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Washington Labor & Employment Wire » Department of Labor

DOL Announces That It Plans To Require Employer Compliance Plans

The Department of Labor (”DOL”) has announced that it is planning to put the onus on employers to demonstrate compliance with wage and hour, safety and health, and other laws overseen by DOL.  It is not clear whether or when the initiative will come to fruition, or the form the initiative will ultimately take.  However, it is clear that the Department is laying the groundwork for changes that may impose substantial new compliance burdens on employers.  

In remarks on April 29, 2010 to the Center for American Progress, Deputy Labor Secretary Seth Harris noted that the DOL’s spring regulatory agenda, released on April 26, was the first step in a new strategy to ensure the burden of compliance with labor laws is on the employer.  This strategy, dubbed by Harris as the “Plan, Prevent, Protect” strategy, seeks especially to target those employers that DOL believes employ a cost-benefit analysis before deciding to comply with the labor laws.  Specifically, “Plan, Prevent, Protect” would require employers to: (1) formulate a plan to comply with specific labor laws; (2) enhance prevention by executing the plan and performing an analysis on its effectiveness; and (3) protect workers by making sure employers follow through by requiring disclosure of the plan to both workers and the government. 

While Harris anticipated applying these principles in a number of contexts including safety regulations under OSHA and MSHA, he repeatedly discussed their application in the context of independent contractor misclassification issues.  Driven in large part by a desire to rein in what it sees as calculated non-compliance by employers in the area of classifying workers as independent contractors, DOL intends to require employers to prepare a written plan for why certain workers are classified as independent contractors.  Employers would have to disclose this plan to their workers.  Harris further noted that DOL plans to implement a misclassification initiative aggressively, including working with the IRS and state labor agencies to target employers who are not classifying workers properly. 

Independent contractor classification has been an area of increased interest for legislators and regulators in recent years.  In addition to the DOL initiative, several states have recently passed laws that seek to tighten the definition of independent contractor, including Connecticut, Nebraska, New Jersey, Maryland, Minnesota, and Illinois.  Other states, such as Vermont, have recently launched initiatives targeting employers who misclassify employees as independent contractors. 

Federal legislation has been also introduced recently in Congress aimed at addressing these issues.  On April 22, 2010, the Employee Misclassification Prevention Act (S. 3254, H.R. 5107) was introduced in both the House and the Senate.  In addition to imposing civil penalties for misclassification and directing the DOL and state unemployment insurance agencies to perform misclassification audits, this bill would require employers to keep records concerning their classification of individuals as independent contractors and notify those individuals of their classification, along with information on what to do if they feel they have been incorrectly classified.  Additional pending legislation, such as the Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (S.2882), which proposes amending the tax code to make classifying workers as independent contractors more arduous, also seeks to address this issue.

A rule implementing the use of “Plan, Prevent, Protect” has yet to be proposed, so any official implementation of DOL’s initiative is likely at least a year in the future.  Nevertheless, Harris signaled that “Plan, Prevent, Protect” is an important component of DOL’s enforcement strategy.              


DOL Publishes Semi-Annual Regulatory Agenda


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On April 26, 2010, the Department of Labor published its semi-annual regulatory agenda in the Federal Register. The agenda presents the rules DOL will seek to review or develop in the next 12 months. Highlights of the agenda include:

(1) Developing regulations to strengthen federal contractors’ affirmative action requirements, including improving recruitment and placement of employs with disabilities. This Notice of Proposed Rule-Making should be published by December 2010.

(2) Undertaking a regulatory initiative to “better implement the public disclosure objectives” of the Labor-Management Reporting and Disclosure Act (LMRDA). This initiative would seek to narrow the definition of the “advice” exception to disclosure. Currently a consultant to an employer does not have to disclose its involvement in persuading employees concerning their rights to collectively organize and bargain if the consultant is only giving advice. The notice and comment would seek to address the “advice” exception that DOL currently considers to be “overbroad.” This Notice of Proposed Rule-Making should be published by November 2010.

(3) Reviewing the size, form, and content of the notice of federal labor laws that must be posted by federal contractors. A final rule should be issued under 29 CFR § 471 by June 2010.

