation in the context of “sham employment.” 

In place of the 1992 exemption, HUD adopted but then postponed the effective date, and then the CFPB permanently eliminated it, providing two additional limited exemptions for payments: 

1. One for employer payments to managerial employees.[iii] 

2. Another for payments to employees who do not perform settlement services.[iv] 

The proposed 1996 revision also would have added a third exemption to clarify that payments made to an employer’s own bona fide employee for generating business for that employer are permissible.[v] 

HUD’s May 9, 1997, proposal,[vi] which the Department withdrew on February 13, 2001,[vii] would have added a new “like-provider” exemption to RESPA’s Section 8 prohibition against kickbacks and unearned fees. (I will not treat the 1996 amendments and the proposed “like-provider” exemption in this response.)

HUD proposed amending Regulation X[viii] to add an exemption that would allow payments by an employer to its own bona fide employees for the referral of settlement service business to an affiliated settlement service provider, provided that the referred settlement service business is the same category of settlement service as provided by the employer of the employee making the referral, the employee makes the affiliated business arrangement disclosure[ix], and the employee making the referral does not perform any other category of settlement service in the same transaction.

Thus, here is the current situation with respect to your question about “sham employment,” specifically, the variety of developments regarding payments by an employer to its employees. Under RESPA, an employer may pay its own employees for any settlement service, including referrals to affiliates. A company may pay the employees of another company only reasonable compensation for settlement services actually rendered.

HUD has made clear, both in its regulatory guidance and its enforcement actions,[x] that it regards “sham employment” or “bogus employee” arrangements as RESPA violations. There is no reason to believe the CFPB takes a different position on this issue.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

________________________

[i] 12 CFR 1024.14(g)(1)(vii), originally adopted by 57 Fed. Reg. 49600 (November 2, 1996) and republished by the CFPB, 76 Fed. Reg. 78978 (December 20, 2011)
[ii] Section 2103(b) of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (Title II of the Omnibus Consolidated Appropriations Act, 1997, Pub. L. 104-208), signed by President Clinton on September 30, 1996; 61 Fed. Reg. 58,472 (11/15/96)
[iii] Withdrawn Regulation X Section 3500.14(g)(1)(viii)
[iv] Withdrawn Regulation X Section 3500.14(g)(1)(ix)
[v] Withdrawn Regulation X Section 3500.14(g)(1)(vii)
[vi] 62 Fed. Reg. 25,740 (May 9, 1997)
[vii] 66 Fed. Reg. 25,478, at 25,497 (5/14/01). HUD withdrew the proposal following the January 20, 2001, issuance of a “Regulatory Review Plan” by the new Bush administration’s White House Chief of Staff, Andrew H. Card, Jr. HUD pointed out in its semiannual regulatory agenda that “Withdrawal of a rule does not necessarily mean that HUD will not proceed with the rulemaking. Withdrawal allows the new HUD Administration to further assess the subject matter and determine whether rulemaking for this subject matter is appropriate.”
[viii] Section 3500.14(g)(1)
[ix] As provided in 12 CFR 1024.15
[x] For instance, see the Znet Financial settlement (September 17, 2003). HUD found that Znet paid ReMax of Atlanta real estate agents as "employees" even though the agents performed little or no work for the lender. These agents were, therefore, sham “employees" who did little or no work for referral fees. Investigators found the agents performed little or no origination work other than filling out loan application forms.

COVID-19 Online Resources

QUESTION
We purchased your Business Continuity Plan recently. Over the last few weeks, we have been using it as a guide. We like the idea that one of the Directors spends time with us at the outset to make sure we understand the plan’s requirements. 

Now, we are building an online website for our employees to handle disaster recovery, business continuity, and pandemic issues. We want a website page with resources for all these areas, and especially we need resources for the COVID-19 challenges. 

Your Business Continuity Plan Checklist provides a huge number of resources and informative links. 

Do you have any suggested COVID-19 links that we can put on our new website?

