On Thursday, June 17, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on preventing employers from misclassifying employees as independent contractors. The hearing focused on the Employee Misclassification Prevention Act (EMPA), a recently introduced bill intended to reduce instances of worker misclassification through new record-keeping requirements, notice requirements, and the imposition of civil penalties for employer violations.

Chairman Harkin (D-IA) opened the hearing by arguing that independent contractors are not afforded sufficient protections under the labor law, such as those provided by minimum wage standards, overtime requirements, unemployment compensation, workers’ compensation, safety and health laws and antidiscrimination provisions. Harkin asserted that a few “unscrupulous” employers thus make economic challenges “even more difficult for their workers by intentionally misclassifying them as ‘independent contractors’ to gain an advantage over their law-abiding competitors.” Harkin also argued employee misclassification costs federal and state governments “billions of dollars in unpaid revenues.” For example, it deprives governments of the payments that support unemployment and workers’ compensation systems, as employers are only required to make these payments on behalf of employees and not independent contractors. Accordingly, Harkin posited that while employer misclassification laws are currently in place in several states, a federal legislative response is necessary.

The committee’s Ranking Member, Senator Enzi (R-WY), responded by calling EMPA an example of “what’s wrong with Washington today.” He argued that the bill would saddle small businesses with additional administrative work and needless costs. Enzi also expressed concerns that EMPA would punish honest business owners for accidental administrative mistakes, while allowing employers that intentionally misclassify workers to remain under the radar. Senator Sherrod Brown (D-OH), who introduced EMPA in the Senate, acknowledged Enzi’s concerns and stated he would work to ensure the bill’s provisions do not overly burden small businesses. He emphasized, however, his belief that employers cannot be left to “self-police,” as without any regulation employers will continue to avoid and manipulate misclassification laws in order to gain a competitive advantage. He further stated that hard economic times particularly call for labor law protections, as many individuals will “do anything” to get a job and are thus at the mercy of unscrupulous employers. Senator Isakson (R-GA) also weighed in, arguing that Congress should be “very careful” not to “demonize” those employers who are currently trying to comply with employee classification laws.

The committee first heard from Seth Harris, Deputy Secretary of the U.S. Department of Labor, who testified in support of EMPA. While Harris acknowledged some employee misclassification may be the “result of uncertainty or misapplication of often complicated laws,” he asserted that “much worker misclassification is intentional.” Harris detailed the Obama administration’s efforts to combat employee misclassification, noting that the president’s fiscal year 2011 budget proposes a $25 million enforcement initiative that includes “close cooperation” between the Department of Labor and the Internal Revenue Service on misclassification issues. Harris also cited a proposed rule currently under consideration by the DOL’s Wage and Hour Division, which mirrors EMPA by requiring employers to perform written analyses and to disclose those analyses to employees before classifying them as independent contractors. Harris underlined the DOL’s belief that federal legislation is important to support these agency efforts, citing three provisions of EMPA as particularly crucial: (1) codifying employee misclassification as a violation of the Fair Labor Standards Act, (2) creating civil monetary penalties for employer recordkeeping violations, and (3) creating a legal presumption that an individual is an employee if the employer fails to keep accurate records.

The committee also heard testimony in support of EMPA from New York State Department of Labor Commissioner Colleen C. Gardner, who detailed her own state’s efforts to combat the problem of employee misclassification, and Legal Co-Director of the National Employment Law Project, Catherine Ruckelshaus, who urged the members to pass the legislation in order to afford greater protection to low-income workers. Business owners Frank Battaglino, representing the Sheet Metal and Air Conditioning Contractors’ National Association and the Campaign for Quality Construction, and Gary Uber, on behalf of the Private Care Association, Inc., a member of the Coalition to Preserve Independent Contractor Status, also testified before the committee. Battaglino testified in support of the legislation, detailing the problems his own construction business faces with “unfair, low-wage competition,” resulting from competitors’ misclassification of workers. Uber, in contrast, cautioned the committee against passing EMPA, noting the difficulties his own business would have meeting the bill’s record-keeping requirements.

Senator Brown introduced EMPA in the Senate on April 22, 2010 (S. 3254). Rep. Lynn Woolsey (D-CA) introduced parallel legislation in the House on the same date (H.R. 5107). The House version of EMPA is currently before the House Committees on Education and Labor and Ways and Means.