(4) Issuing a final rule for Executive Order 13495, the Non-displacement of Qualified Workers Under Service Contracts, which requires a successor contractor to give qualified employees of the predecessor contract a right of refusal. The comment period for this rule will end on May 18, 2010, and a final rule should be issued by December 2010.

(5) Updating record-keeping regulations under the FLSA in order to enhance transparency and disclosure to workers of how pay is computed, and to modernize timekeeping for workers who telecommute or have flex-time arrangements. This Notice of Proposed Rule-Making should be published by June 2010.

(6) Examining, in light of the changes in the home care industry, the regulations of the FLSA that exclude from FLSA requirements those workers who provide “companionship services.” This Notice of Proposed Rule-Making should be published by October 2011.

(7) Finalizing regulations for the H-2B visa program allowing the importation of workers into the United States. This Notice of Proposed Rule-Making should be published by October 2011.


Proposed Rule Eliminates Government Contractor Reimbursement for Persuading Costs

A proposed rule published in the Federal Register on April 14, 2010 would no longer allow federal contractors to claim reimbursement from the government for costs incurred in persuading employees regarding union organizing and collective bargaining. The proposed rule was issued under Executive Order 13,494, Economy in Government Contracting, signed by President Obama on January 30, 2009. The order was intended to maximize government efficiency by cutting certain costs “not directly related to the contractors’ provisions of goods and services to the Government.” Costs of activities that were aimed at influencing employees and thus would no longer be reimbursable under the proposed rule include:  preparing and distributing materials, hiring or consulting legal counsel or consultants, holding meetings, including paying the salaries of those attending the meetings, and planning by managers, supervisors, or union representatives during work hours.

While the executive order disallows reimbursement to the employer for “activities undertaken to persuade employees” regarding their decision to form unions or engage in collective bargaining, the order allows reimbursements for costs “incurred in maintaining satisfactory relations between the contractor and its employees,” including the costs of labor-management committees and employee publications.


NPRM Published for the “Nondisplacement of Qualified Workers Under Service Contracts”

On March 19, 2010, the Department of Labor (DOL) published a notice of proposed rulemaking (NPRM) under Executive Order 13495, “Nondisplacement of Qualified Workers Under Service Contracts.” Once regulations take effect for this order, employees working on federal service contracts and subcontracts of $100,000 or more will generally be entitled to an offer of employment on the contract or subcontract if it is awarded to a successor and the work is to be performed in the same location. Existing employees of the original contractor, not including managers or supervisors, will be given a right of first refusal under the new contract. The deadline for submitting comments for this NPRM is May 18, 2010.           

Executive Order 13495 effectively revokes a Bush administration order and reinstates an order put in place by President Clinton, Executive Order 12933. While the Obama administration order tracks the Clinton order, it is broader in scope. For example, the NPRM covers all contracts above $100,000, instead of only covering contracts for the maintenance of public buildings. The Obama order also eliminates exemptions found in the Clinton order, including exemptions for the military, NASA, the Veterans Administration, and the Postal Service.

Other modifications to the Clinton order include definition of the terms managerial and supervisory employees, and a requirement that contractors include in their subcontracts a term requiring the subcontractor to agree with the nondisplacement provisions. While subcontractors below the $100,000 threshold are excluded from the order, if a contractor above the threshold discontinues the services of a subcontractor, it would have to offer the right of refusal to the subcontractor’s employees.


DOL Final Rule Sanctions $1,100 Daily Penalty on Underfunded Multiemployer Pension Plans


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On February 26, 2010, the Department of Labor published a final rule that will allow the Employee Benefit Security Administration (EBSA) to impose a civil penalty of up to $1,100 per day on multiemployer plans in endangered or critical funding status that fail to adopt funding improvement plans. The rule takes effect on March 29, 2010 for plan years beginning on or after January 1, 2008. No changes were made from the proposed rule.

In assessing a penalty, DOL will consider the willfulness and severity of the violation. The department will notify the multiemployer plan sponsor of the penalty and give the reasons for the penalty. The department may then waive the penalty, if the plan is able to demonstrate compliance or mitigating circumstances to explain noncompliance. The plan sponsor may also request an administrative hearing to contest the penalty. The rule clarifies that liability is joint and several among the trustees, regardless of their role in the violation.