ANSWER
Thank you for this question, as it gives me a chance to provide some additional feedback. I think you should be using - 

(A) our complimentary Checklist – Business Continuity Plan Checklist (Includes COVID-19 Pandemic Response) – along with -

(B) our inexpensive Plan – Business Continuity Plan – Disaster Recovery & Business Continuity Plan, Includes Pandemic Response. 

Taken together, they provide a considerable amount of information that will strengthen your business continuity as well as your pandemic response.

The Checklist is now 208 pages and is on Update # 7. Update # 8 will be published as soon as the next stimulus is signed into law. The Plan is available, of course, and one of our Directors does a “walkthrough” with you to answer questions and show you how to use it.

I do have some suggested resource links that, in my view, should be placed on your new website. It is a good idea to notify your visitors that a new link has been added. Keep your visitors current all the time, because the pandemic is dynamic, meaning it spreads and mutates in complex ecosystems. Today’s medical and statistical information may differ from yesterday’s analyses.

Following basic hygienic guidelines will not change: wear protective masks (viz., protect yourself and others), maintain social distancing, wash hands, avoid meetings where people are arranged closely together, stay clear of settings where aerosol transmission easily happens. 

Be alert to changes in federal and state responses to the coronavirus, as politics has unfortunately been contaminating scientifically derived guidance. That places an extra burden on your website because visitors are going there for facts, not politics; and they want reliable scientific and medically reliable resources, not controversy and opinions.

Providing online resources is a great idea. Don’t be concerned if some visitors dispute the reliability of some links. People tend toward confirmation bias, so they screen out what they don’t want to believe. Don’t be surprised if some visitors say they do not believe in science. Science is not a belief; it is not subject to faith; it does not accept unfalsifiable theories. To date, the scientific method is the best means known to humankind to validate and verify physically identifiable aspects of life. Give visitors a chance to use the links, and most of them will be grateful that your organization takes everyone’s health and welfare seriously.

The following are some online links that I suggest you consider for the COVID-19 pandemic. They run the range from statistical information to preparation and also to progress regarding treatments and vaccines.

CNN.com – Tracking COVID-19  

Coronavirus Dashboard 

Coronavirus Tracker  

COVID-19 Tracking Project

COVID World Map, The Guardian 

GlobalEpidemics.org 

Health.com – Coronavirus 

Johns Hopkins – DOVID-19 Dashboard 

StatNews.com 

Rt (Effective Reproduction Number) 

Worldometer – Coronavirus (Countries) 

Worldometer – Coronavirus (USA) 

Worldometer – Coronavirus (World) 

A word about the Rt (Effective Reproduction Number) listed above. 

Rt (Effective Reproduction Number) 

The statistic, Rt, measures how fast the virus is growing. It is the average number of people who become infected by an infectious person. If Rt is above 1.0, the virus will spread quickly. If Rt is below 1.0, the virus spread slows down and eventually stops. The idea is that it is not possible to capture the exact moment when somebody becomes infected. Instead, scientists do a sort of reverse engineering. Thus, data such as derived from testing, hospital admissions, and deaths, are used to estimate the velocity of propagation of the virus.

Mathematically, if the Rt (effective reproduction number) is greater than one (viz., >1.0), the rate of spread increases exponentially; that is, the rate of change accelerates rapidly, and the virus propagates quicker and quicker. 

Medically, this means that there are more and more infections and many more deaths involving the coronavirus and deaths related to comorbidities - the coexistence of two or more disease processes (such as heart disease, diabetes, asthma, cancer) - affected by the coronavirus infection.

Economically and logistically, any population growing exponentially must, sooner or later, encounter shortages of various resources, such as beds in ICU, availability of medications, medical staff, medical supplies, and gradual financial incapacitation. 

It is only by bringing the effective reproduction rate down that we can return to some semblance of normality. Monitor the Rt for your state, and proceed with appropriate caution and care.

