Contractor Conundrum Continues – The federal Employee Misclassification Prevention Act (EMPA) of last year has been replaced with a more ominous-sounding Payroll Fraud Prevention Act (S 770). One of the EMPA record-keeping headaches has been removed, but this bill again proposes to amend the FLSA and retains requirements to  notify workers upon hire whether they are an employee or a “non-employee” and provide them with the U.S. Department of Labor website, to get more info and to file a complaint if the worker thinks his or her classification is incorrect;  beef up civil penalties to a range of $1000 to $5000 per misclassified worker;  impose treble (3x) actual damages (e.g., minimum wage, overtime) arising from misclassification and more. The most recent budget includes $21.3 million for the Secretary of Labor to identify and pursue cases of worker misclassification. With government coffers low, this measure is seen as a way to ensure that “contractors” who are really employees receive all protections of the FLSA and employers withhold and properly remit taxes to state and/or federal agencies
- Take a Tip – New FLSA regs have been released and will take effect 5-5-11, impacting tip credits, tip pooling, salaried nonexempts paid via the fluctuating workweek method and more. Employers who use the tip credit (i.e., pay certain tipped nonexempt workers only $2.13 per hour, with the difference between that amount and the applicable minimum wage being satisfied via customers’ tips) must inform workers of the intent to use the tip credit, along with additional details such as the direct pay amount, the tip credit amount, that the amount claimed as a tip credit cannot exceed the tips actually received and more. There is no requirement that this notice be made in writing, but that is the best way to prove compliance, if asked. Tip pooling arrangements are no longer subject to a 15% cap on contributions to the pool. The fluctuating workweek is a method used to pay nonexempts a fixed salary where hours worked vary from one week to the next. When those hours exceed 40 in a workweek, overtime is calculated by dividing the salary by the hours worked and using half of the resulting amount as the multiplier when paying overtime. The revised reg addresses the question of paying these employees bonuses or other premium pay and states that such payments are incompatible with the fluctuating workweek method and payment would negate the employer’s ability to use that method.
- Sibling Rivalry? – Not to be outdone by the SEC, which recently awarded its biggest ever whistleblower bounty ($1 million), the IRS awarded $4.5 million to a whistleblower under its enhanced program, which was designed to encourage employees to rat out their noncompliant employers. The award was 22% of the $20 million recovered in back taxes and interest from a large financial firm. April Showers.
- On April 6, the Social Security Administration (SSA) announced it would resume sending single employee “no match” letters to employers and would permanently discontinue use of the letter which lists multiple employees. Employers remain between a rock and hard place, with the SSA cautioning that a mismatch letter is not evidence that the individual lacks U.S. work authorization and ICE holding firm that an employer’s receipt of the letter and failure to address it is possible evidence of “knowing” employment of an unauthorized worker which would violate the INA. The proposed “safe harbor” rule from 2007 was never finalized and was eventually rescinded, removing a set of steps for employers to follow in these situations that would provide protection from liability for an INA violation. For now, check your records for a possible data entry error that would explain the mismatch in your employee’s SSN. If that’s not the answer, direct the employee to go to the SSA to get a correct SSN card and allow a “reasonable” amount of time for this to happen.
- On April 12, the Paycheck Fairness Act was re-introduced in the Senate (S. 797) and the House (H.R. 1519). The bill, which is intended to beef up the Equal Pay Act, fell two votes short of cloture in the Senate last November.
- On April 14, CIS announced that a final rule had been adopted, making changes to the Form I-9. Chances are you’ve been operating under the interim rule (since 4-3-09) and the final rule has no changes to report. You can see the form at www.uscis.gov/files/form/i-9.pdf. Some documents are no longer acceptable to provide identity and/or authorization to work and some new docs have been added. Also, you can no longer accept expired documents as proof.
- On April 14, the Employment Non-Discrimination Act (ENDA) was re-introduced in the Senate (S. 811). The companion bill is H.R. 1397. ENDA proposes to make unlawful employment discrimination based on sexual orientation and gender identity. You can always see full text and check out the status of pending federal bills at http://thomas.loc.gov.
