The NLRB Holds that Class Action Waivers Violate NLRA

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A big decision just hit the airwaves in the employment law world. The National Labor Relations Board (“NLRB”) recently announced its decision in D.R. Horton, Inc. In the case the NLRB considered whether an employer violates the NLRA when it requires employees to sign an agreement that precludes them from filing a class action addressing their wages, hours, or other working conditions against the employer. The Board found that such an agreement violates section 7 of the NLRA, which gives employees the right to engage in concerted activities for mutual aid or protection.

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In 2006, D. R. Horton Inc., a nationwide home builder, began requiring each of its employees to execute an arbitration agreement. The employees understood this agreement to be a condition of employment; meaning they would be terminated if they didn’t sign it. The agreement provided that all disputes relating to employment will be determined by arbitration. What is arbitration? Arbitration is a different form of dispute resolution as compared to filing a lawsuit in court. It’s a private form of adjudication where the parties pay from the judge. Arbitration also has fewer legal hoops for the lawyers to jump through when preparing and presenting a case. D. R. Horton’s arbitration agreement stated that the arbitrator may hear only employee’s individual claims, not class actions. It also provided that employees waived the right to file a typical lawsuit or other civil proceeding relating to their employment.

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Michael Cuda was a superintendent for D. R. Horton and brought a nationwide class action in court asserting that D. R. Horton misclassified its superintendents as exempt from the protections of the Fair Labor Standards Act (FLSA). This means that Cuda believe he should be paid on an hourly basis, not on salary. That way he could earn overtime. The employer replied that Cuda failed to give an effective notice of intent to arbitrate, stressing that the agreement bars arbitration of collective claims.

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Cuda’s attorneys responded by filing an unfair labor practice charge, alleging that the employer violated Section 8(a)(1) of the NLRA by maintaining an agreement that the arbitrator may hear only individual claims.

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The Board saw through the employers’ argument and held the arbitration agreement violates the NLRA because it requires employees, as a condition of their employment, to refrain from bringing collective or class claims in any forum. They cannot proceed in court, because the arbitration agreement waives their right to a judicial forum; and they cannot proceed in arbitration, because the arbitration agreement prohibits the arbitrator from awarding collective relief.The Board and the courts have long held that the NLRA protects the right of employees to bring legal action addressing their wages, hours, and working conditions. This includes the right to bring employment-related claims on a classwide or collective basis.

“Rather,” the Board stated, “we hold only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial. So long as the employer leaves open a judicial forum for class and collective claims, employees’ NLRA rights are preserved without requiring the availability of classwide arbitration.  Employers remain free to insist that arbitral proceedings be conducted on an individual basis.”

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What does this mean for the average worker? If your employer made you sign one of these agreements, do not worry, it may not be enforceable. You shoudl be able to bring a class action in court.  For employers, you may want to have these reviewed before using them. Any questions please contact Richard E. Quintilone II, Esq. at req@quintlaw.com

Tags : class actions, NLRA, NLRB, worker protection

Attorney general, Kamala Harris, has issued Opinion AG 07-804, (found at 87 Ops. Cal. Atty. Gen. 114) which states a private parking lot owner cannot issue a ticket with a monetary fine. Even if the private parking lot owner towed your car (something they are allowed to do if the appropriate signs are posted), that owner cannot require you to pay a fine in order to get your car out of hock with the towing company. If you would like to read the opinion, click here on the Attorney General’s website. Search for Opinion 07-804, filed December 22, 2011. 

Issuing parking tickets on private property has been a great revenue-generating concept. The official summary reads as follows:

“1. Neither California Vehicle Code section 22658, nor any other state law, authorizes private property owners to issue parking citations imposing monetary sanctions to the owners of vehicles parked on their property.
2. Absent statutory authorization, private property owners may not acquire, by means of issuing a written warning or posting signage, the right to issue parking citations imposing monetary sanctions to the owners of vehicles parked on their property.
3. Persons who tow and impound vehicles under Vehicle Code section 22658 may not require payment of parking citations that have been issued by private property owners.
4. Owners of vehicles who have received parking citations imposing monetary sanctions issued by private property owners or their agents do not have rights or remedies per se, but the citations are unenforceable against the vehicle owners.”