Finally, I recommend that you hold periodic calls to discuss the new website, particularly emphasizing your company’s safe hygiene plans. Encourage questions and suggestions. Act as a team, as a corporate family, and you will get through the pandemic knowing that you have done all you could to ensure a safe and healthy world for you, your colleagues, and your families.

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director

Lenders Compliance Group

Pandemic Preparation: Bracing for COVID-19

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QUESTION

I am the Chief Risk Officer of a multiplatform lender. We are in 48 states. Over the last few weeks, I have been tasked with setting up an infrastructure to handle the impact of the coronavirus on our company. I am also concerned about our non-online loan officers who have continual face-to-face contact with the public. I read your announcement about getting prepared for the pandemic, which was very informative. However, because we are such a large company, I am challenged in finding a means to go beyond mere training. What else can I do to inform our employees of the actions they should take to protect themselves from the coronavirus?

ANSWER

I appreciate your concern. The coronavirus is no hoax. It is deadly. As I write, China is currently reporting that there are patients who recovered from the coronavirus, tested negative, and were released from medical care into the general population, only to again test positive for the coronavirus, with additional complications developing, such as pneumonia. Currently, the US government has embargoed sharing sufficient, vital, and lifesaving information (i.e., the size and results of tests) – and, what’s worse, there are not enough test kits.

We published the announcement, entitled Coronavirus: CDC Guidance - An Urgent Message. I urge everyone to go there and read it! You can print it out, too. The announcement is devoted to the impact of this pandemic on businesses. It has received a huge response. But time will tell if companies take the actions needed to protect themselves!  

The US is on the threshold of the first wave of the pandemic. There will be considerable mortality and sickness. Over the next few months, the mortality and morbidity will crest at awful levels, but perhaps nothing like the impact of the second wave, which will commence in Fall and Winter. It is the second wave of such a pandemic that usually is many times more severe than the first wave. Unprepared institutions will incur all manner of risks, adverse knowns and unknowns, and financial setbacks. Now is the time for management to act soberly, calmly, confidently, and deliberately.

During these difficult times, it is important for management to set standards to diffuse the panicking alarmists and people with political agendas who would prey on our fears or dismiss the severity of this worldwide pandemic. The coronavirus is not political. Pay attention to medical professionals and scientists. Politicians who have no medical expertise or think science is a joke or have no expertise specific to the epidemiological conditions and symptoms of the coronavirus are in no position to offer medical or scientific guidance. Ignore them! This virus is not SARS, it’s not MERS, and it’s not influenza. It is a unique virus with unique characteristics. You should conduct an online search of scientific and medical organizations to compile sufficient information to draft and disseminate a policy document for your employees.

Containment is possible, but it must be implemented immediately!

Here are some actions to consider:

Management: The Senior Management and Board of Directors should meet and draft a statement that recognizes the potential impact of the pandemic on the financial institution and sets forth a directive to put in place various strategies to identify and reduce risk.

Manual: Develop a manual that is provided to employees, containing the outline of your response plan. Obtain a written attestation from employees that they have received and read the manual.

Human Resources: Ensure that HR is fully engaged in handling sick leave and other remedial measures. Be sure that HR has researched and proactively prepared for ADA requirements.

Links: Disseminate links to medical and scientific organizations, such as -

-Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19), February 2020 

-CDC’s COVID-19 Website

-What you need to know about COVID-19

-What to do if you are sick with COVID-19

-Interim US Guidance for Risk Assessment and Public Health Management of Persons with potential coronavirus disease 2019 (COVID-19) exposure in travel-associated or community settings

-Health Alert Network

-Travelers’ Health Website

Hotline: Provide a hotline that has a distribution list to Compliance, HR, Legal, and Management.

Committee: Establish a Health Management Committee that is tasked with keeping the company current on the COVID-19 pandemic, its effects, its impact, and the actions needed to contain it. Give the Committee authority to take affirmative actions on behalf of the company.

