Obama Nominates New Labor Secretary

Posted by Staci Ketay Rotman on March 18, 2013

thomas.perez.jpgThis morning, President Obama formally nominated Thomas Perez to be the next Secretary of the Department of Labor.  Mr. Perez, an assistant U.S. Attorney General, will replace outgoing Secretary Hilda Solis.  Mr. Perez’s nomination is widely supported by the labor community. 

Mary Kay Henry, the president of the Service Employees International Union (SEIU), stated on NBCNews.com's First Read: 

President Obama has made an excellent choice in nominating Thomas Perez to lead the U.S. Department of Labor.  During his time as Labor Secretary in Maryland, Mr. Perez’s had a strong record of enforcing labor laws, especially wage and hour and other violations that stood in the way of workers earning a fair wage. Enforcing these labor laws help to close the income gap between the wealthy and everyone else.

While we will learn more about Mr. Perez during the confirmation process, it does seem likely that the DOL’s wage and hour initiatives will continue under his leadership.

Louisiana Joins the DOL's Misclassification Initiative

Posted by Staci Ketay Rotman on February 29, 2012

signing.memo.XSmall.jpgLouisiana is the latest State to sign a Memorandum of Understanding and join forces with the U.S. Department of Labor to combat employee misclassification.  These Memorandums of Understanding with state government agencies arose as part of the U.S. Department of Labor's Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. Louisiana is now the thirteenth State to sign one of these Memorandums after California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington.  The Memorandums allow the DOL to share information and to coordinate efforts with participating states as part of its Misclassification Initiative.

As we have previously mentioned, the DOL is laser focused on employers who misclassify employees as independent contractors.  And as misclassification continues to grow, so does the DOL’s resolve.  In 2011, the Wage and Hour Division collected more than $5 million in back wages for minimum wage and overtime violations under the FLSA that resulted from employees being misclassified as independent contractors or otherwise not properly treated as employees.  With that kind of money being collected, this issue is not going away any time soon.

Insight for Employers

Whether a worker is an independent contractor or an employee is a very fact specific analysis.   Like other misclassification issues, when left unchecked, failure to properly classify a worker as an employee may lead to serious monetary damages down the road.  Even if you are familiar with these rules, if your business uses independent contractors, it may be worth a few minutes of your time to confirm with an experienced employment attorney that your workers are properly classified. 

"Right to Know" Rule Not Likely in 2012

Posted by Bill Pokorny on January 27, 2012

Regulatory Agenda screen clip.pngFor roughly the last two years, the U.S. Department of Labor has been contemplating (some would say "threatening") revisions to the recordkeeping regulations under the Fair Labor Standards Act that would require an employer who classifies an employee as exempt to prepare a written justification of the basis for the exemption. This document would have to be provided to the employee and would be subject to inspection by the Department of Labor. For obvious reasons, many employers strongly disfavor this proposal.

The Department of Labor's plans for new regulations are published semiannually in the Unified Regulatory Agenda. The first entry relating to the proposed Right to Know rule, in the Spring 2010 agenda, indicated that proposed regulations would be published in August 2010. That date was later moved back to April 2011, and most recently to October 2011. In the most recent edition of the Unified Regulatory Agenda, published on January 20, 2012, the DOL moved the "Right to Know" rules from the "Proposed Rules Stage" to "Long-Term Actions," and removes any projected date for issuing proposed rules. "Long-term actions" are defined in the agenda as "items under development but for which the agency does not expect to have a regulatory action within the 12 months after publication of this edition of the Unified Agenda." That being the case, it appears that the Department of Labor does not plan to move forward with its Right to Know rules at least until January 20, 2013 - hardly surprising given that these will be controversial rules and this is an election year. 

However, once the election is over (and assuming President Obama remains in office), we can expect the Department to move forward once again on this proposal. According to a recent article in BNA's Daily Labor Report (subscription required), Acting Wage and Hour Administrator Nancy Leppink called the Right to Know rule one of the Wage and Hour Division's priorities, stating "We're continuing to work on that regulation," and that "We're learning about what the issues are" from the Department's ongoing misclassification enforcement initiative. This is probably not such good news for the employers who will have to comply with the new regulations. However, I'm certainly looking forward to them, as they will undoubtedly provide plenty of interesting new problems for us to write about on this blog. Stay tuned!

 

DOL Coordinates With IRS, States On Independent Contractor Misclassification

Posted by Bill Pokorny on September 22, 2011

Audit stampEarlier this week, the U.S. Department of Labor held a ceremony at which Secretary of Labor Hilda Solis signed a memorandum of understanding with the Internal Revenue Service to "improve departmental efforts to end the business practice of misclassifying employees in order to avoid providing employment protections." The DOL also signed or has agreed to sign memorandums of understanding with officials in 11 states to coordinate efforts to crack down on independent contractor misclassification, including Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah, and Washington. 