DOL Publishes Final Rule for H-2A Program

On February 12, 2010, the Department of Labor (DOL) published a new rule regarding the H-2A temporary agricultural worker program. This rule will strengthen worker protections for both U.S. and foreign workers and ensure the integrity of the H-2A program. Major features of the rule include: 

  • Requires documentation from employers showing compliance with the prerequisites for bringing H-2A workers into the country. Employers can no longer simply attest compliance.
  • Returns to the USDA Farm Labor Survey, instead of the Occupational Employment Statistics Survey, as the basis for the determining the Adverse Effect Wage Rate;
  • Reinstates the requirement that State Workforce Agencies inspect and approve employer-provided housing before the Department issue H-2A labor certification;
  • Creates a national electronic job registry for all H-2A job orders to improve US worker access to agricultural jobs;
  • Requires employers to provide workers with copies of the job orders before departure and to display a poster describing employee rights in a language common to the workers at the work site;
  • Prohibits the use of multi-area itineraries by H-2A labor contractors

            The rule will become effective March 15, 2010.


Senate Confirms M. Patricia Smith as Solicitor of Labor

On February 4, 2010, the Senate confirmed President Obama’s nomination of M. Patricia Smith to serve as Solicitor for the Department of Labor. The 60-37 party-line vote confirming Smith’s nomination ends a long confirmation process that started when Obama first announced his intention to nominate Smith on March 19, 2009.

The Senate HELP Committee approved Smith’s nomination on October 7, 2009, but the ranking Republican on the Committee, Sen. Michael B. Enzi (R-WY), placed a hold on the nomination because he believed that Smith made inconsistent statements during her confirmation hearing concerning the New York Wage Watch program. That program, which was formed while Smith was the Commissioner for the New York State Department of Labor, allows labor unions and groups advocating on behalf of low-wage immigrants to work with New York state officials to uncover wage and hour violations. As a result of that hold, Smith needed 60 votes to bring her nomination to the Senate floor for debate. On February 1, 2010, the Senate voted 60-32 along party lines to begin debate over Smith’s confirmation as the Solicitor of Labor.

As Solicitor of Labor, Smith will represent the DOL in litigation and alternative dispute resolution and provides legal opinions and advice regarding DOL activities.


President Obama Signs FY 2010 Consolidated Appropriations Bill (H.R. 3288)


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On Wednesday, December 16, President Obama signed into law the Fiscal Year 2010 Consolidated Appropriations Bill (H.R. 3288).  This omnibus appropriations legislation provides additional funding to the Department of Labor, the National Labor Relations Board, and the Equal Employment Opportunities Commission, among other federal agencies.  The bill passed in the Senate by a 57-35 vote earlier this week, and previously passed the House by a vote of 221-202. 


DOL Announces Semi-Annual Regulatory Agenda for EBSA


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On December 7, 2009, the Department of Labor’s Employee Benefits Security Administration (”EBSA”) published its semi-annual regulatory agenda for regulations selected to be reviewed or developed over the next twelve months. Included in the agenda are the following significant regulatory items in the final rule and proposed rule stages. While EBSA has published a schedule for these items, the published dates are tentative and subject to change.

Regulations in Final Rule Stage

In December 2009, EBSA intends to issue a final rule clarifying the prohibited transaction exemption created by the Pension Protection Act of 2006. EBSA previously sought written comments and suggestions concerning this rule. The exemption would allow investment advice provided under an “eligible investment advice arrangement” to be provided to participants or beneficiaries of certain individual account plans. As defined in section 408(g)(2) of the Employee Retirement Income Security Act (ERISA), an “eligible investment advice arrangement” covers arrangements under which advisor fees do not vary with the selection of differing investment options, or under which investment options are selected on the basis of statutorily-compliant computer models. The final rule would provide additional guidance as to what types of computer models are satisfactory and would require the Secretary of Labor to create a model fee-disclosure form. EBSA also indicated in its semi-annual regulatory agenda that it plans on issuing a notice of proposed rulemaking in February 2010, which would narrow the scope of the prohibited transaction exemption as initially proposed by the Bush Administration.