Disaster Recovery and Business Continuity Plan (DRBC): Draft and ratify a DRBC as soon as possible and continually update the Business Continuity section per the changing demands of the pandemic.

Training: Use medical and scientific personnel to assist in training employees on the ways and means to contain the pandemic. Training should be done online.

Meetings and Travel: Cancel group meetings, conferences, and conventions. Cancel all unnecessary travel where flying is being discouraged by health notices. Group meetings and certain kinds of travel are vectors for spreading coronavirus.

Weekly Online Update: Offer employees a weekly online update, where employees can receive current information about critical news involving the pandemic as well as how to engage with the public, such as in taking face-to-face applications.

Management Message: Management should not sugar-coat the implications of the coronavirus or play politics. Any equivocating will be viewed as disingenuous and could provoke panic. Keep it real! The company may become seriously exposed to a reduction in workforce and revenues. Management should issue periodic statements about what it is doing to mitigate the risks, encourage its employees, and do what it can to support the community it serves.

If you want to discuss your particular situation, you can contact me HERE.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

Examination Hot Topics

QUESTION

As a stateside, non-depository, mortgage licensee, I am interested in learning about areas of concern relating to regulatory examinations. What are some of the hot topics and regulator recommendations in these areas?

ANSWER

I recently attended the 29th Annual Regulatory Conference, held in Boston, for the American Association of Residential Mortgage Regulators (AARMR). One of the breakout sessions was entitled Examination Hot Topics.  The session was moderated by a state regulator from Georgia and included three state regulators from the states of Missouri, Connecticut and Michigan.

Topics and issues raised are detailed below.

Loan Brokerage Fee Agreement: The disclosure should be provided by the broker and not the lender.

Profit-based Bonuses: Broker, mortgage loan originator, profit-based bonuses are exceeding the 10 % threshold.

Marketing Services Agreements: The use of Marketing Services Agreements has increased resulting in RESPA issues. One area of contention is whether advertising should be paid by the mortgage company or the loan officer. 

Rental Agreements: There is no basis by which to establish market value of rental agreements. The example referenced two identical office spaces within the same office complex valued at $300 and $600, respectively.

Change in Circumstances: The calculations do not provide adequate supporting information in the file to facilitate the examination review.

Mortgage Fraud known as “Convenience Fraud:” MLOs are signing borrowers’ names on forms. They are also using electronic signatures. This activity has resulted in loss of licenses.

Cut and Paste Tactics: This activity is on the rise. The activity includes altering IRS Form 4506-T relating to designation of third parties to receive the tax return information. It also includes the forging of signatures on borrower loan documents, claiming as an excuse that the borrower was on vacation. One regulator stated that they found practice signature evidence and the actual cuts in the borrower loan file!

Unlicensed Loan Originations: Unlicensed individuals are taking applications over the phone (usually in call centers), due to lack of management oversight of their operations. This process results in more loan volume. Companies offer the excuse that they are only taking “partial” applications.

Mortgage Call Report (MCR): The MCR information is inaccurate. The requested loan list at the time of examination does not correlate with the loans listed on the Mortgage Call Report. Companies need to establish a process that includes work papers to back-up the information. It was also recommended that MCR reporting duties should not be assigned to untrained individuals and that a back-up person be assigned to the task.

Unlicensed Underwriting: Brokers are doing underwriting without the required lender licensing.

Third-Party Processing: Lenders are inquiring about the requirements for third-party processing and underwriting. Many are engaged in the activity without the proper license.

Hiring Practices: There is evidence of companies hiring convicted felons in direct violation of statutes and regulations. Some of these companies have been reported to the regulators by competitors.

Disclosure Text Errors: Incorrect language is being used in disclosures related to TRID and foreclosures. Be certain to reference state and federal requirements in this area.

Advertising: Issues have been identified relating to advertising. The main point is that marketing and compliance departments have two different goals. The compliance group must review all ads prior to being released to the public. There are issues with companies misleading the public by holding themselves out as government agencies.

