PIECP Compliance Solutions – Staying on Top of the Nine Mandatory Criteria April 14, 2014 www.nationalcia.org.

PIECP Compliance Solutions – Staying on Top of the Nine Mandatory Criteria April 14, 2014

Meet Today’s Presenters!
Barbara Auerbach, PIECP Technical Consultant, NCIA Wil Heslop, Grant Manager, NCIA

Agenda Welcome & Agenda Overview – Wil Heslop
Service vs. PIECP – Wil Heslop Compliance Review – Barbara Auerbach & Wil Heslop Wages (Annual Wage Update, 10th P, Training Wage/Period, SOC codes, Properly classifying workers using SOC Codes, Back Wages, Split Wages, Piece Work Wages) Wages – Minimum Wage Displacement Deductions Voluntary Participation CAC Re-designation NEPA Patient Protection & Affordable Care Act PIECP Historical Growth – Barbara Auerbach PIECP Resources – Wil Heslop Question & Answer Adjourn

Service vs. PIECP Wil Heslop

Service vs. PIECP NCIA often receives a request to review a proposed project and make a determination on whether or not it is a “service” or should be designated as PIECP. While NCIA and BJA can offer an opinion, neither entity can provide an exception from 18 U.S.C for “service” projects. The only exception BJA can grant is through PIECP.

Service vs. PIECP So, how can a certificate holder make the determination? Threshold Inquiry for Determining Applicability of PIECP Exception Status – Appropriate PIECP participants include prison industries whose activities would likely violate the 18 U.S.C. 1761(a) prohibition and would likely not fit within an 18 U.S.C. 1761(b) exception. BJA has devised an administrative approach for identifying such industries. This approach incorporates relevant sections 1761 (a) and (b) considerations, including whether a given prisoner-made item qualifies as an excepted agricultural product, whether a given prison industry activity qualifies as an unregulated service, and whether a product distribution activity qualifies as an intrastate distribution of goods.

Service vs. PIECP These considerations are reflected in the following threshold inquiry, which BJA will use to determine whether a prison industry should be encouraged to apply for PIECP exception status: Is a statutory exception applicable under 18 U.S.C. 1761(b)? The following prisoner-made items are excepted from the prohibition set forth in section 1761(a): Parts for the repair of farm machinery; or Commodities manufactured in a Federal, District of Columbia, or state institution for use by the Federal Government, or by the District of Columbia or by any state or political subdivision of a state or not-for-profit organizations. This exception is intended to inure to the benefit of the public; or Agricultural commodities grown or cultivated on a farm which retain continuing substantial identity through processing stages, if any. In making the determination as to whether a processing stage changes a product from an agricultural commodity to a manufactured commodity, a relevant consideration is whether the processing is incidental or ancillary to agricultural commodity growth and or cultivation. If the processing is incidental or ancillary in nature and is commonly undertaken by agricultural enterprises, then it would likely fall within the scope of the statutory exception.

Service vs. PIECP Could the contemplated activity trigger 18 U.S.C. 1761(a) by resulting in a production of goods by inmates in any penal or reformatory institution? The production of goods, which is regulated by 18 U.S.C. 1761(a), must be distinguished from inmate services which are not regulated by the criminal prohibition. The following factors are relevant in determining whether a given activity results in the production of prison-made goods: Has a tangible item been produced, manufactured or mined? Has a tangible item been formed or transformed? Has the activity resulted in the creation of property or in a new, marketable item?

Service vs. PIECP Could the contemplated activity trigger 18 U.S.C. 1761(a) by resulting in a postproduction, interstate transportation of prisoner made goods? Will there be transportation of prisoner-made goods into the flow of interstate commerce, i.e., across state lines or from a foreign country into the United States? Is there a commercial economic enterprise present?

