WorkplaceHorizons.com

Department of Labor Announces New Initiative to Eliminate Independent Contractor Misclassification

2010-03-11T19:48:15Z

During the AFL-CIO Executive Council’s winter meeting, U.S. Department of Labor (“DOL”) Secretary Hilda Solis announced plans to address what she perceives to be the rampant misclassification of independent contractors by their would-be employers. Designed to inform workers of their rights and protections under federal law, notify them of whom to contact should they have questions or issues, and enlighten them about “who they can trust,” the campaign will begin in Houston, Texas as early as April.

The DOL’s campaign is part of a new, joint DOL-Treasury Department initiative that seeks to combat misclassification of employees as independent contractors. The DOL’s proposed budget for the campaign includes a request for $25 million to hire additional Wage and Hour division employees, employees to pursue misclassification litigation, and funds to modify the training curriculum and investigation guidelines used by Occupational Safety and Health Administration (“OSHA”) inspectors. According to Secretary Solis, the DOL’s focus on misclassification will look first at those sectors where she believes the most “egregious abuse” is occurring - the service and construction industries. Employers in all industries, and certainly those in the service and construction industries, should take a second look at whether they have properly classified individuals as independent contractors. Employers should also make sure to maintain all documents and records relating to their workforce for at least the three-year statute of limitations period on wage covering misclassification claims.

Secretary Solis also took time during her remarks to comment on the make up of the National Labor Relations Board and the seemingly-stalled Employee Free Choice Act (“EFCA”). Declining to provide specifics or discuss particular nominees, Secretary Solis indicated that “people will be pleased, they will be very pleased,” with the NLRB’s composition. Her comments hint that the White House will not give up on its embattled Board nominee, Craig Becker, the AFL-CIO’s former associate general counsel. With regard to EFCA, Secretary Solis acknowledged that she did not have the ability to pressure Congress to pass EFCA, but indicated she would continue to acknowledge its merits, and she encouraged labor organizations not to give up on its passage.

Wage and Hour Focus Intensifying

2010-03-05T16:57:35Z

In 2009, employers faced a barrage of wage and hour class and collective actions. 2010 promises more of the same, plus increased enforcement by administrative agencies, including the Internal Revenue Service (“IRS”).

Taking a step in a new direction, in recent months, courts have demonstrated an increased willingness to grant class or collective action certification in Fair Labor Standards Act (“FLSA”) and/or state wage and hour claims. This trend toward certification can be the difference in liability for underpaying a handful of individual employees versus an entire workforce. When multiplied class-wide, liability for wage and hour violations adds up quickly. Walmart, for example, agreed to pay up to $640 million last year to settle multiple wage and hour suits.

At the same time that employers are facing increased pressure from civil suits, state and federal agencies have stepped into a more prominent role in enforcing wage and hour laws. Department of Labor (DOL) Secretary Hilda Solis recently announced that in early 2010, the DOL’s Wage and Hour Division will launch “We Can Help,” a national public awareness campaign to inform workers about their rights. Secretary Solis has also hired an additional 250 wage and hour investigators to step-up enforcement efforts. President Obama’s proposed 2011 budget would allocate $25 million to the DOL to combat employees misclassified as independent contractors. The “Misclassification Initiative” provides for 100 additional enforcement personnel and would encourage state enforcement through grant money. Even the IRS is participating, announcing that it will launch a three-year employment tax audit initiative, the “National Research Project.” Like the DOL’s We Can Help initiative, the National Research Project will also focus on the misclassification of employees as independent contractors.

Faced with triple threats from civil lawsuits, labor-focused administrative agencies, and the IRS, employers would be well-served by auditing their wage payment practices and workforce classification structure to ensure compliance with both federal and state wage and hour laws.

President Obama Extends COBRA Continuation Coverage Subsidy

2010-03-04T20:48:57Z

On March 2, 2010, President Obama signed into law the Temporary Extension Act of 2010. The Act amends the American Recovery and Reinvestment Act of 2009 by extending through March 31, 2010, a 65% federal subsidy of COBRA continuation coverage premiums. Without the extension, employees laid off after February 28, 2010 would have been ineligible for the subsidy. In addition to extending the eligibility period, the Act also extends eligibility criteria. Now individuals who had a reduction of hours, did not elect COBRA coverage at the time of the reduction, and later suffer involuntary termination may be eligible to receive premium subsidy assistance under certain conditions.