Mortgage Servicing Compliance: Examinations of mortgage servicers identified issues involving the lack of compliance with the terms and conditions by the new servicer. Recommendation was for servicers to have robust policies and procedures. It was also noted that companies are not posting payments properly. Files need to have better documentation.

Commingling of Funds: Companies are commingling operating funds and escrow funds in direct violation of the law.

It is my hope that you have come away with some new insights into examination areas of concern raised by state regulators.

We can assist you in preparing for examinations and in providing you with the ability to outsource some of the compliance functions in your operation. Our compliance support includes all mortgage banking policies and procedures, mortgage and servicing compliance, quality control analytics, vendor management, licensing and Mortgage Call Reports. Please contact us for a free consultation.

Alan Cicchetti

Director/Agency Relations, Lenders Compliance Group

Executive Director, Brokers Compliance Group

Medical Leave and Time-Off

QUESTION

An employee has requested time off for a medical reason, but this individual has not disclosed the details. It is a critical time for our company and we cannot afford for the employee to take time off. Are we obligated to allow time off?

ANSWER

Your employee may qualify for medical leave under the Family and Medical Leave Act (FMLA), and, if so, the company may be required to allow the time off. Below are some basic facts to help you assess your obligations under FMLA. 

• FMLA applies to all private businesses that employ 50 or more employees for at least 20 weeks per year.
• To qualify, an employee must work for the company for at least 12 consecutive months and work at least 1250 hours in those 12 months. An employee need not be full-time to qualify; the minimal qualification of 1250 hours is about 24 hours per week. In 2008 FMLA expanded coverage for military leaves for purposes of exigency leave (when a family member is deployed) and leave to care for an injured service member.
• FMLA cannot be denied if the employee meets the qualifications and has a documented medical reason for the leave. The employee does not have to disclose the nature of their medical condition; however, the condition needs to be verified by a medical professional. Inconvenience for the employer is not an acceptable reason to deny a qualified employee their leave request.
• The 12 weeks of available leave does not have to be taken consecutively. An employee could work an intermittent or reduced hours schedule.
• The company is required to restore the employee to their original position upon return from the leave of absence. FMLA also allows for an employee to be placed in the same or equivalent position. An equivalent position must have the same or substantially similar duties authority and responsibility as the pre-leave position. 

Leave laws are very complex. Violating FMLA can result in costly fines or penalties, third-party complaints, or attorney letters demanding compensation for the denied employee. I’ve outlined below some situations caused by uninformed managers that will place the company at risk. 

• Denying leave to a qualified employee. If your company has an HR department, it’s always a good practice to consult the professionals when working with a request for FMLA. If your company does not have an HR department, it is even more imperative that managers are aware of their obligations under FMLA. They should never dismiss a request before reviewing the facts to verify employee qualifications and need for leave. An employee does not need to use the words “FMLA” in order to be approved for leave. Managers need to understand that any request for time off could be approved under FMLA. An employee may say, “I need surgery” or “I need some medical tests”, as an example.
• Pressing an employee for details of their medical condition. An employee does not have to reveal the nature of their medical condition in order to be approved for leave under FMLA. A medical certification is all that is necessary. (Note: if an employee is requesting an accommodation, it will probably be necessary to understand the medical condition in order to consider appropriate accommodations).
• Disclosing an employee’s medical condition. If an employee voluntarily discloses the nature of their medical condition (or has disclosed it as part of a request for accommodation), the manager is not authorized to discuss that information with others. The law allows for sharing information on a “need to know” basis, which may include their immediate supervisor or manager, first aid or safety personnel in the event the employee needs emergency medical treatment and their condition is relevant.
• Failure to return an employee to their previous or equivalent position could be considered retaliation. Even if an employee is rightfully provided with the requested leave, any retaliation or perceived retaliation will be considered a violation of FMLA laws. 