Service vs. PIECP BJA will use this preliminary threshold inquiry to instill greater consistency in PIECP eligibility decision-making. If a prison industry activity falls within the scope of the Sec.1761(b) statutory exception, the involved industry need not seek Sec. 1761(c) exception status to avoid Sec. 1761(a) criminal sanctions. Additionally, if a prison industry activity would not result in the production of goods, interstate transport of prisoner-made goods, or does not in any other way trigger Sec. 1761(a), the involved industry need not seek compliance with the requirements set forth in Sec. 1761(c) or this Guideline. This threshold inquiry was devised only for 18 U.S.C. 1761(c) programmatic purposes and does not reflect the Department of Justice’s 18 U.S.C. 1761(a) prosecution guidelines. Thus, reliance on this Guideline, or any BJA determination based thereon, is not a complete defense to any civil or criminal action, but would depend on other factors as well. It is recommended that a Certificate Holder review this “threshold inquiry” with their legal counsel prior to start-up.

Compliance Review Barbara Auerbach & Wil Heslop

Wages Wil Heslop

Wage Requirements Wages must be paid at a rate that “is not less than that paid for work of a similar nature in the locality in which the work is performed” [18 U.S.C.1761(c)] See 10th Percentile definition (next slide) Prevailing wage verification must be obtained from the State DES agency

Wages: 10th Percentile Since 2006, wages may not fall below the 10th percentile unless the DES provides written approval of a lower wage for a “limited training period” In 2011, the approval of the “limited training period” was clarified by BJA – the CH must have written approval from the DES of both the training wage and period 10th Percentile Wage means that 10% of similarly situated workers in the locality are paid at or less than this wage and 90% are paid more

Wage Requirements: General
The prevailing wage must be received by workers performing notable tasks It must be verified prior to the initiation of the project and annually thereafter (on or before the anniversary of the last wage update)

The annual wage update must be performed for each individual CAC (since CACs are designated at different times of the year) CHs may “align” wage verifications for each CAC as long as each CAC is verified within one year of the previous verification (see next slide for examples)

Wage Requirements: Annual Update
CAC Name Designation Date* Next Wage Update CAC1 6/1/2013 Before 6/1/2014 CAC2 6/1/2013 Before 6/1/2014 CAC3 9/1/2013 Before 9/1/2014 To “align” CAC3 with CAC 1&2, just update CAC3 wages before 6/1/2014 *or last verification date

Wage Requirements: Annual Update
CAC Name Next Wage Update When to Start?* CAC1 Before 6/1/2014 Good Question!** CAC2 Before 6/1/ “ ” CAC3 Before 9/1/2014 Same time as CAC 1&2 *In other words … when to start the annual wage verification process! **Allow yourself enough time to contact the DES, send your written request for wage verification and receive your response in enough time to update wages in your system – 1 to 3 months (keep in mind that the DES response expires in six months).

In no case can the wage fall below the Federal or State minimum wage, whichever is higher IMPORTANT – This doesn’t set the wage “floor” at FMW/SMW (see 10th Percentile Wage) Overtime must be paid at time-and-a-half for work in excess of 40 hours per week

Wages: SOC Codes All inmate work must be described by SOC code.
SOC = Standard Occupational Classification SOC codes can be found at:

Wages: SOC Codes - Example
Source: U.S. Department of Labor, Bureau of Labor Statistics, Standard Occupational Classifications (

Wages: 10th Percentile Example
Source = U.S Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics (

Properly Classifying Workers Using SOC Codes
Your CAC has 25 workers … all classified as SOC Code = (Packers & Packagers – Hand). For your locality, the DES has determined that the 10th P Wage for is $7.65/hr. For this CAC, 23 of the 25 workers perform duties related to the Packer & Packager – Hand, SOC Code = … what about the other two?

One of the workers drives a forklift 2 hours per day (works the rest of the shift packing) This worker should have a split-classification in that this worker should receive 10th P wages as a forklift operator for 2 hours per day. For the rest of the hours worked, this worker should receive the 10th P wage of $7.65/hour (for SOC Code = )

One of the workers operates a computer for the entire shift that generates/prints out packing slips and box ID tags. This worker should be re-classified to an SOC Code appropriate to the type of work described above (not a Packer & Packager – Hand) and paid the 10th P wage for that SOC Code.

