As we have been reporting, March 12 was the deadline for submitting comments regarding the U.S. Labor Department's proposal "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."  Despite our having asked for a copy of the proposed survey in a letter to USDOL dated January 14, we never received one.  Those who responded to our February 20 straw poll said that neither had they received a copy.

We have now submitted a comment (link to reproduction below) taking the position that the proposed collection of information should not be cleared, approved, or undertaken.  As we said to USDOL:

[the] circumstances strongly suggest that the Labor Department has failed to provide an adequate opportunity for public comment on this proposed information collection.  The Labor Department has clearly failed to do so with respect to members of the public who have expressed their interest in commenting by requesting copies but to whom it has provided none.  This state of affairs does not comport with the requirements and purposes of the Paperwork Reduction Act of 1995.

If USDOL nevertheless proceeds with its proposal at this point, the design and content of the survey, as well as the results produced by it and the use to which that outcome is put, might well be tainted and subject to challenge in light of the inadequate opportunity afforded for public comment on the proposal.

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Worker Classification Survey Comment 03 12 13 .pdf (47.81 kb)

Readers will recall our January post concerning the U.S. Labor Department's announced intention to "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."  As we said then, this is likely to be a precursor to a renewed "Right to Know" initiative.

USDOL did not publish the actual proposed survey along with its January 11 Federal Register entry.  On January 14, we requested a copy from the official to whom USDOL directed that these requests be sent (link to reproduction below).  As of this writing, 38 days later, and after appreciably more than half of the comment period has elapsed, we have received neither a copy nor any other response.

The end of the comment period is March 12, 2013, 21 days from now.  As matters stand, one may reasonably conclude that the public has had no adequate, fully-informed opportunity to evaluate the proposed survey or to formulate and submit substantive comments.

We are led to wonder whether our experience is representative of the public's at-large.  If you requested a copy of the proposed information collection also, please respond to our poll to let us know whether you received one.

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Request For Proposed Information Collection.pdf (62.35 kb)

As we speculated in November, the U.S. Labor Department apparently does intend to reinvigorate its so-called "Right to Know" initiative.  This vague and ambiguous proposal first surfaced in 2010 but was eventually shelved.  USDOL has now announced its intention to conduct a survey "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."

"Right to Know" About What?

In 2010, USDOL said that such a rule would require among other things the "notification of workers' status as employees or some other status such as independent contractors, and whether that worker is entitled to the protections of the [federal Fair Labor Standards Act]."  Many wondered at the time whether the provision would extend to disclosures about management's decisions as to which employees are considered to be exempt from the FLSA's pay requirements, and Wage and Hour Division officials seemed to be avoiding the question.  USDOL's recent announcement says, "Worker misclassification can be understood as the practice, intended or unintended, of improperly treating a worker who is an employee under the applicable law as in a work status other than an employee (i.e., an independent contractor)."  For the moment, then, the focus appears to be upon erroneously deeming workers to be independent contractors or incorrectly considering them to be functioning in some other non-employee capacity.

The announcement also provides at least some hint of what a "Right to Know" regulation will entail.  USDOL notes that "federal labor laws" do not require an employer to:

♦   Inform workers of their status as employees or non-employees;

♦   Provide the basis for these status determinations; or

♦   Notify the workers of their hours worked, pay rates, and wages paid.

Presumably, any "Right to Know" rules will obligate employers to provide this information, although to whom, when, in what form, to what extent, and at what level of detail remain unknown.

What Happens Next?

USDOL seeks comments on its proposed information collection by March 12, 2013.  However, it did not publish the actual information request.  Instead, a copy of this document must be obtained separately, raising the question of whether USDOL's announcement complies with the notice requirements of the Paperwork Reduction Act.  In any event, we have asked for a copy and will post the document when we receive it.

The notice specifies 30 months as the evaluation timeframe but then says in the same sentence that the period ends in March 2014.  Perhaps USDOL will later clarify which of these is its intention.

Businesses and other organizations (particularly those whose operational models include the use of non-employee workers) would be wise to take the opportunity to weigh-in on this proposed survey, to participate in the survey when it occurs, and otherwise to follow these developments closely.  It is foreseeable that the actual information collection might be orchestrated so as to provide a predicate for unprecedented new requirements.

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Recent U.S. Labor Department news releases show something important about its current approach to enforcing the federal Fair Labor Standards Act:

♦       An enforcement initiative directed at Long Island, New York full-service restaurants resulted in assessments of more than $2.3 million in back-wages for 578 employees, as well as in civil money penalties of over $200,000.

♦       DOL is conducting a multi-year enforcement initiative focused upon the construction industry in Connecticut and Rhode Island, where 183 investigations of construction-industry employers have so far recovered nearly $3.3 million in back-wages for 1,226 employees.

♦       A DOL enforcement initiative focused upon hand-harvested crops in Florida has generated back-pay of over $156,000 for 689 agricultural workers and approximately $680,000 in civil money penalties.