The Temporary Extension Act only extends COBRA continuation coverage for the thirty-one days of March. The Act was only intended as a stop-gap. Congress continues to debate proposed legislation, H.R. 4213, further extending the subsidy period through December 31, 2010. H.R. 4213 is presently before the Senate.

STAPLES, INC. SETTLES ASSISTANT STORE MANAGERS’ OVERTIME CLAIMS FOR $42 MILLION

2010-02-09T23:07:57Z

Office-supply retailer Staples, Inc. has agreed to a $42 million settlement of thirteen lawsuits alleging that the company had misclassified more than 5,000 assistant store managers as exempt from federal and state wage-and-hour laws and consequently failed to pay them overtime compensation to which they were entitled. The claims, brought under the federal Fair Labor Standards Act and various state wage-and-hour laws, date back as far as 2002. The settlement, which is subject to court approval, contains no admission of wrongdoing by the company.

The Staples settlement illustrates the highly contentious issue of exempt status for assistant store managers in retail operations. Although some assistant store managers can satisfy the standards for exempt status as bona fide executive employees, many retail employers routinely classify this job title as exempt without assessing whether the individuals holding these jobs actually meet the requirements for exempt executive status. In some instances, assistant store managers spend most of their time performing such nonexempt work as stocking shelves and ringing up sales – a situation that can defeat exempt status. In some stores, assistant store managers do not independently supervise two or more full-time employees, but merely share supervisory authority with the store manager. This situation can also result in the assistant store managers being deemed nonexempt. Given the potential financial pitfalls of misclassifying assistant store managers as exempt, employers in the retail industry would be wise to examine carefully whether those positions meet all of the requirements for exempt status under the Fair Labor Standards Act and applicable state laws.

Employers Should Be Vigilant as the EEOC Anticipates Increased Charges, Funding, and Enforcement in 2010

2010-02-04T20:28:47Z

Job bias claims filed with the Equal Employment Opportunity (“EEOC”) in 2009 reached near-record numbers. By the end of the EEOC’s fiscal year on September 30, 2009, over 93,000 charges of discrimination had been filed with the agency, the second-highest in the EEOC’s history. In a January 6, 2010 press release, the EEOC attributed this “near-historic level of total discrimination charge filings” to several factors, including greater accessibility of the EEOC to the public, distressed economic conditions, employees’ enhanced awareness of their legal rights, and changes to the agency’s intake process that reduced the number of steps necessary for an individual to file a charge.

Both the EEOC and industry experts expect the number of charges filed with the agency to continue to increase in 2010. The EEOC anticipates that the current economic climate will result in at least 101,653 charges of discrimination being filed with the agency during fiscal year 2010. To meet the increased demand for its services, the EEOC requested a $23 million funding increase from Congress. The money will be used to hire approximately 300 new investigators, mediators, and attorneys to reduce the backlog in private sector claims.

Employers should expect a very visible and active EEOC in 2010 and beyond. Not only has the EEOC received increased funding for 2010, but President Obama’s proposed 2011 budget includes a request for an $18 million increase to the EEOC’s annual budget. EEOC Acting Chairman Stuart Ishimaru reiterated the agency’s intent to remain vigilant, stating that President Obama’s requested funds will permit the EEOC “to continue our focus on systemic enforcement.” In light of the EEOC’s heightened visibility, employers should take affirmative steps to prevent discriminatory actions that could serve as the basis for a charge and to ensure that they are in the best position to defend against any charges filed. Employers would be well-served to update handbooks, audit employment policies to ensure that they include recent amendments to the ADA, FMLA, and Equal Pay Act, and train their managers on the implications of such amendments. Employers should also consider providing refresher sexual harassment training courses and remind front line managers of the crucial need to partner with human resources and to document performance problems and conversations at the time they occur.