The clear remedy for a manager’s mistakes is to provide a comprehensive FMLA training program to all supervisors and managers. Even if your HR department manages the details of employee leaves, uninformed managers can leave the company vulnerable to complaints.

Additionally, many states have existing leave laws that must be followed in addition to the federal FMLA. These should be included in any training provided to supervisors and managers.

Kimberly Braman

Director/Human Resources Compliance

Lenders Compliance Group

Sexual Harassment in the Workplace

QUESTION

Sexual Harassment issues are in the news. How can I ensure that my company is creating an environment of support for victims and following all legal requirements?

ANSWER

Handling complaints of sexual harassment the right way may keep employees from filing a case with the Equal Employment Opportunity Commission (EEOC) that investigates these types of complaints.

Best Practices on the proper handling of complaints are outlined below.

• Understand what sexual harassment is. Sexual harassment is the unwelcome behavior of a sexual nature that is made a term or feature of an individual’s employment or creates a hostile work environment. A hostile work environment is the most common and can be physical, verbal or visual.
• Create an environment of mutual respect among all employees. Leadership should lead by example and make it clear to all managers and employees that this type of behavior will not be tolerated.
• A confidential process for reporting alleged harassment is critical. Investigators must be prompt and thorough. Even anonymous complaints must be investigated. Results of an investigation are confidential and should be released only on a “need to know” basis.
• If allegations are found to be true, action should be taken in accordance with company policy and federal and state laws. Consequences should be administered fairly and consistently.
• Leadership must make it clear that retaliation of the complainant will not be tolerated. Retaliation is upheld in more cases investigated by the EEOC than the facts of the initial harassment complaint.
• Preventive training is key. Federal law requires managers in companies with 50 or more employees to take two hours of training within six months of becoming a supervisor, and at least once every two years. States may have more stringent guidelines. The company must keep records of all training.
• Although not required by law, training for employees is encouraged. This will ensure a common understanding of prohibited behavior and the company’s commitment to a harassment-free environment.

Lenders Compliance Group® can provide training to managers and employees or assist with sexual harassment policies and investigative procedures. A good place to start would be to have us conduct our HR Tune-up!™, which provides an overview and action plan for remediation.

Kimberly Braman

Director/Human Resources Compliance

Lenders Compliance Group® 

Human Resources Strategies

QUESTION

How should Human Resources strategies relate to today’s challenges for financial services companies?

ANSWER

Over the past ten years of recovering from the financial crisis, companies still face challenges that can be supported with their HR policies and strategies. One of the challenges is damage to reputation and brand. 

Financial Services took a reputational hit during the financial crisis and is no longer an employer of choice. Consequently, employee engagement can be critical in retaining and attracting employees. Employee engagement is an important Human Resources strategy!

Reviews on sites such as Glass Door are explored, particularly by millennials, which is the fastest growing population in the workforce today. Millennials are now becoming the supervisors and managers in companies. Current employees who are engaged are more likely to post positive reviews, spread positive reputation by word of mouth or refer qualified applicants.

Employee disengagement happens over time and is often subtle. However, the signs are not subtle and must be recognized. Disengaged employees don’t perform their jobs well, are a negative influence on other staff, and often create conflicts in the work environment. Disengagement is often caused by a marked difference between employer and employee expectations. Surveys have shown that overall employee satisfaction is the lowest in two decades.

Some areas where employees communicate dissatisfaction are time wasted in unnecessary meetings; conflicts with other work teams; confusion regarding duties and responsibilities; inefficient processes and poor communication; and a marked difference between leadership’s perception and employees’ reality.

What does employee engagement look like?

• Employees take pride in their work, evidenced in the quality performance that enhances productivity and provides exceptional customer service.
• Employees view the company goal as a common goal and work together to accomplish the goals. They believe “We’re all in this together.”
• Employees are loyal and have no plans to leave the company.
• Employees understand and support the company’s mission during good and bad times.

What can an employer do to increase employee engagement?