♦       DOL is conducting a multi-year enforcement initiative focused upon the gas-station industry in New Jersey, where it has already conducted 74 investigations resulting in over $1 million in back-wages for 295 workers.

♦       An ongoing DOL enforcement initiative targeting full-service buffet restaurants in south Florida has to date resulted in 34 completed investigations involving more than $667,000 in back-wages for 271 restaurant employees, as well as in the levy of over $14,000 in civil money penalties.

♦       DOL has embarked upon an enforcement initiative focusing on the residential-care industry in North Carolina, through which officials seek to remedy what they believe to be "systemic violations" in this industry.

As this reveals, DOL's Wage and Hour Division is allocating substantial resources to broad-based regional, state, and local efforts centered around certain industries and employers.  DOL probably feels it appropriate now to make full use of the hundreds of investigators it has hired in the last two years or so, viewing them as being experienced enough to take on these efforts.  The categories involved seem for now to be among those to which DOL has devoted heightened attention in the past, that is, agriculture, day-care/residential care, restaurants, garment manufacturing, guard services, healthcare, hotels and motels, janitorial services, and temporary workers.  However, employers should not assume that the initiatives will be limited to these industries.

DOL is no doubt scheduling selected employers for compliance audits even though no individual has made an FLSA complaint.  And although DOL sometimes undertakes "directed" audits to look into specific issues, management should not necessarily expect an investigator to limit his or her inquiries to these areas.

These efforts are also likely to include compliance reviews of at least some employers whom DOL has previously found to be in violation of the FLSA.  And as the summaries above reveal, it is entirely possible (maybe even likely) that DOL will assert FLSA civil money penalties and/or will take more-serious action if these follow-on audits reveal additional shortcomings.

Employers should immediately confirm that they are fully in compliance with the FLSA and with all applicable state or local laws.

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The U.S. Labor Department's most-recent regulatory agenda now targets April 2011 for the release of a proposed rule that DOL says is intended to, among other things, "update [federal Fair Labor Standards Act] recordkeeping requirements to foster more openness and transparency in demonstrating employers' compliance with applicable requirements to their workers, to better ensure compliance by regulated entities, and to assist in enforcement."  Elsewhere, DOL has stated that this forthcoming "Right To Know Under The Fair Labor Standards Act" would address "notification of workers' status as employees or some other status such as independent contractors, and whether that worker is entitled to the protections of the FLSA."  The proposal would "also explore requiring employers to provide a wage statement each pay period to their employees," apparently so as to convey to employees "how their pay is computed."

These current notifications include even fewer specifics than their predecessors, about which we reported in May.  At that time, DOL expressed an intention to require employers to notify workers of their FLSA rights in some unidentified way and to provide unspecified "information" about hours worked and wage computations.
 
DOL also said earlier that employers would be required to prepare some sort of "classification analysis" for a worker whom the employer will "exclude . . . from the FLSA's coverage," to disclose this analysis to the worker, and to provide the analysis to a DOL investigator upon "request."  Judging from the latest notices, this is still on the table.  It is less than transparent whether such an analysis would be restricted to situations in which a worker is categorized as being or not being an employee for FLSA purposes.  For example, there is concern that it will also extend to an employer's decisions about which employees it will treat as being exempt from the FLSA's pay requirements.  At a May "Stakeholder Forum" in Washington, D.C., DOL officials declined to address this question.

We continue to recommend that employers remain on the alert for this proposed rule.  When it is published, employers should evaluate each provision in detail, should carefully consider all potential ramifications, and should be prepared to submit suggestions, comments, and any objections.  In light of the recent "Bridge to Justice" initiative, there is every reason to anticipate that information compiled under the requirements of any final regulation will wind up in the hands of claimants and their lawyers.

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The U.S. Labor Department has now provided additional, disquieting insight into its "Plan, Prevent, Protect" program that we first reported on in our April 30 post.  Part of DOL's Spring Regulatory Agenda 2010 announces an intention to issue a Notice of Proposed Rulemaking ("NPRM") proposing significant amendments to the FLSA recordkeeping regulations.

There are as yet no details.  But DOL says that its new rules will, among other things, seek to require employers:

•    To notify workers of their FLSA rights (apparently, the longstanding requirement to display DOL's prescribed poster somehow does not accomplish this);

•   To provide currently-unspecified "information" about hours worked and wage computation; and

•    To perform and document some kind of "classification analysis" for a worker whom the employer will "exclude . . . from the FLSA's coverage", to disclose this analysis to the worker, and to provide the analysis to a DOL investigator upon "request".

DOL's amendments will also undertake to "address burdens of proof when employers fail to comply with record and notice requirements."  It will be interesting to see whether and to what extent DOL will presume to instruct the courts as to what proof burdens they must apply and how and when to apply them.