The California Legislature has already authorized private parking lot owners to tow cars and this Opinion does not alter that right.  In addition, the Attorney General has prohibited “booting” cars in the parking lot as it constitutes vehicle tampering.  Merry Christmas California.

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The California Legislature employment laws that go into effect on January 1, 2012, as failure to implement policies and procedures for complying with these statues could lead to hefty penalties.

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Misclassification of Independent Contractors

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Under newly added Labor Code Sections 226.8 and 2753, employers who have willfully misclassified independent contractors will be required to publicize findings of their violations on their company websites for a year. The notice, which must be signed by a corporate officer, must include a statement that the employer has committed a serious violation by willfully misclassifying employees, the employer changed its business practice to prevent future violations of section 226.8 (a) and any employee who believes he or she is misclassified may contact the Labor and Workforce Development Agency.

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The punishment for the violation is vicious. Any “person” (not just those statutorily defined as “employers”) who willfully (voluntarily and knowingly) misclassifies an employee as an independent contractor may be liable for penalties ranging from $5,000 to $25,000 for each incident of willful misclassification.

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The new laws also forbid an employer who has willfully misclassified an individual from charging that individual a fee or making any deductions from the individual’s compensations (e.g., for goods, materials space rental, services, licenses, repairs and maintenance) where such fee or deduction would have been illegal if the individual were not an independent contractor. Under this new legislation, there is still an open legal question whether every improper deduction or fee charged to a willfully misclassified independent contractor could give rise to a separate penalty of up to $25,000.

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Wage Theft Prevention Act of 2011

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Pay notices must be provided to new employees under the new Wage Theft Prevention Act of 2011 which will require employers to provide all newly hired, non-exempt employees with a written notice of certain wage information at the time of hire. The notice must contain the following information:

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“The rate or rates of pay and basis therof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable; allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances; the regular payday designated by the employer in accordance with the requirements of this code; the name of the employer, including any “doing business as” names used by the employer; the physical address of the employer’s main office or principal place of business, and a mailing address, if different; the telephone number of the employer; the name, address, and telephone number of the employer’s compensation insurance carrier; and any other information the Labor Commissioner deems material and necessary.”

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This law will help identify “what” an employee is making “who is” the true employer and eliminate any issues from the onset of employment. If any of the above information changes, the employer must, within seven (7) days of any such change, provide the employees with notice in one of the manners set forth by the statute.

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Update to the Genetic Information Nondiscrimination Act (“GINA”)

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When we reported on this legislation we were interested to see any cases that might arise out of it. Thus far, litigation has been limited. Regardless, the legislature amended the GINA which applies to employers with 15 or more employees. GINA forbids discrimination on the basis of genetic Information when hiring or firing employees or making decision related to compensation, terms, condition, or privilege of employment it also bars employers from requesting requiring, or purchasing genetic information with certain limited exceptions and limits the disclosure of genetic information. Effective January 1, 2012 Senate Bill 559 extends prohibition of discrimination based on genetic information to California employers with five (5) or more employees. While under GINA, penalties for violations are capped between $50,000 and $300,000 (depending on the size of the employer), there is no statutory limit on the amount of damages that may be awarded to an employee who demonstrates discrimination under the amended state law. The irony is health care providers have a statutory damages cap for emotional distress at $250,000 (say for cutting off the wrong arm as an example) but small 5 person employers, with no lobbying front, can be subject to $300,000 in damages for genetic discrimination? Employers should make sure that policies and handbooks (including insurance and wellness program language and medical certification forms are updated and that supervisors are properly trained to comply with these laws. Quintilone & Associates can assist with handbooks and compliance review.