• Clearly communicate the company's mission and vision.

• Employees are engaged when they understand the goals of the organization and their part in fulfilling the mission and vision. In this way, they feel they are part of the company’s success.

• Provide clear expectations for employee behavior and results. 

• This includes holding employees accountable for results and behavior.

• Provide open and honest communication. 

• Both good news and bad news should be communicated. Lack of communication can create fear and uncertainty and can lead to turnover. In times of uncertainty, it is often high performers who leave because they realize their market value.

• Reward and Recognize. 

• Ensure employees understand they are valued. Incentive plans are not the only way to reward employees.

• Involve employees. 

• When it is possible, engage the employees in decision making. This can be especially important to millennials who value a collaborative approach to work.

• Provide work and life balance. 

• Current workforces highly value having time for other pursuits besides work. Most employees no longer wish to continue working in an environment of continuous long hours and sustained feelings of overwhelming work responsibilities.

• Understand the role of leadership. 

• There is a direct correlation between engagement and leadership behaviors. Leaders who lead by example, openly communicate, and focus on employee well-being make a positive impact on employee morale, which increases employee engagement. The gap needs to close between leadership perceptions and employee realities. Leaders must have a vehicle for hearing employee concerns and recognizing when changes or improvement could be made. Skill development and training for managers to improve leadership behaviors should be available to every level of manager.

Employee engagement can be improved by incremental steps. The first step is embracing the concept of employee engagement and understanding the important role it plays in a company’s bottom line.

Kimberly Braman

Director/Human Resources Compliance 

Lenders Compliance Group

Human Resources Compliance

QUESTION

Our bank is undergoing an internal review of its human resources department. I know you conduct such reviews and would like to know some of the primary regulations involving human resources compliance. There are experts in this kind of compliance; however, they seem to be mostly interested in handling litigation issues, while we are looking for a way to draft policies and procedures. What are some important federal regulations involving human resources? What review issues should we consider in our policy statements?

ANSWER

Human Resources (“HR”) compliance is a specialization that very few risk management firms offer. Ours does! Unfortunately, the legal community tends to focus on the litigation arising from compliance failures involving human resources, rather than providing reasonably-priced, compliance reviews of the HR function. Our firm actually has a Director of Human Resources Compliance, an expert in the regulatory requirements of human resources. We focus on guidance and reviews that seek to prevent litigation!

HR is the term that describes individuals who comprise the workforce of an organization. Human resources compliance, or "HR compliance," or sometimes colloquially referred to as "HR," is the term that applies to the department and functions within an organization, the administrative responsibility of which is charged with implementing strategies and policies relating to the management of individuals associated with the organization.

In many ways, human resources compliance is a central feature of a financial institution’s overall compliance function. This is intuitively obvious, given that local, state, and federal employment laws all play a role in human resources. Indeed, HR must be familiar with a wide array of different statutory and regulatory authorities to effectively and lawfully deal with company personnel.

Here are just two of the many federal regulations that affect HR compliance. Local and state statutes should also be included in any HR policy statement. 

• Fair Labor Standards Act (FLSA): This is a federal statute that applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce (unless the employer can claim an exemption from coverage).
• National Labor Relations Act (NLRA), sometimes called the Wagner Act, which, as amended, is known as the Labor Management Relations Act (LMRA).

The foregoing regulations are but two of the vast array of regulations, at all levels of government, that involve HR.

HR compliance takes into consideration virtually all work functions amongst an institution’s rank and file. For instance, HR’s responsibilities in an institution include overseeing and managing duties related to hiring, firing, employee benefits, wages, paychecks, and overtime. 

A compliance review of the HR function should include how its many authorities extend to the oversight of workplace safety, privacy, preventing discrimination, prohibiting harassment, minimizing legal liability in the hiring and firing process, worker complaints, job protection, compensation, benefits, pensions, employee training, and labor relations.

Jonathan Foxx

Managing Director 

Lenders Compliance Group