On January 5, 2010, the comment period for the interim final rule implementing anti-genetic discrimination in covered group premiums under the Genetic Information Nondiscrimination Act (GINA) will end. The interim final rule was adopted in October 2009 and became effective on December 7, 2009. GINA prohibits group health plans and health insurers from denying coverage or charging higher premiums to an individual based on a genetic predisposition towards developing certain diseases and disorders. The rule provides, among other things, guidance regarding the prohibition on plans and issuers from requesting or requiring genetic testing, as well as the prohibition on the collection of genetic information. In addition to the formal prohibition of genetic-based discrimination, the rule establishes civil penalties under ERISA.

In January 2010, EBSA intends to issue final rules establishing a safe harbor period of seven days during which money withheld by employers or paid by participants for contribution to a plan would not be considered “plan assets” under Title I of ERISA or the related provisions of the Internal Revenue Code. Because plan assets are subject to fiduciary duties and other obligations, the amendment seeks to provide greater certainty to plan sponsors and fiduciaries, as well as plan participants, as to whether particular participant contributions held by an employer constitute plan assets. 

In April 2010, EBSA plans on issuing an interim final rule concerning the implementation of the Mental Health Parity and Addiction Act of 2008. That act requires that annual or lifetime dollar limits on mental health benefits be no lower than medical or surgical benefits offered under a group health plan. In response to an April 2008 Request for Information, EBSA received over 400 comments raising concerns over compliance with these parity provisions. Accordingly, EBSA anticipates issuing an interim final rule that will provide regulatory guidance regarding these provisions. 

In April 2010, EBSA plans to issue a final rule requiring that multiemployer plan administrators provide plan participants, beneficiaries, representatives, or contributing employers copies of written documents relating to the plan’s funding and financial condition within 30 days of receiving a written request. This final rule implements the new plan disclosure requirements set forth in the Pension Protection Act of 2006. EBSA intends to publish a separate regulation at a later date establishing civil penalties under section 502(c)(4) of ERISA for noncompliance with this provision.

In September 2010, EBSA plans to issue final rules implementing portions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and subsequent related legislation, including the Children’s Health Insurance Program Reauthorization Act of 2009.

In September 2010, EBSA plans to issue a final rule clarifying what information must be provided to plan participants and beneficiaries to allow them to make informed investment decisions. The rule may amend regulations governing ERISA section 404(c) plans. According to EBSA, the rule will specifically cover the disclosure of information concerning plan fees and expenses.

Regulations in Proposed Rule Stage

In June 2010, EBSA plans to issue a notice of proposed rulemaking intended to bring the definition of “fiduciary” in line with the current practices of plan managers, individual plan participants, and investment advisors. Under ERISA’s regulatory definition, a “fiduciary” administers plans by controlling plan operations, selecting service providers and managing plan assets. The rule would amend the definition of “fiduciary” at 29 C.F.R. § 2510.3-21(c) to include individuals rendering investment advice for a fee, as set forth under section 3(21) of ERISA. EBSA is issuing this rule in response to concerns that the current definition of “fiduciary” may inappropriately limit the types of investment advice that trigger fiduciary duties on the part of investment advisors.

In August 2010, EBSA intends to issue a notice of proposed rulemaking that would satisfy requirements of the Pension Protection Act of 2006 by requiring administrators of defined benefit plans to provide annual funding notices to pension plan beneficiaries and participants. Further, in September 2010, EBSA intends to issue a notice of proposed rulemaking that would satisfy requirements of the Pension Protection Act of 2006 by requiring ERISA-covered plans to provide individual pension benefit statements to plan participants and beneficiaries at designated intervals. Under the proposed rule, the designated intervals would differ with the type of account plan.  Individual account plans providing for individual direction would be required to provide quarterly statements, individual account plans not permitting individual direction would be required to provide annual statements, and defined benefits plans would be required to provide statements every three years.


