Heat Turned Up on Alleged Worker Misclassification
Written by: John F. Birmingham, Jr.
The classification of workers as independent contractors has been a focus of multiple federal and state agencies for at least the past two years. However, the September 19, 2011 announcement by the leaders of the U.S. Department of Labor, the IRS, and 11 state agencies that there will be a coordinated effort to fight misclassification signals a ratcheting up of the intensity. In justifying this program in these troubled economic times, these governmental entities have argued that worker misclassification is a widespread problem that cheats workers out of minimum wages and overtime pay and robs states of tax revenue. It also is expected that they will seek to hold a company liable for the sins of its subcontractors under a "joint employment" theory. The program will involve information-sharing between the agencies as well as coordinated enforcement.
While the government agencies have sold the initiative as "pro-business," stating that it will place law-abiding employers on a level playing field with those who have been skirting the rules, the regulatory costs as well as the legal uncertainty posed by ambiguous standards, which vary by state, pose a challenge for employers concerned with cost-effective compliance. Recent state action also has upped the ante. For example, California just passed new legislation (http://tinyurl.com/6drsyue) imposing strong monetary penalties for willful misclassification. In September 2011, Connecticut issued 28 stop work orders at construction sites for misclassification.
However, there are concrete steps employers can take to help mitigate the risk:
- Self-Audit: Take a hard look at any workers classified as independent contractors, especially those who were once employees of the company or who perform roles that are typically done by employees. Fix any problems.
- Do Not Control: While federal and state agencies use different standards, the control over how a worker performs his or her job is a prime indicator of an employment relationship.
- Consider the IRS Voluntary Classification Settlement Program (http://tinyurl.com/3h2wzzd): This program allows eligible employers the opportunity to reclassify some or all workers as employees without being subject to an IRS audit or penalties.
- Have the Courage of Your Convictions: Of course, it depends on the circumstances, but the legal status of independent contractors has been recognized for many years, and joint employment may be difficult to establish. Especially if the potential ramifications of reclassification are significant, a company may need to expend the resources to convince the government agency, or the court, that its classification decision is correct.
Is That Job Ad Specific Enough?
Written by: Roy Barquet
The U.S. Department of Labor's Board of Alien Labor Certification Appeals, otherwise known as BALCA (http://tinyurl.com/5upeqf4), recently issued a decision in favor of an employer seeking a labor certification to secure permanent employment of a foreign national worker.
In the Matter of Emma Willard School, BALCA No.: 2010-PER-01101 (http://tinyurl.com/5ruv6um), the Board held that an employer need not specify in its job availability advertisements that it offers employer-subsidized housing with respect to a permanent employment position sought in the labor certification application (http://tinyurl.com/6yt3rab).
After conducting a lengthy recruitment campaign that produced no available U.S. workers, the employer, Emma Willard School, a boarding school for girls in Troy, New York, filed an Application for Permanent Employment Certification with the Department of Labor for the position of "Spanish instructor." The Department of Labor's certifying officer had denied the application, arguing that the advertisement's failure to specify the boarding school offered optional employer-subsidized housing violated department regulations requiring employers to ensure their advertisements "not contain wages or terms and conditions of employment that are less favorable than those offered to the alien."
In appealing the certifying officer's denial, the boarding school argued that the job availability advertisements did not include the housing benefit because the Spanish instructor employee is not required to live with the school to perform the duties of Spanish instructor. Instead, the school argued, the subsidized housing was an optional benefit to the job offered. The Board agreed, concluding there is no obligation for an employer to list every term or condition of employment and that the absence of such an itemized listing does not create an automatic assumption that no such benefits exist.
Employers who seek such labor certifications as a necessary first-step in securing U.S. lawful permanent residence, rather than a mere temporary employment-related visa benefits for an existing or prospective foreign national employee, should take solace in the Board's decision. In recent years, Department of Labor certifying officers have been unnecessarily auditing and denying labor certification applications if the filed applications evidence the foreign national employee opts to work on the employer's premises or from their personal residence. Given the ever-increasing flexibility afforded by employers in the location for completion of job duties, BALCA has afforded employers with commonsensical parameters in which to evidence the non-availability of U.S. workers to perform job duties.
Labor and Employment Trivia
Last week's question: The Social Security Act was signed into law by President Franklin D. Roosevelt in 1935. What was the bill's original name and how did the name change?
Answer: The term "Social Security" was not commonly used prior to 1935. The original legislation introduced by the Roosevelt administration was known as the Economic Security Act, in part because the Committee on Economic Security helped draft the bill. Remember, 1935 was the height of the Great Depression. Somewhere in the legislative process the name was changed to Social Security. There is some historical debate as to who came up with the name, between various legislators who were proponents of the bill such as Congressman Frank Buck or the committee's attorney Tom Elliot. A good history of the Social Security Act can be viewed at www.ssa.gov/history.
This week's question: What famous industrialist was the target of an assassination attempt in response to management's conduct during a labor strike? Name the labor strike and the perpetrator.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