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California law already prohibits employers from discriminating on the basis of a person’s medical condition, including genetic characteristics. GINA broadens the protection to employees by prohibiting employers from requesting, requiring, or purchasing genetic information about an employee or his/her family members, except under certain limited circumstances. As a result, employer-sponsored wellness programs that seek family medical history information in the course of risk assessments may implicate GINA. GINA also requires a modification of the Equal Employment Opportunity Commission (“EEOC”) employer posting requirement. Go to eeoc.gov to view the current posters.

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Consumer Credit Reports

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Employers are prohibited from obtaining a consumer credit report in connection with an employee or applicant background check unless the employee or applicant holds or would hold any one of the following positions.

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(1) A managerial position which qualifies for the executive exemption from overtime pay requirements under the California wage orders.
(2) A position that affords regular access to bank or credit card account information, Social Security numbers, or dates of birth for any one person (as long as the access to this information does not merely involve routine solicitation and processing of credit card applications in retail establishment).
(3) A position for which the employer is required by law to consider credit history information.
(4) A position for which the information contained in the report is required by law to be disclosed or obtained.
(5) A position where the individual is or will be named signatory on the bank or credit card account of the employer and or authorized to transfer money or authorized to enter into financial contacts on the employer’s behalf.
(6) A position that affords access to confidential, proprietary, and or trade secret information.
(7) A position that affords regular access during the workday to the employer’s, a customer’s or client’s cash totaling at least $10,000.
(8) A position in the State Department of Justice or a sworn peace officer or law enforcement position.

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Where an employee or applicant falls under on the exceptions, the employer should continue to provide the employee with appropriate written notice and an opportunity to receive a free copy of any credit report the employer runs. Additionally, the employer must now also provide the employee/ applicant with advance written notice identifying the applicable exception that applies.

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Despite these new restrictions, employers may still obtain income or employment verification reports that do not contain credit-related information and may further obtain “investigative consumer reports,” provided they comply with any other consent, disclosure and notification requirements. Since almost every employee has “A position that affords access to confidential, proprietary, and or trade secret information,” we see no real change or purpose of the law other than to add an additional layer of legislation. In other words, any employee could be subject to Consumer Credit report under this standard.

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New Notification Requirement for Background Checks

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Labor Code Section 1786.22 will require employers that order background reports other than consumer credit reports (such as criminal background reports or motor vehicle reports) to provide the subjects of the report with the website address of the consumer reporting agency. If there is no website address, the employer must provide the telephone number of the agency where the individual can find information about its privacy practices.

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Changes in Health Benefit Contribution Requirements

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There are changes for employers with health plans to employees on pregnancy disability leave: while employers with five or more employees are already required to permit employees disable by pregnancy to take a leave of absence of up to four (4) months, they will now be required, effective January 1, 2012, to continue to provide up to four (4) months of group health coverage to those employees on pregnancy disability leave on the same terms and conditions as if the employee continued actively reporting to work.

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If an employee disable by pregnancy fails to return to work, the employer may be able to recover from the employee the premium that the employer paid under the group health plan under limited circumstances provided under the law.

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Employers should note that the requirement to continue health insurance for employees on pregnancy disability leave is in addition to the requirement that employers with 50 or more employees continue to provide medical benefits to an employee who takes time off post-delivery to bond with the baby under the Family Medical Leave Act and California Family Rights Act.

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Employers, both large and small, should update their policies and make sure that their employees’ rights notices and postings are up to date and review all independent contractor agreements to remain in compliance. To comply with the substantive requirements of GINA, employers should train supervisors to avoid discussing medical issues with employees that may implicate GINA. Employers should also review their wellness programs to ensure that they comply with GINA. Please contact Richard E. Quintilone II, Esq. at Quintilone & Associates if you have any questions about the GINA and your business.

Tags : GINA, independent contractors, misclassification, overtime, pay stubs

Dear Quintilone & Associates Friends:

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We are writing as a courtesy to let you know that the oral argument in Brinker v. Superior Court, will stream live on www.calchannel.com at 9 am tomorrow. For those who want to watch, simply click on the link on the right side of the screen for the Live California Supreme Court in session.