DOL Announces Semi-Annual Regulatory Agenda


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On December 7, 2009, the Department of Labor (DOL)’s Employment Standards Administration (”ESA”) and Employment and Training Administration (ETA) published their semi-annual regulatory agenda for regulations selected to be reviewed or developed over the next twelve months. Included in the agenda are the following significant regulatory items in the final rule, proposed rule, pre-rule, and long-term action stages. While ESA and ETA have published a schedule for these items, the published dates are tentative and subject to change.

Regulations in Final Rule Stage

In February 2010, ETA plans to issue a final rule to amend its regulations regarding the process by which employers obtain temporary labor certifications from DOL in conjunction with H-2A petitions submitted to the Department of Homeland Security (DHS). The revised rule is intended to undo changes made to the H-2A program by the 2008 final rule, particularly concerning the current attestation-based certification process and the calculation of farm worker wages. ETA issued a notice of proposed rulemaking in September 2009 and extended the comment period to October 20, 2009.

In June 2010, ESA expects to take final action on its proposed rule implementing regulations pursuant to Executive Order 13496, signed by President Barack Obama on January 30, 2009. The regulations propose to prescribe the size, form, and content of the notice that contractors must post to describe the rights of employees under federal labor laws. In August 2009, ESA issued the proposed rulemaking and ended the comment period in September 2009.

Regulations in Proposed Rule Stage

In December 2009, ESA plans to issue a notice of proposed rulemaking pursuant to Executive Order 13495, signed by President Barack Obama on January 30, 2009. This rulemaking would set forth regulations requiring contractors and subcontractors, who succeed a contract for the same or similar service at the same location of a predecessor, to offer employees employed by the predecessor a right of first refusal to employment.

In August 2010, ESA expects to update the recordkeeping regulations under the Fair Labor Standards Act. These new regulations will provide additional information to workers regarding how their pay is computed, and they will focus on employees with “telework” and “flexiplace” arrangements.

In November 2010, ESA may issue additional regulations implementing the new military family leave amendments to the Family and Medical Leave Act included in the National Defense Authorization Act. ESA issued the current regulations implementing the military family leave amendments in January 2009.

Also in November 2010, ESA plans to publish a notice of proposed rulemaking that considers a revised interpretation of Section 203(c) of the Labor-Management Reporting and Disclosure Act. Section 203(c) of the LMRDA creates an “advice” exemption from reporting requirements that apply to employers and other persons in connection with persuading employees about the right to organize and bargain collectively. The proposed interpretation would narrow the scope of the “advice” exemption.

Additionally, ETA plans to publish a notice of proposed rulemaking to alter the current attestation-based certification requirements of the H-2B visa program in November 2010. Currently, prior to the admission of H-2B workers, DOL must certify that there are not sufficient qualified U.S. workers available and that hiring foreign workers will not adversely affect the wages and working conditions of similar U.S. workers. The new regulation will alter the current H-2B program to increase the program’s integrity and strengthen protections of U.S. workers.

Regulations in Pre-Rule Stage

In November 2010, ESA intends to publish a request for information regarding the application of Title IV of the Labor-Management Reporting and Disclosure Act in the context of Internet balloting in union officer elections.

Regulations in Long Term Action Stage

In December 2010, ESA plans to issue an advanced notice of proposed rulemaking to revise the regulations that implement the nondiscrimination and affirmative action provisions of section 503 of the Rehabilitation Act of 1973. This rulemaking would strengthen affirmative action requirements by requiring federal contractors and subcontractors to conduct more in-depth analyses and monitoring of their recruitment efforts of individuals with disabilities.

Also in December 2010, ESA also intends to issue a notice of proposed rulemaking to revise the regulations that implement the nondiscrimination and affirmative action provisions of the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA). The amendments would require that federal contractors and subcontractors conduct more in-depth analyses of recruitment and placement efforts taken under VEVRAA. The amendments would also require the use of numerical targets for affirmative action efforts and would alter record-keeping requirements.

In January 2011, ESA plans to issue a notice of proposed rulemaking to revise the affirmative action requirements of Executive Order 11246 applicable to federal and federally assisted construction contractors. The revisions would update the regulations that set forth the actions to be taken by construction contractors to meet their affirmative action obligations.