A webcast of the hearing, as well as written witness testimony, is available on the HELP Committee’s website.

Core Provisions: This legislation would amend the Fair Labor Standards Act (FLSA) to strengthen enforcement and penalties for misclassification of employees as independent contractors. 

The bill creates new record-keeping requirements and requires employers to provide notice to employees and those classified as non-employees (1) of their classification, (2) that their rights to “wage, hour, and other labor protections” depend upon proper classification, and (3) directing them to the Department of Labor for further information about the rights of employees.  Failure to keep the required records or provide the required notice would create a rebuttable presumption that an individual who is remunerated for the performance of labor and services by an employer is an employee of that employer.

The legislation would impose civil penalties of up to $1,100, or up to $5,000 for repeated or willful violations, for each misclassification or violation of the record-keeping or notice provisions. If a misclassification accompanies violations under the FLSA’s maximum hours or minimum wage requirements, a worker could recover double his or her liquidated damages.

The legislation would also require state unemployment insurance agencies to conduct auditing and investigative programs to detect employers that misclassify or fail to properly report compensation to workers with the effect of excluding employees from unemployment compensation coverage. Additionally, the legislation would require the DOL to target industries it determines to have frequent incidence of misclassifying workers for audits.

Secretary of Labor Hilda Solis issued a statement supporting the bill and affirming the DOL’s committing to targeting worker misclassification.

Status: H.R. 5107 was introduced by Rep. Woolsey (D-CA) on April 22, 2010, and referred to the House Committees on Education and Labor and Ways and Means.  S. 3254 was introduced by Sen. Brown (D-OH) on April 22, 2010 and was referred to the Committee on Health, Education, Labor, and Pensions.  Both the House and Senate introduced similar bills in the 110th Congress, but both bills failed to make it out of committee.

Although it has not received much attention, part of the Patient Protection and Affordable Care Act, the health care reform bill signed into law by President Obama on March 23, contains an amendment to the Fair Labor Standards Act (”FLSA”) that requires employers to provide nursing mothers unpaid break time to express milk. 

Under this amendment to section 7 of the FLSA, employers are now required to provide “a reasonable break time” for an employee to express breast milk for a nursing child ”each time such employee has need to express the milk.”   The amendment also requires provision of a “place, other than a bathroom, that is shielded from view and free from intrusion” in which to take these breaks. These breaks are mandated for up to a year following the birth of a child and do not need to be compensated by the employer. 

All employers will be required to comply with these new break requirements, except those who employ less than 50 employees if compliance for these employers would “impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employee’s business.” The amendment also makes clear that it does not preempt more protective state laws.  The Department of Labor has not yet issued any guidance concerning this new amendment.

Core Provisions: The CARE Act would amend the Fair Labor Standards Act (”FLSA”) to strengthen the prohibitions against child labor.  Specifically, the Act would (1) narrow the exemption for children performing agricultural work; (2) increase civil penalties for child labor violations; (3) impose special criminal penalties for aggravated child labor violations; (4) require the Secretary of Labor to gather and analyze data on work-related injuries to children employed in agriculture; (5) impose additional employer reporting requirements for work-related injuries for employees who are minors; and (6) incorporate a pesticide-related worker protection standard.

Status: Rep. Roybal-Allard (D-CA) introduced the bill on September 15, 2009, and it was referred to the House Committee on Education and Labor that same day.  Rep. Roybal-Allard introduced similar legislation (H.R. 2674) in the 110th Congress, but that bill failed to make it out of committee.

Core Provisions: This legislation would amend the Portal-to-Portal Act to suspend the statute of limitations on Fair Labor Standards Act litigation while an investigation by the Secretary of Labor is pending. Under the bill, the statute of limitations would be tolled from the date the Secretary provides notice to the employer of an investigation related to the cause of action until the date the Secretary provides notice to the employer that the investigation has concluded.

The bill is based on a Government Accountability Office (GAO) recommendation made in a report concerning the Department of Labor’s investigations into wage theft. The GAO investigated the Wage and Hour Division’s complaint handling and found that the investigation process was too lengthy and the statute of limitations on wage claims often ran out while the investigation was underway.