- April 28 was Take Our Daughters and Sons to Work Day . . . and June 24 will be Bring Your Dog to Work Day. Uh oh, the cat’s going to feel left out,
- Handbook Helper – Not so long ago, drafting an employee handbook was largely an exercise in creative writing. Today, an intricate web of federal, state and local regulation touch nearly every employer policy, limiting what you can and cannot say. The latest poke comes from the NLRB, where the Board disregarded a hearing officer’s findings and held that three handbook policies were so objectionable, the results of a successful union decertification had to be set aside. Jurys Boston Hotel, 356 NLRB No. 114 (2011). Even though the employer had revised two statements and removed the third in response to an unfair labor practice filing, the Board opined that the statements relating to solicitation, loitering and grooming (especially wearing of buttons) tended to interfere with employee choice. Of interest, the union raised no objection to these policies during the two years leading up to the decert election.
- The Bear Necessities
– A wildlife park worker who was sat upon and bitten while feeding a grizzly bear in its pen can collect workers’ comp benefits even though the worker admitted he smoked pot on the way to work that day. While most states have statutory exclusions for unemployment comp and workers’ comp eligibility when the employee tests positive for illegal drugs, it’s not always a slam dunk. In MT, the Supreme Court decided that the worker was in the course and scope of his duties when injured and while his pre-work pot use was “ill-advised” and “mind-boggingly stupid,” it was not the leading cause of the injury. Hopkins v. Kilpatrick (Mont. 3-11). Other states have strict procedural requirements on the drug testing process which can trip up what looked like an easy win for the employer, so bear in mind the requirements that apply in your locale. J
- Bright Spots
- President Obama is expected to sign a bill which will repeal the much maligned PPACA requirement that employers provide a Form 1099 for all corporate service providers that received more than $600 annually in goods and/or services.
- EEOC will pay $751,942.48 to an employer, as court-ordered sanctions for pursuing a meritless claim. EEOC filed a class action lawsuit, claiming the employer had a blanket policy of refusing to hire individuals with a criminal record and such action had a disparate impact on Blacks and Hispanics. The court determined the case had no foundation from the start and it was unreasonable to pursue the claim, driving up the defendant’s attorney fees, expert fees and court costs to more than $1 million. EEOC v. Peoplemark, Inc. (W.D. Mich. 3-11).
- Stated Differently – Here are some morsels for you multi-state employers:
– The 9th Circuit upheld a U.S. District Court injunction, blocking parts of the AZ immigration law including provisions making it unlawful for an unauthorized worker to solicit, apply for or perform work in the U.S. The U.S. Department of Justice sought the injunction, claiming that federal law preempts state action on immigration.
- Georgia – The House sent a bill (HB 87) to Governor Nathan Deal for signature, which will require private sector employers with 500+ employees to use E-Verify on all new hires, beginning no later than 1-1-12. Employers with less than 500 but more than 99 employees will have until 7-1-12 to comply and those with 11 or more employees have until 7-1-13. Employers with ten or less employees are excluded. Also, only employees who work 35+ hours per week are subject to the requirement.
- Hawaii – Effective 1-1-12, same sex couples can enter into civil unions which entitle them to the same rights, responsibilities and obligations as married couples.
- New Jersey – Effective 3-29-11, it is unlawful for employers to knowingly or purposefully publish, in print or on-line, an ad for any job vacancy in the state that contains  any provision stating or suggesting that the qualifications for a job include current employment;  any provision stating or suggesting that the employer will not consider or review an application for employment submitted by any job applicant currently unemployed; or  any provision stating or suggesting that the employer will only consider or review applications for employment submitted by job applicants who are currently employed. Penalties start at $1000 and there is no private cause of action for individuals, against the prospective employer.
- Philly, PA – If the employment application you use in this city has a box to check relating to arrests and/or convictions, you will need to revise your form. 90 days after 4-13-11, an ordinance will take effect which makes it unlawful for an employer of 10+ employees to  knowingly and intentionally inquire about, require a person to disclose, or take any adverse action against any person on the basis of an arrest or criminal accusation not pending against the person and that did not result in a conviction; or  inquire about or require an applicant to disclose any criminal convictions during the application process and during the first interview. There is an exception for situations where such inquiry is allowed or required (e.g., child care workers). It’s still OK to run a criminal background check later in the pre-employment process, or on current employees.
Audrey E. Mross
Labor & Employment Attorney
Munck Carter LLP
Employment Law Legal Update is provided to alert recipients to new developments in the law and with the understanding that it is guidance and not a legal or professional opinion on specific facts or matters. For answers to your specific questions, please consult with counsel.