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Brinker is a highly anticipated wage and hour case in which the Court will decide whether, in complying with California’s rest and meal break laws, an employer must simply maintain a policy that is compliant with the law (by making meal and resk breaks “available”) or, alternatively, whether the employer must affirmatively police on an ongoing basis whether its policy also is being followed by employees (“ensuring” they are taken). This highly anticipated case will effect millions of California employees and employers.

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See http://www.calchannel.com/channel/live/

Tags : Brinker, class actions, meal breaks, premium pay, rest breaks

On October 5, 2011, United States District Court – Central District Judge Cormac J. Carney denied a motion to compel arbitration of a PAGA claim brought by the defendnats Orkin Services of California, Inc. on the grounds that the arbitration agreement contained an unconscionable PAGA waiver, rendering the agreement unenforceable.  See Urbino v. Orkin Servs. of Cal., 2011 U.S. Dist. LEXIS 114746 (C.D. Cal. Oct. 5, 2011). As reasoned by the Court, the U.S. Supreme Court’s analysis in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) was inapplicable, as PAGA embodies “representative” and “public right” aspects which are fundamental and inseparable features of a PAGA claim, and could not be set aside by private agreement: [A]s Plaintiff correctly notes, AT&T concerned the enforceability of a consumer class action arbitration waiver, rather than a representative PAGA claim waiver. (Plaintiff’s Opposition at 21 (citing Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011); Plows v. Rockwell Collin, Inc., No. SACV 10-01936, 2011 U.S. Dist. LEXIS 88781, at *14–*15 (C.D. Cal. Aug. 9, 2011)).) In Brown, the California appellate court refused to extend AT&T to a PAGA action in light of the fundamental nature and purpose of a PAGA claim. Brown, 197 Cal. App. 4th at 500-03; see also Plows, 2011 U.S. Dist. LEXIS 88781, at *14–*15. Specifically, the Brown court explained that the purpose of PAGA “contrasts with the private individual right of a consumer to pursue class action remedies in court or arbitration, which right, according to AT&T may be waived by agreement so as not to frustrate the FAA – a law governing private arbitration. AT&T does not provide that a public right, such as that created under the PAGA, can be waived if such a waiver is contrary to state law.” Brown, 197 Cal. App. 4th at 500. Furthermore, as noted by the Brown court, the Quevedo court failed to take into account that there are no separate individual claims in a PAGA action; rather, the individual must bring a PAGA claim as a representative action on behalf of himself and other aggrieved employees. See id. at 503 n.8.n13 The Court finds the reasoning offered by the Brown court persuasive. See also Plows, 2011 U.S. LEXIS 88781, at *14–*15 (agreeing with the Brown court’s reasoning of why class action waivers in arbitration agreements may not be used to divest plaintiffs of their right to bring representative actions under PAGA and denying defendant’s motion to compel arbitration of plaintiffs’ PAGA claims). Because the PAGA arbitration waiver in the Agreement is unconscionable, and the waiver taints the entirety of the Agreement with illegality, the Court deems the Agreement unenforceable. See Urbino, 2011 U.S. Dist. LEXIS 114746, at 39-40. This Court’s decision applies the state standards surrounding the PAGA and joins a growing list of opinions finding Concepcion inapplicable in the California wage and hour class action contex. 

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If you believe you have been denied proper overtime, commission or meal and rest break pay or expense reimbursement in California, please contact Quintilone & Associates at info@quintlaw.com for a free consultation. 