Although misclassifying workers as independent contractors can result in violations of numerous laws, including the tax code and wage and hour laws, the various government agencies charged with enforcing those laws have historically not shared information or coordinated their enforcement efforts. That now now appears to be coming to an end, as the DOL becomes more aggressive in its enforcement efforts and state and federal governments look for opportunities to enhance their revenues.

At the same time, the IRS has announced a new "Voluntary Classification Settlement Program" to encourage employers who have misclassified workers in the past to "get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit." To be eligible for this program, applicant employers must (1) consistently have treated the workers as nonemployes, (2) have filed all required 1099s for the workers for the prior three years, and (3) not currently be under audit by the IRS, DOL, or a state agency concerning the classification of the affected workers. Employers accepted into the program will be required to pay an amount "effectively equaling just over one percent of the wages paid to the reclassified workers for the past year." No penalties or interest wll be assessed, but for the first three years under the program, the employers must agree to an extended statute of limitations for the IRS to pursue payroll tax violations. Unfortunately for employers, the IRS program would not provide any amnesty for violations of other laws, such as state or federal overtime laws or state tax violations. The IRS announcement also makes no mention of whether the agency will shre information from the settlement program with the Department of Labor or other agencies. 

Because misclassification violations implicate a wide range of laws and frequently involve multiple workers, they can represent a significant liability for employers, particularly for small and midsize businesses without significant financial reserves to defend or settle these claims. Given the risks and the spotlight that the DOL is shining on this issue, businesses that use independent contractors should act now to ensure that their workers are properly classified. Among other things, this means making sure that when you classify a worker as an "independent contractor," you are prepared to prove that your classification decision is warranted under all of the relevant laws, including but not limited to the Fair Labor Standards Act, state wage and hour laws, workers' compensation statutes, and the state and federal tax codes. Unless you are well-versed in these laws, this is yet another area where a few hours of consultation with an experienced employment lawyer now may help avoid serious liability down the road.

 

Interesting Wage & Hour Enforcement Statistics

Posted by Bill Pokorny on September 01, 2011

DOL Enforcement Stats screenshot.pngRecently the U.S. Department of Labor revamped its enforcement data website, http://ogesdw.dol.gov/, adding some snazzy new map displays showing inspection and violation data from OSHA and the Mine Safety and Health Administration. 

Of more interest to readers of this blog willl be the site's statistics regarding the Wage and Hour Division's enforcement activities. 

According to the site's interactive piecharts, the agency conducted 68,644 enforcement actions. (The chart, unfortunately, does not say over what period, though if the chart is based upon the large data set available from the site this may represent FY2007 to present.) Of these, the Department found violations in 50,364 cases, and no violation in just 18,280. In other words, the Department found violations in roughly 73% of all of its compliance actions. These findings resulted in findings of back wages due totaling $681,151,513, or about $13,524.57 per case in which a violation was found. 

Like crunching numbers? You can download the Wage & Hour Division's of all concluded compliance actions since FY 2007 here. The dataset includes, among other things, the names and addresses of employers, whether any violations were found, the back wage amount, the number of employees due back wages, and civil money penalties assessed.

If you find anything noteworthy in the data, feel free to share in the comments!

 

Restaurant Association Sues to Block Tip Credit Rules

Posted by Bill Pokorny on June 17, 2011

DOL April 5 final regs cover screenshotOn April 5, 2011, the U.S. Department of Labor published new final regulations that among other things require employers to give new detailed notices to tipped employees in order to credit tips toward the minimum wage. The new regulations took effect on June 5, 2011. Yesterday, June 16, 2011, the National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Businesses filed a lawsuit against the DOLseeking to block enforcement of the new rules. National Restaurant Association v Solis (PDF).

The Tip Credit and the New Rules

Under the Fair Labor Standards Act (FLSA), employers must pay all employees a minimum hourly wage, currently $7.25 per hour. 

However, for tipped employees (i.e., those who customarily and regularly earn more than $30 per month in tips), the FLSA allows employers to pay a lower cash wage and take a "tip credit" to bring the employee's total compensation up to the minimum wage. Currently, federal law allows employers to take a tip credit of up to $5.12 per hour. (Many states provide for a higher minimum wage. In Illinois, for example, the minimum is $8.25 per hour. The tip credit in Illinois is limited to $3.30 per hour, and tipped employees must receive a cash wage of $4.95 per hour.)

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DOL's iPhone App Needs An Update

Posted by Bill Pokorny on May 26, 2011

On May 9, 2011, the U.S. Department of Labor proudly announced its new time-tracking app for the iPhone, which Secretary of Labor Hilda Solis touted as an "invaluable" tool for the Wage & Hour Division in cases where employers failed to keep accurate records. The announcement certainly got the attention of blogging labor and employment law bloggers - see below for a few of the many posts on this. 

Ironically, the app that's designed to allow hourly employees to keep track of their hours and pay doesn't accurately calculate either in accordance with the Department of Labor's regulations. 

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