Wages: Training Wages The DES agency and the Certificate Holder should work together to design a training wage and time period Training wage periods and amounts must be comparable to those used in similar private sector operations BJA has clarified that Certificate Holders must obtain written justification of the training wage & period for all CACs

Wages: Training Wages Ideally, your DES will provide or approve the training wage & period In cases where the DES cannot provide the information, the Certificate Holder may submit other documentation showing comparable training wages & periods for the locality

Wages: Training Wages Any CAC utilizing a training wage & period that is designated after January 2011, must have written justification of the training wage & period, and it must be updated annually Any CAC currently utilizing a training wage & period must have had written justification from the DES for the next annual wage update after January 2011 and from thereon Training period justification will be reviewed in this upcoming (2014) assessment

Wages: Training Wages Request to DES
SOC Code Training Wage Training Period 10th P Wage $ days $10.84 $ days $8.25 At the completion of the 180 day (for ) and 90 day (for ) training period, workers must advance to the 10th P Wage for that SOC code

Wages: Training Wages Request to DES
SOC Code Training Wage Training Period 10th P Wage $ hours $10.84 $ hours $8.25 At the completion of the 920 hours (for ) and 480 hours (for ) training period, workers must advance to the 10th P Wage for that SOC code CHs may use a “graduated” training period as long as it is approved by the DES

Wages: Training Wages, cont’d.
Graduated training period Training hrs. Wage 480 hrs. 920 hrs hrs. 10th P wage $7.25 $7.50 $8.00 $8.25 $8.50 As the workers progresses through 480/920/1400/1880 hours, the wage increases at a “graduated” rate until it reaches the 10th P wage for that specific SOC code Again, need approval by your DES

The workers must earn the 10th percentile wage upon completion of the approved training period Workers who complete the approved training period must have their 10th percentile wages updated annually

Sources for training periods: O-net (

Sources for training periods: Your private partners (employer model) … or customers (customer model) who employ the same SOC codes Your DES may have this information

Wages: Back Wages Back wages must be paid to inmate workers who have been paid less than the DES determined wage BJA has written guidance on the topic Back Wage policy located on NCIA and BJA Website

Wages: Back Wages Back Wage Policy (December 2010) – Available in PIECP Assessment Workbook The Certificate Holder should measure the difference between the DES approved wage and the actual wage for the period of time the inmate workers were underpaid and pay that amount to the workers in question Allowable deductions may be taken from back wage gross pay If a given worker cannot be located, an alternate recipient may be used (e.g., the inmate welfare fund, the victims’ compensation fund, etc.)

Wages – Minimum Wage Wil Heslop

Wages: Minimum Wage Some states are raising their State Minimum Wage (SMW) or have legislation pending to raise the SMW In some cases, the SMW is higher than the Federal Minimum Wage or FMW (currently $7.25) An increase in the SMW may affect PIECP wages if the SMW is higher than the 10th P wage

Wages: Minimum Wage (Example #1)
Wage Update on April 1, 2014 SOC 10th P Wage SMW (now – April 2, 2014) $ SOC 10th P Wage SMW (increased on July 1, 2014) $ $8.50 Starting July 1, 2014, you would need to pay a minimum of $8.50 to all offenders with SOC =

Wages: Minimum Wage (Example #2)
Wage Update on April 1, 2014 SOC 10th P Wage SMW (now – April 2, 2014) $ SOC 10th P Wage SMW (increased on July 1, 2014) $ $8.05 On July 1, 2014, you would continue to pay the 10th P wage of $8.25 to all offenders with SOC =

Wages: Minimum Wage An increase in the SMW may also affect your training wages If there is an increase in the SMW you should consult your DES

Split Wages Wil Heslop

Split Wages Some Certificate Holders designate “split wage” CACs
A split wage CAC manufactures product for both “traditional” and “PIECP” An example would be a garment shop where the CAC produces uniforms for the DOC, and also produces other garments bound for interstate commerce (PIECP) The CAC “splits” the wage paid to offenders between traditional wages and PIECP wages