Tags : Arbitration Agreements, california, Employee handbooks, overtime, Overtime GINA FLSA overtime wage & hour, wage and hour law

Nicholas employed Chen from late 2004 to early 2007. In June 2007, Nicholas filed a complaint against Chen stating multiple causes of action related to alleged breaches of contract and torts committed by Chen during his term of employment. After answering and filing a cross-complaint for indemnity, in an interesting role reversal of the typical case where an employer moves to compel arbitration, ex-employee Christopher Chen file a motion to compel arbitration.
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In the first of two visits to the court of Appeal, Chen challenged the trial court’s denial of his petition to compel contractual arbitration against his ex-employer. The trial court found Chen did not meet his statutory burden (provide enough evidence) of establishing the existence of a written arbitration agreement between the parties. (Code Civ. Proc., § 1281.2.) Chen failed to attach the alleged agreement to his petition, instead relying on a declaration claiming he recalled signing a document with a broad arbitration agreement covering all disputes. Because the trial court, as the trier of fact, was entitled to find Chen did not meet his burden of establishing the existence of an arbitration agreement, the Court of Appeal affirmed, leaving each side to bear its own costs. The case moved forward with the trial Court.

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On the eve of trial, the parties filed a stipulation premised on the following facts: “WHEREAS, Nicholas Lab[s] has decided to dismiss its Complaint without prejudice, if Chen decides to submit his Cross-Complaint for disposition pursuant to written submission to and decision by the Court; [¶] WHEREAS, Chen has decided to submit his Cross-Complaint for disposition pursuant to written submission to and decision by the Court, exclusive of a jury and without the presentation of live testimony.” The parties stipulated: (1) Nicholas Labs “will dismiss its Complaint without prejudice pursuant to the Request for Dismissal attached hereto”; (2) “Chen will submit his Cross-Complaint” for a bench trial based on written submissions; and (3) “This stipulation is not a resolution of a disputed claim. [Nicholas Labs] has determined to dismiss the action for its own reasons, and [Chen] has determined to submit the cross-complaint in writing to the court for [his] own reasons.” The stipulation was accompanied by a request for dismissal of Nicholas Labs‟ complaint, “without prejudice.”

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During the bench trial, the Court found insufficient evidence of direction and control of Chen’s services by NS Holdings, LLC, and that Chen’s salary was paid by [Nicholas Labs] and not NS Holdings, LLC. There court found there was insufficient evidence that Chen was an employee in an enterprise in which he was “subject to the control of both Nicholas Labs and NS Holdings rendering him a joint employee of both entities.”

The trial court entered judgment: (1) for Chen and against Nicholas Labs on the complaint; and (2) for Nicholas Labs and against Chen on the cross-complaint. The court awarded Chen his costs on the complaint and awarded Nicholas Labs its costs on the cross-complaint. Chen then moved for attorney fees under section 2802.

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Citing statutory authority (§ 2802, subd. (a); Corp. Code, § 317, subd. (d)) and the Nicholas Labs operating agreement, Chen claimed Nicholas Labs was obligated to “indemnify” Chen for the attorney fees he incurred in this action (both to defend against the complaint and pursue the cross-complaint for indemnification). The Court of appeal rejected this contention and held that plaintiff Nicholas Labs was not required to “indemnify” its ex-employee for attorney fees incurred by Chen during his successful defense of an action brought by Nicholas Labs. The court of appeal, Fourth Appellate District, Division 3, upheld the trial court and rejected Chen’s assertion that Labor Code § 2802(a) or Corporations Code § 317(d) and/or contractual indemnity provisions obligated Nicholas Labs to reimburse Chen.
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The Court held that Labor Code section 2802 does not require an employer to reimburse its employee for attorney fees incurred in the employee’s successful defense of the employer’s action against the employee. The Court also concluded that Corporations Code section 317 has no application to limited liability companies. Unlike the first appeal, the Court awarded its costs to Nicholas Labs.

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Normally California employers are required to reimburse employees for costs and expenses incurred in the discharge of their employment. In some cases for lawsuits brought against the employee in the course and scope of their employment. Every case turns on its facts. For more information on seeking reimbursement of expenses and whether you have a potential claim please contact Quintilone & Associates at req@quintlaw.com.