Status: H.R. 3303 was introduced by Rep. Miller (D-CA) on July 23, 2009 and referred to the House Committees on Education and Labor and on the Judiciary.

Core Provisions: The Living American Wage Act would amend the Fair Labor Standards Act (FLSA) to provide for the calculation of the minimum wage based on the federal poverty threshold. This legislation would require the Secretary of Labor to recalculate the minimum wage rate by no later than June 1, 2010, and subsequently once every four years. The Secretary would be required to set the rate at such a level that a person working for minimum wage 40 hours per week, 52 weeks per year would earn an amount fifteen percent higher than the federal poverty threshold for a family of two, including one child under the age of 18, as published each year by the Census Bureau.

The current federal minimum wage is $6.55 per hour and is set to increase to $7.25 per hour effective July 24, 2009. The minimum wage is not currently tied to any federal poverty standards.

Status: Rep. Green (D-TX) introduced the legislation on June 25, 2009, and it was referred to the House Committee on Education and Labor. Rep. Green introduced similar legislation in the 110th Congress, but that bill failed to make it out of committee.

Core Provisions: The bill would amend several federal statutes to provide additional protections for breastfeeding.  First, the bill would amend Title VII of the Civil Rights Act of 1964 to protect breastfeeding women from being discriminated against in the workplace.  The bill would explicitly provide that “breastfeeding and expressing breast milk in the workplace are protected conduct.” Second, the bill would establish certain tax credits for employer expenses incurred to promote or support workplace breastfeeding, while simultaneously modifying the Internal Revenue Code definition of “medical care” to provide individuals with tax deductions for breastfeeding equipment and consultation services. Third, the bill would direct the Secretary of Health and Human Services to establish performance standards for breast pumps and identify those pumps that are appropriate for use on a regular basis in places of employment.  Finally, the bill would amend the Fair Labor Standards Act to provide that employers with 50 or more employees must provide breastfeeding mothers with adequate break time and privacy for breastfeeding needs. 

Status: Rep. Carolyn Maloney (D-NY) introduced the bill on June 11, 2009, and it was referred to the House Committees on Education and Labor, Ways and Means, and Energy and Commerce that same day.

Core Provisions: The bill, known as the “RAISE Act”, would amend the National Labor Relations Act to provide that an employer does not commit an NLRA unfair labor practice or violate the terms of a collective bargaining agreement by paying its employees greater wages, pay, or other compensation than provided for in the applicable collective bargaining agreement.  Thus, the bill would effectively establish that wage scales contained in collective bargaining agreements represent a floor, but not a ceiling, for bargaining unit employee pay. 

Status: Rep. Rep. Tom McClintock (R-CA) introduced the bill on June 4, 2009, and it was referred to the House Committee on Education and Labor that same day.

Core Provisions: This legislation would amend the Fair Labor Standards Act to require employers with multiple employees to provide paid annual leave to employees. Specifically, the bill requires employers with at least 100 employees to provide at least one week of paid vacation. Additionally, three years after enactment of the legislation, employers with 100 or more employees must provide at least two weeks of paid vacation, and employers with at least 50 employees must provide at least one week of paid vacation. Both full- and part-time workers would be eligible for leave after one year of employment.

Status: H.R. 2564 was introduced by Rep. Grayson (D-FL) on May 21, 2009 and referred to the Committee on Education and Labor.

Core Provisions: The bill would amend Section 3(m)(1) of the Fair Labor Standards Act to increase the base minimum wage for tipped employees. “Tipped employees” are employees that customarily and regularly receive more than $30 a month in tips. Employers are currently required to pay tipped employees at least $2.13 per hour.

Under the bill, the base minimum pay for tipped employees would increase in a three-step process. Within 90 days of the bill becoming law, employers would be required to pay tipped employees at least $3.75 per hour. As of July 1, 2011, employers must pay tipped employees at least $5.00 per hour. Finally, as of July 1, 2012, employers must pay tipped employees at least 70% of the minimum wage for non-tipped employees, and no less than $5.50 per hour. The bill also requires the Secretary of Labor to provide notice of each wage increase in the Federal Register and on the Department of Labor website. 

Status:  Rep. Donna Edwards (D-MD) introduced the bill on May 21, 2009, and it was referred to the House Committee on Education and Labor that same day.