Split Wages Some examples of a split wage
In the following examples, we are going to use two wage rates for illustrative purposes: Traditional wage - $.50/hour PIECP 10th P wage - $8.50/hour

Percentage of Sales – The CAC calculates 70% of sales from traditional work / 30% of sales from PIECP work. The CAC pays offenders the traditional hourly rate for 70% of time worked, and the PIECP hourly rate for 30% of time worked Example - an offender works 10 hours per week: 7 hours – paid at $ .50/hour (traditional wage) … or gross wages of $3.50 3 hours – paid at $ 8.50/hour (PIECP 10th P wage) … or gross wages of $25.50 Total gross wages for the 10 hour week = $29.00

Split Shop – workers are divided into “traditional” workers and “PIECP” workers Example – The CAC has three production lines (running parallel to each other): 2 of the lines produce traditional product - all offenders working these two lines earn the traditional wage ($.50/hour) The remaining line produces PIECP product – all offenders working this line earn the PIECP wage ($8.50/hour)

By specific product – when an offender works on a PIECP products, he/she earns PIECP wages ($8.50); when an offender works on traditional products, he/she earns traditional wages ($.50/hour) How do you do this? Tag the product as it moves through the manufacturing process, identifying it as Traditional or PIECP Tag/identify batches of product as Traditional or PIECP Offenders log hours based on which product they are working on

Split Wages At assessment – assessors will want to see a written description of the split Explain the written description of the split with offenders What you are not allowed to do: Arbitrarily select a group of workers to receive PIECP wages

Piece Work Wages Wil Heslop

Piece Work Wages In general, piece work wages (wages based on units produced) must be converted to an hourly wage, so that if may be compared with the 10th P wage For example, an offender earns $ .15 per unit produced. The offender produces 1,000 units during 20 hours of work $.15 units x 1,000 units = $150 earned over 20 hours (or $7.50/hour)

Piece Work Wages If this CAC utilizes a piece work wage, please complete the following standard hourly wage analysis which will allow you to determine if the wage plan is designed to meet or exceed the DES 10th p: Obtain the standard hourly production rate used in the CAC (the number of units that management has determined the inmate worker should produce per hour). The CAC may be using the standard hourly production rate in normal use in the industry, or the CAC may have determined its own standard hourly production rate. If the rate is not the rate normally used in the industry, what is the basis for determining a standard hourly production rate that differs from the industry norm? Obtain the pay rate per unit produced (the piece work pay rate) used in this CAC.

Piece Work Wages Standard hourly wage analysis (continued):
Multiply the production rate used in this CAC by the pay rate per unit produced by the inmate workers in this CAC. This is the standard hourly wage for inmate workers in the CAC. That is, this is the wage rate that workers who produce the expected number of units per hour should receive. Is the standard hourly wage below, equal to or above the DES 10th P wage? If the standard hourly wage is below the DES 10th P wage, then the CAC has created a wage plan that does not meet BJA’s 10th P requirement. The plan will have to be revised, changing either the production rate or the pay rate per unit produced, or both, so that the workers who produce the expected number of units per hour can receive at least the DES 10th P wage.

Piece Work Wages Example (using the hypothetical 10th P wage of $8.50/hour): The CAC determines that the standard hourly production rate is 50 units per hour Offenders are paid a piece work wage of $ .15/unit Offenders who work at the standard hourly production rate would earn $7.50/hour This is below the 10th P wage of $8.50 by $1.00

Piece Work Wages After determining the standard hourly wage, please calculate the actual hourly wage earned by inmate workers in this CAC. [NOTE: Even if the standard hourly wage has been set so as to make it possible for inmate workers to earn the DES 10th P, you must determine whether or not a majority of the workers actually do earn wages at or above that level.] Determine the number of workers in the CAC who were paid an actual hourly wage below the DES 10th P _________ What is the percentage of the workers who were paid an actual hourly wage below the DES 10th P? ________________

Piece Work Wages Calculating the actual hourly wage earned (continued): For all of the inmate workers who were paid an actual hourly wage below the DES 10th P, the CAC must identify inmate worker performance variances as justification for the wage rate that those inmate workers are paid. If more than half of the inmate workers in the CAC were paid an actual hourly wage below the DES 10th P, then the CAC is not in compliance and a compliance plan will need to be developed. (NOTE: In no case may a PIECP inmate worker be paid less than the Federal or state minimum wage, whichever is higher.)