Tags : Arbitration Agreements, Employer suing Employee, Expense Reimbursment, Labor Code section 2802, Non-Compete Clauses, wage and hour law

The California Supreme Court recenlt announced that BRINKER RESTAURANT v. S.C. (HOHNBAUM)
Case: S166350, involving meal periods in California, is set for oral argument on Tuesday, November 8, 2011 at 9:00 a.m. in San Francisco

For more information on this case, go to:

http://appellatecases.courtinfo.ca.gov/search/dockets.cfm?dist=0&doc_id=1898028

Tags : Brinker, Meal Periods, Rest Periods

In Brown v. Ralphs, Plaintiff Terri Brown brought a class action and representative action under the Private Attorney General Act of 2004 (“PAGA”) against her employers, defendants and appellants Ralphs and Kroger for violations of the California Labor Code. Defendants appealed from the trial court’s order denying their petition to compel plaintiff to submit her individual causes of action to arbitration as required under her employment agreement.

The CA Second Apellate Dist, Div 5 (LA) held that the trial court erred in ruling that under Gentry v. Superior Court (2007) 42 Cal.4th 443 (“Gentry”), the class action waiver provision in plaintiff’s employment agreement was unenforceable because that ruling was not supported by substantial evidence. The Court of Appeal also held that the recent decision of the United States Supreme Court in AT&T Mobility LLC v. Concepcion et ux. (2011) 131 S.Ct. 1740, holding that California decisional law invalidating class action waivers in consumer arbitration agreements is preempted by the Federal Arbitration Act (9 U.S.C. § 1 et seq. (“FAA”)), does not apply to representative actions under the PAGA, and thus the trial court correctly ruled that the waiver of plaintiff’s right to pursue a representative action under the PAGA was not enforceable under California law. The Court of Appeal remanded the case for the trial court to determine whether to sever the unenforceable provision in the arbitration agreement waiving plaintiff’s right to pursue a PAGA representative action or whether to refuse to enforce the entire arbitration agreement or parts of it.

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Gina Holmes worked for Petrovich Development Co. as assistant to Paul Petrovich. She signed and agreement indicating the company computer was company property and warned her email would be inspected. She was pregnant early in her employment and got into a discussion with her boss about the length of her leave and their feelings about her pregnancy. Although it appeared that they had resolved their differences, Holmes simultaneously attempted to hire a lawyer, via email at work. Apparently, Holmes became upset that Petrovich forwarded her emails to others in the organization and quit, claiming constructive discharge, discrimination, harassment, intentional infliction of emotional distress and invasion of privacy.

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The trial court dismissed the harassment, discrimination and retaliation claims on summary judgment. The court of appeal affirmed – holding that the harassment evidence was limited to email correspondence that was neither severe nor pervasive.  The court of appeal also affirmed dismissal of the claim that Holmes was forced to resign. The court noted that when a plaintiff cannot establish a hostile work environment, a constructive discharge claim is a higher standard and must also fail.  Holmes’ retaliation claim failed too, because of the lack of an adverse action.

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That left claims for intentional infliction of emotional distress and invasion of privacy, which were then submitted  to a jury. The jury found for the defendants. On appeal, Holmes claimed the trial court should not have allowed Petrovich to use the emails she sent to a lawyer seeking a referral, in which she explained her situation.  The trial court held that Holmes waived the privilege because she used company email, and there were clear policies explaining the company’s right to monitor email.  There were also some issues with the employee lawyer’s attempts to recover the emails or seek an appropriate protective order.  The court of appeal agreed that Holmes waived the privilege, holding:

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“Although a communication between persons in an attorney-client relationship “does not lose its privileged character for the sole reason that it is communicated by electronic means or because persons involved in the delivery, facilitation, or storage of electronic communication may have access to the content of the communication” (§ 917, subd. (b)), this does not mean that an electronic communication is privileged (1) when the electronic means used belongs to the defendant; (2) the defendant has advised the plaintiff that communications using electronic means are not private, may be monitored, and may be used only for business purposes; and (3) the plaintiff is aware of and agrees to these conditions. A communication under these circumstances is not a “„confidential communication between client and lawyer‟” within the meaning of section 952 because it is not transmitted “by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation . . . .” (Ibid.)

