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Washington Labor & Employment Wire » Wage and Hour

Enhanced New York Wage Payment Protections Scheduled to Go Into Effect April 9, 2011


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In December 2010, New York State strengthened wage payment protections for employees with the Wage Theft Prevention Act, which will go into effect on April 9, 2011. The Act expands the right of employees to seek civil and criminal remedies against employers who pay them less than the wages to which they are entitled. 

Notably, the legislation increases liquidated damages on unpaid wages from 25% to 100% in court actions. To facilitate collection of wages ordered to be paid, the Act automatically increases the total judgment amount by 15% if an employer defaults on payment for more than 90 days. The Act also authorizes public posting of employer violations, and extends criminal penalties to cover non-payment of minimum wage or overtime compensation. Those penalties include fines ranging from $5,000 to $20,000 and imprisonment for up to a year.

The Act increases protection for employees who report wage law violations by assuring that employee complaints need not cite specific labor law provisions to trigger retaliation protections.  In addition to allowing for liquidated damages of up to $10,000 for victims of prohibited retaliation, the Act provides the Commissioner with all necessary tools, including ordering reinstatement, to remedy retaliation.

The Act also imposes new notice and record-keeping requirements, and sets out penalties for employers who fail to comply.


Senate Fails to Invoke Cloture on Paycheck Fairness Act

On November 17, 2010, the Senate was unable to carry the requisite 60 votes needed to invoke cloture to overcome a Republican filibuster and proceed to a vote on the Paycheck Fairness Act, S. 3772,  with a final vote of 58 yeas and 41 nays.

The Paycheck Fairness Act, previously introduced in the Senate by Senator Clinton (D-NY) as S. 766 and subsequently reintroduced by Senator Harry Reid (D-NV) on September 13, 2010, would amend the portion of the Fair Labor Standards Act (”FLSA”) known as the “Equal Pay Act.”

The Paycheck Fairness Act would amend the portion of the Fair Labor Standards Act (”FLSA”) known as the “Equal Pay Act” that prohibits differentials in pay between employees of the opposite sex unless those differentials “are based on any other factor other than sex.” Among other things, the bill would require that any pay differential be based only on certain “bona fide factors,” such as education, training or experience, which must also be consistent with “business necessity.” In addition, the bill provides for compensatory damages, and, in certain circumstances, punitive damages for Equal Pay Act claims, provides for opt-out class actions for Equal Pay Act suits under the FLSA, as opposed to opt-in class actions, and requires that the EEOC collect pay information data from employers relating to employees’ sex, race and national origin.  


Senate Scheduled to Vote on Paycheck Fairness Act

On November 17, 2010, the Senate is scheduled to hold a cloture vote on the Paycheck Fairness Act, S. 3772. The Paycheck Fairness Act would amend the portion of the Fair Labor Standards Act (”FLSA”) known as the “Equal Pay Act” that prohibits differentials in pay between employees of the opposite sex unless those differentials “are based on any other factor other than sex.”

The bill amends this language to require that any pay differential be based only on certain “bona fide factors” such as education, training or experience. Such bona fide factors must also be consistent with “business necessity.” In addition, the bill provides for compensatory damages, and, in certain circumstances, punitive damages for Equal Pay Act claims.  The bill also provides for opt-out class actions for Equal Pay Act suits under the FLSA, as opposed to opt-in class actions, and requires that the EEOC collect pay information data from employers relating to employees’ sex, race and national origin.  

The Paycheck Fairness Act was previously introduced in the Senate by Senator Clinton (D-NY) as S. 766. However, no action was taken on the bill. The bill was subsequently reintroduced by Senator Harry Reid (D-NV) on September 13, 2010.  The Paycheck Fairness Act was introducted in the House as H.R. 12, and passed the House by a vote of 256 to 163 on January 9, 2009, the same day that the House passed the Lily Ledbetter Fair Pay Act.  The President has previously indicated his support for the bill. 


Fair Playing Field Act of 2010 (H.R. 6128, S. 3786)


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Core Provisions: This legislation would amend the Internal Revenue Code (the Tax Code) to strengthen both guidance regarding classification of workers as independent contractors and the tax penalties faced by employers who misclassify their employees.

The bill ends the current moratorium on Internal Revenue Service (IRS) guidance regarding worker misclassification while also requiring that the Treasury (1) issue prospective guidance clarifying the employment status of individuals for the purpose of federal employment taxes and (2) issue annual reports on worker misclassification. The bill also amends those provisions of the Tax Code providing for reduced penalties for an employer’s failure to deduct and withhold income taxes and the employee’s share of Federal Insurance Contributions Act taxes. Finally, the bill would require that any person who contracts for the services of independent contractors on a “regular and ongoing basis” provide a written statement to each independent contractor notifying them of (1) the federal tax obligations of an independent contractor, (2) the labor and employment law protections that do not apply to independent contractors, and (3) the right of the independent contractor to seek a status determination from the IRS.

The White House has indicated its support for the bill, as Vice President Joe Biden hailed the legislation as “timely” upon its introduction in the House and the Senate.

Status:  H.R. 6128 was introduced by Rep. Jim McDermott (D-WA) on September 15, 2010, and referred to the House Committee on Ways and Means. S. 3786 was introduced by Sen. John Kerry (D-MA) on September 15, 2010 and referred to the Senate Committee on Finance. The Employee Misclassification Prevention Act, H.R. 5107, S. 3254, introduced by Rep. Woolsey (D-CA) and Sen. Brown (D-OH), also seeks to address independent contractor misclassification through an amendment to the Fair Labor Standards Act.


Paycheck Fairness Act (S. 3772)

Core Provisions: This bill would revise the portion of the Fair Labor Standards Act of 1938 (”FLSA”) known as the Equal Pay Act that prohibits differentials in pay between employees of the opposite sex unless those differentials “are based on any other factor other than sex.” The bill would change this language to require that any pay differential be based only on “bona fide factors,” such as education, training or experience. The bill would also revise the portion of the FLSA concerning retaliation to prohibit retaliation against employees for inquiring about, discussing, or disclosing wages in response to a complaint, investigation, or action concerning sex discrimination. The bill would also provide for compensatory or punitive damages in a civil action against an employer for sex discrimination under the FLSA.

Status: On September 13, 2010, Senator Harry Reid (D-NV) reintroduced the Act.  The bill has been placed on the Senate Legislative Calendar under General Orders, which means that the bill could be called to the floor at anytime.  Whether it will be called to the floor in the three weeks before the election is speculative.

The Paycheck Fairness Act was previously introduced in the House during the 110th Congress as H.R. 1338.  That bill passed the House by a vote of 247 to 178.  Following the House vote, the bill was introduced in the Senate by then Senator Clinton (D-N.Y.) as S. 766 and referred to the Senate Committee on Health, Education, Labor, and Pensions.  No further action was taken.


Senate HELP Committee Holds Hearing on Independent Contractor Misclassification


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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.


Employee Misclassification Prevention Act (H.R. 5107, S. 3254)


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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.


Health Care Reform Bill Includes FLSA Amendment Requiring Unpaid Breaks for Nursing Mothers

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.


Children’s Act for Responsible Employment of 2009 (”CARE Act”) (H.R. 3564)

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.


Wage Theft Prevention Act (H.R. 3303)

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.