These proposals are likely to raise a host of substantial and troubling questions.    For instance, must a "classification analysis" be done for each worker, rather than simply for a group of similarly-classified ones?  What level of detail will be necessary?  Must the analysis directly or indirectly reflect the advice of in-house or outside counsel so as to implicate the attorney/client privilege?  Must it contain confidential business information where this might be linked to a decision to treat an employee as being exempt from the FLSA's minimum-wage, overtime, and timekeeping requirements?  What assurance will DOL give (indeed, what assurance can it give) that a written analysis turned over in response to an investigator's demand will not be disclosed outside of DOL?

We recommend that employers remain on the alert for this NPRM.  Once the document is published, each proposed amendment and its potential ramifications should be closely scrutinized and carefully considered.  We strongly suspect that there will be provisions as to which comments, and perhaps even strenuous objections, will be advisable before any revisions are adopted.

Keep in mind also that, as we have noted earlier, pending legislation would attach potentially burdensome penalties to an employer's being found not to have complied with whatever any final recordkeeping amendments turn out to be.

Tough talk and other recent developments could reveal an increasingly adversarial, "gotcha" approach to FLSA enforcement by the U.S. Wage and Hour Division.  A prior post covered both the We Can Help initiative and other intensified U.S. Labor Department enforcement measures.

The Division also announced this week that, as part of a broader DOL policy, it will disclose quarterly investigative information on its website.  This will show wage-hour violations found in specific investigations, as well as back-wage amounts, numbers of employees involved, and any civil money penalties assessed. 

Then, on April 29, senior DOL officials said that they are developing "Plan, Prevent, Protect" rules to require employers (1) to create a plan for identifying and correcting non-compliance; (2) to implement the plan in concrete ways; and (3) to monitor the plan's effects.  A New York Times account indicates that an employer will be required to disclose some or all of the plan to the Labor Department and to employees.  DOL believes that these rules are warranted because "too many" companies "are playing a dangerous game of catch me if you can".  While it remains to be seen, we anticipate that failing to follow these Plan, Prevent, Protect requirements to the Division's satisfaction could lead to civil penalties and perhaps other sanctions.

The FLSA can seem simple in the abstract, but it is often difficult and complex to deal with in the real world.  Any worthwhile compliance plan necessitates knowing exactly how the FLSA applies in innumerable situations.  But at the same time DOL is adopting a take-no-prisoners enforcement posture as to a no-excuses law, the Division is offering little guidance on the endless FLSA gray-area questions that exist.

In the past, some employers have asked for the Division's official written explanation of how the law works in particular situations.  The Division's reply educated both the inquiring employer and the many others who read it.  Instead of continuing to leverage its efforts in this way, the Division has announced that it will respond to interpretation requests by sending generalized legal citations instead of specific answers.  It has also demonstrated its willingness to change or withdraw prior interpretations without warning, thereby adding to uncertainty and unpredictability in FLSA matters. 

The current atmosphere is likely to affect how the Division views investigations right now.  Employers should not wait for DOL compliance-plan rules to come out before systematically being sure that their pay policies and practices pass muster under the FLSA.

UPDATE 05/23/10:  Fisher & Phillips participated last week in a Washington, D.C. "Stakeholder Forum" conducted by the Division.  On multiple occasions, we urged the Division to reconsider its new position regarding opinion letters.  Among other things, we pointed out that these letters serve a far-broader educational purpose than the Division might realize, such that the "cost/benefit analysis" it referred to in taking its recent stance might well have ascribed too little weight to the positive impact its opinions have upon FLSA compliance.

U.S. Labor Secretary Solis has announced the We Can Help program, which is designed in part to encourage reports of alleged Fair Labor Standards Act non-compliance.  Solis declared that there is "a new sheriff in town" and outlined steps such as launching an advertising campaign; distributing videos, posters, and booklets; introducing theme-focused items on the Labor Department's website; providing a hotline; and working through community activists and others.

The Labor Department will pay particular attention to food service, hotels and motels, home-healthcare, construction, janitorial work, and immigrant workers.  But no employer is immune; experience suggests that this initiative will have a broader impact.  For instance, it could include what enforcement officials call "low wage" occupations in areas such as retailing, temporary services, day-care, and agriculture.  And in the past, the Labor Department has targeted businesses and other organizations that are small or new, or that operate in multiple locations, or that were previously found to have violated the FLSA.

In addition, the Labor Department sometimes assigns teams of investigators to special projects or task forces.  For example, it did this in connection with Katrina-related recovery work on the Gulf Coast, and in two, extensive "Operation Child Watch" enforcement efforts aimed at the unlawful employment of minors.

We Can Help might well lead to employee dissatisfaction about things having nothing to do with the FLSA (or with any other law the Labor Department enforces).  In at least one video, the actor says that he complained because his paycheck "just wasn't right."  Of course, the FLSA only requires that wages be "right" in certain, very-specific ways.  Even so, employees seeing the video might be moved to act upon any unhappiness with their pay.

Every employer should immediately ensure that its compensation practices (1) comply with the FLSA and all other applicable laws, and (2) are consistent with employment contracts and pay-related policies.