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When Holmes e-mailed her attorney, she did not use her home computer to which some unknown persons involved in the delivery, facilitation, or storage may have access. Had she done so, that would have been a privileged communication unless Holmes allowed others to have access to her e-mails and disclosed their content. Instead, she used defendants‟ computer, after being expressly advised this was a means that was not private and was accessible by Petrovich, the very person about whom Holmes contacted her lawyer and whom Holmes sued. This is akin to consulting her attorney in one of defendants‟ conference rooms, in a loud voice, with the door open, yet unreasonably expecting that the conversation overheard by Petrovich would be privileged.”

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The lesson to be learned is that counsel should immediately seek a protective order or address these issues with the court rather than relying on opposing counsel to “work it out.”  Further, attorneys for employees should advise prospective clients and current employees not to use company or monitored email systems. Employers should revise their employee handbooks and ensure their email policies are clear regarding the company’s monitoring of electronic communications and that there should be no expectations of privacy.

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The case is Holmes v. Petrovich Development Company LLC and the opinion is on the Court’s website here.

Tags : Email, Employee handbooks, Employment Updates, Privacy at Work, Protective Order

Employers who misclassify their employees as non-employees are potentially the focus of a bill brought before the United States Congress. The bill would require organizations nationwide to keep accurate records of non-employees, such as independent contractors. Employers would also face new penalties for misclassifying employees. These record keeping requirements are already part and parcel of a company’s responsibility in California.

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The Employee Misclassification Prevention Act (“EMPA”), proposes to make amendments to the recordkeeping and notice requirements section of the FLSA.  The proposed law requires employers who are subject to FLSA to keep accurate records of all workers, employees and nonemployees (e.g. independent contractors). Records would include the hours worked, payment, and classification of each worker.

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Employers would be required to give written notices to all of their workers, employees and non-employees, upon hire or if there was any change of the employee’s classification status.  It does not specify if notice could also be electronic.  Notices would:

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1. Inform the worker of their classification;
2. Direct them to the appropriate Department of Labor (“DOL”) website for further information;
3. Provide contact information to the local DOL office; and
4. Include a special paragraph for non-employees regarding their rights. 

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The bill would prohibit companies from firing or discriminating against any worker, employee or non-employee, for filing a complaint, testifying in a hearing, or serving on an industry committee regarding misclassification practices.  These protections already exist for California employees. 

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The language of the Special Penalty for Certain Misclassification, Recordkeeping, and Notice Violations- § 16 of the FLSA would be changed to include “individuals” in addition to employees. In addition, civil penalties for misclassification practices would be increased to up to $1,100 per worker, and up to $5,000 per worker for willful repeat violations.  The bill also includes a provision for the Secretary of Labor to establish an employees’ rights website, which seems to be redundant given the fact the Secretary of Labor is supposed to enforce employees’ rights. 

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In addition to the amendments proposed to the FLSA, the bill aims to make changes to the Social Security Act (42 U.S.C. 503(a)). The changes are intended to increase enforcement by:

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1. Improving auditing and investigative procedures;
2. Issuing quarterly report s to the Secretary of Labor on findings; and
3. Establishing administrative penalties for misclassification practices.   

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To increase effective enforcement of misclassification, the bill seeks to promote inter-department communication. The bill proposes that if any section of the DOL has evidence of an employer participating in misclassification, they should report the information to the Wage and Hour Division (“WHD”), who then can choose to refer it to the Internal Revenue Service (“IRS”).

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The act would also allow the WHD to target employers for auditing purposes if they are in industry with a history of misclassifying employees.  While the bill may sound promising in theory, it appears the government is attempting to encroach on what many talented and qualified attorney’s already do, and that is bring collective and class action claims to protect the rights of the workers. 

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The bill was referred to the Committee on Education and Labor and the Committee on Ways and Means for review.

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The entire bill, H.R. 5107, is available online at the Library of Congress website or See http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.5107:

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For more information on classifying employees please contact Quintilone & Associates at req@quintlaw.com

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