Displacement Barbara Auerbach

Displacement The Guideline states that “PIE CAC operations must not result in displacement of employed workers; be applied in skills, crafts, or trades in which there is a surplus of available gainful labor in the locality; or significantly impair existing contracts.”

Displacement Displacement is of most concern at the time of Designation, but it may also become a factor in the annual wage verification Under current economic conditions, some State DES agencies have been unable or unwilling to provide non-displacement assurances for new CACs If you are unable to get a displacement determination from your DES, contact NCIA

Displacement Sample DES Wage Verification & Displacement Determination Request – AT DESIGNATION The _____ Department of Corrections is developing a private sector prison industry at the _____ Correctional facility, in partnership with the ABC Corporation. ABC plans to hire offenders to manufacture wooden doors. To meet the requirements of the Prison Industry Enhancement Certification Program (PIECP), I am requesting the following wage information: The 10th Percentile Wage for the State Capitol locality for: Cabinetmakers and Bench Carpenters Sawing Machine Setters, Operators I am also requesting that you provide a written determination that this project will not: Result in displacement of employed workers Be applied in skills, crafts, or trades in which there is a surplus of available gainful labor in the locality Significantly impair existing contracts

Displacement Sample DES Wage Verification & Displacement Determination Request – NEXT WAGE UPDATE To meet the requirements of the Prison Industry Enhancement Certification Program (PIECP), I am requesting the following wage information as part of the required annual wage update: The 10th Percentile Wage for the State Capitol locality for: Cabinetmakers and Bench Carpenters Sawing Machine Setters, Operators I am requesting that this wage information be send by _______________

Deductions Barbara Auerbach

Deductions Optional on the part of the Certificate Holder, with two exceptions: Taxes FICA deductions for employer model CACs In total, deductions cannot exceed 80% of gross salary and must be clearly noted on the voluntary participation form

Deductions The four allowable deductions are: Taxes Room and board
Victims’ compensation (and restitution) Family support Victims’ compensation deductions must fall between 5% and 20% of gross salary, and these deductions must be deposited into any fund established by law to compensate the victims of crime.

Deductions: Deductions from Net
BJA is currently reviewing the court-ordered child support deduction and court-ordered restitution deduction from gross and net wages. Savings accounts are not classified as “deductions” for PIECP purposes.

Voluntary Participation
Barbara Auerbach

PIECP inmate workers must volunteer to participate in a PIECP CAC The inmate worker must sign a voluntary participation form before project start-up or before the inmate worker begins working in the CAC Staff representing the Certificate Holder must also sign the same voluntary participation form before project startup or before the inmate worker begins working in the CAC. The date should match the date for the inmate worker’s signature. The voluntary form must state that the inmate worker agrees to deductions and other financial arrangements, as well as state that deductions must not exceed 80% of gross pay

Sample Deduction Text* I agree that the following deductions will be taken from my gross wages: Any taxes (Federal/state/local) or social security deductions Room & Board (20%) Victims Compensation Fund (10%) Family Support (10%) Deductions in aggregate shall not exceed 80% of gross wages. The remaining funds will be [state the deposition … deposited into mandatory savings, commissary account, etc.] *Provided as a sample only … the voluntary participation form is a legal document – please have your legal counsel review it!

CAC Redesignation Barbara Auerbach

CAC Re-designation When do I need to “re-designate” a CAC?
BJA requires either a new designation or a re-designation when: A different product is to be produced than the product(s) currently designated A CAC is moved to a new location (not necessarily a new "locality") Or, additional components or processes are being added to an existing CAC that potentially have environmental impacts These circumstances (above) could trigger the need for a new designation: NEPA categorical exclusion request local labor notification local private industry notification wage determination from your DES non-displacement determination from your DES You should notify NCIA of your intention prior to making such changes, to determine whether a new designation or re-designation will be necessary.

NEPA Wil Heslop

NEPA The two documents many Certificate Holders overlook when submitting a NEPA: FEMA Floodplain Map Letter to the Chief State Historical Officer

Patient Protection & Affordable Care Act
Wil Heslop

Patient Protection & Affordable Care Act (PPACA)
BJA is not aware of any changes to the PIECP program requirements precipitated by the PPACA Certificate Holders should refer questions to the federal agency responsible for administering the programs created by the PPACA (HHS, IRS, etc.) Certificate Holders may also want to contact their legal counsel (or private partners may want to contact their legal counsel) for advice on responsibilities you may have resulting from the PPACA

PIECP Growth & History Barbara Auerbach

PIECP Growth & History NCIA compiled a PIECP program history outlining the growth of the program from 1979 to In addition, NCIA conducted research and surveyed PIECP Certificate Holders in order to determine factors that have either contributed to or hindered the growth of PIECP.

PIECP Growth & History PIECP historical growth can be summarized as follows: The pace of growth during the first 10 years of the program with regards to the number of pilot projects or program participants was limited to the number certificates available. In general, this was a period where PIECP was a pilot program growing in size from one to nineteen certificate holders by 1989. In 1990, Congress increased the number of certificates to fifty and through the management of the program by the LEAA, BJA and NCIA, the program continued to grow at a steady rate until Another highlight of this period included the issuance of the 1999 PIECP Guideline. At the end of this period, there were thirty-nine certificate holders.

PIECP Growth & History PIECP historical growth (continued):
From 2002 to 2012, program growth slowed. While six new certificates were awarded, other metrics remained relatively flat during this ten year period: Number of CACs = 190 to 200 (average range/approximation) Number of Offenders = 5,000 (on average/approximation) During this same period, the majority CAC model shifted from the “employer” model to the “customer” model. Both the slowed growth of the program and the shift in model utilized by certificate holders appear to be caused by national economic uncertainties and lackluster economic growth.

PIECP Growth & History Since the program inception in 1979 and through 2012, gross wages paid to offenders totaled $636,621,288 and deductions (for room and board, victims’ compensation, child/family support and taxes) totaled $373,975,021. Certificate holders reported that PIECP sales (on average) represent about 10% of total revenues. These same certificate holders indicated that 20 – 30% would be a more ideal range for PIECP sales. Certificate holders also reported that 10-20% of workers in their program are PIECP workers. These same certificate holders indicated that 20 – 30% would be a more ideal range for PIECP workers in their programs. In general, most certificate holders do not employ full-time business development staff for PIECP and do not have a formal PIECP marketing or business development plan.

PIECP Growth & History Restraints to growth of PIECP reported by certificate holders include: Restrictions created by the DOC – lack of suitable manufacturing space; restrictions on the movement of offenders, staff and materials; and other security concerns or restrictions. Lack of suitable manufacturing space was the number one problem reported by PIE managers from the seven largest PIECP programs. Offender-based restraints – high offender turnover and the lack of a skilled workforce External factors – weak economic conditions, lack of support from the state department of economic security (DES). This was the second most frequently reported restriction reported by PIECP managers interviewed.

PIECP Growth & History Restraints (continued):
Displacement – concerns that a new PIECP CAC may lead to the actual or perceived displacement of free-world workers were mentioned by all of the PIECP managers interviewed, but most had not experienced negative reactions from either labor of industry in several years. Limited pool of private partners – in general, certificate holders reported that the pool of potential private partners is relatively narrow. The majority of certificate holders stated that PIECP compliance criteria and other regulatory compliance were not factors in limiting growth of the program.

PIECP Growth & History Overall, certificate holders support the PIECP program and would like to see more PIECP opportunities and growth for the future.

LOCATING INFORMATION ON PIECP
On – under the “PIECP” tab

PIECP Contacts Please contact Wil Heslop at NCIA with any PIECP related questions or requests: Wil Heslop, NCIA

Question and Answer Session

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