Federal Government to Crack Down on Misclassified "Independent Contractors?"
It's always risky to misclassify someone who should be an employee as an "independent contractor," but President Obama's 2011 budget proposal will increase the risks for employers. According to this budget summary from the U.S. Department of Labor, the misclassification of employees as contractors is estimated to cost the Treasury Department over $7 billion in lost payroll tax revenue over the next ten years. To help make up for this shortfall, the proposed budget includes funds earmarked for a "joint proposal" between the DOL and the Treasury Department to eliminate legal incentives for such misclassification, and an additional $25 million to target misclassification with 100 additional enforcement personnel and competitive grants to boost states’ incentives and capacity to address this issue.
If this budget provision goes into effect, employers will need to be particularly careful not to misclassify employees as contractors. Of course, it's already a risky proposition to misclassify employees as contractors. For example, as we reported back in 2008, FedEx was on the wrong end of a $14 million award after a California court concluded that the shipping giant misclassified hundreds of drivers as contractors. Lawsuits in this area are common, ranging from individuals seeking unpaid wages and overtime to multi-million dollar class actions. Federal and state governments are also known to go after employers for unpaid payroll taxes and associated penalties.
Are you concerned that your independent contractor might actually be a misclassified employee? The IRS has published this handy information on how to determine whether the employee is correctly classified. There is even an IRS form (Form SS-8) that you can file to seek the Service's help in determining if your employee is correctly classified. Of course, if you believe that you have misclassified employees working as contractors, it might be a good time to contact your labor and employment attorney.
COBRA Subsidy Extended Through February 28, 2010
As originally enacted as part of the 2009 stimulus package, the COBRA subsidy provided up to nine months of health insurance premium assistance for covered workers who were involuntarily terminated on or before December 31, 2009. Last week, President Obama signed a bill that extends the COBRA subsidy for involuntarily terminated employees in two ways: First, it extends the eligibility period to provide assistance to workers who were involuntarily terminated on or before February 28, 2010; second, it provides up to 15 months of insurance premium assistance.
Employers should, as soon as possible but in any case no later than February 21, 2010, provide notices to all former employees who may be affected by the extension informing them of their rights. Employers should also update the COBRA subsidy information they are currently providing to employees upon termination to ensure that it accurately reflects the eligibility period.
Want to know more? For more information on the COBRA subsidy in general, read Stoel Rives' COBRA Subsidy Alert from earlier this year (but ignore the out-of-date eligibility dates). You can also click here to read the IRS' COBRA subsidy information page, with answers to frequently asked questions.
FOREWARN Act Introduced - Changes to WARN Act in 2009?
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Last week, the Federal Oversight, Reform, and Enforcement of the WARN (FOREWARN) Act was introduced in the House by Rep. George Miller (D-CA) and in the Senate by Sen. Sherrod Brown (D-OH). FOREWARN aims to amend the Worker Adjustment and Retraining Notification (WARN) Act by requiring more and smaller employers to notify workers of plant closings or mass layoffs. FOREWARN also would increase penalties for employers who violate the act. For more information, click here to read Senator Brown's press release on FOREWARN.
This isn't the first time in Congress for FOREWARN; it was introduced in 2007, but failed to gain traction, perhaps because of a likely veto from the then Bush White House had it passed. The reintroduction of FOREWARN does not come as a big surprise: the World of Work warned (ouch! bad pun!) that changes were coming to the WARN Act back in March. Better yet, we predicted FOREWARN would be on then President-Elect Obama's agenda back in November 2008.
While FOREWARN is still making its way through Congress, employers must comply with the existing WARN Act, and we have some WARN Act resources to help:
- For a basic overview of the law, here's a basic WARN Act Fact Sheet.
- For more detailed information, download the Employer's Guide to the WARN Act (a great resource and our personal favorite).
- Next, if your layoff is caused by an "act of God," you might want to download the WARN Act Natural Disaster Fact Sheet.
- And finally, you can read what the DOL is telling your employees: the Workers' Guide to the WARN Act, and for Spanish-speaking employees, the Guía para el Trabajadores.
Obama To Extend Job Benefits to Same-Sex Partners
The New York Times is reporting that President Obama will sign an order later today extending some -- but not all -- job benefits to the same-sex partners of federal employees. According to reports, the order will come short of providing full health care coverage to same-sex partners. Check back in with the World of Work for details as they emerge.
Major Budget Increases for Federal Labor and Employment Enforcment Agencies
The Obama Administration has released its fiscal year 2010 budget request. Among the items are several increases for the federal agencies that oversee labor and employment matters. Here are some highlights:
- $104.5 billion to the Department of Labor, an increase of 10 percent, to increase its staff and enforcement activity.
- $283 million for the National Labor Relations Board, an increase of 7.9 percent.
- $267 million for the Equal Employment Opportunity Commission, an increase of 6.6 percent, to increase staffing.
- $145 million of the Justice Department's Civil Rights Division, an increase of 18 percent.
- $112 million to the Department of Homeland Security for the E-Verify program.
Assuming they are passed by Congress, these increases reverse a long trend under the Bush Administration to cut funding to the federal agencies that enforce labor and employment laws. Employers can expect increased enforcement of those laws by the federal government in the years to come.
Stimulus Package Includes COBRA Subsidies
Among the provisions of the new stimulus package signed by President Obama are subsides for unemployed workers continuing their health care benefits through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The key points of the package are:
- Who is eligible? Employees who have been involuntarily terminated between September 1, 2008 and December 31, 2009 with annual incomes less than $125,000 (single) or $250,000 (couples) are eligible for the COBRA premium assistance. Qualified individuals, who initially decline COBRA coverage, would be given an additional 60 days after they receive notice of the special election period to elect to take advantage of the subsidy.
- How much is the subsidy? Eligible employees may receive a 65 percent subsidy toward their health care premium for up to nine (9) months. The Treasury Department will provide employers (or health plans, if they administer COBRA benefits) a credit against payroll taxes to cover the cost of the subsidy. The subsidy terminates upon any offer of new health care coverage through an employer or with Medicare eligibility.
- Are there new notice requirements? Of course! COBRA notices must include information on the availability of the premium assistance. Model notices from the Department of Labor are due 30 days after enactment (so by March 18, 2009). The Act requires employers to notify all plan participants of the new subsidies within 60 days of enactment (or by April 17, 2009). We'll post the model notice as soon as it is available.
- When does the subsidy take effect? March, 2009.
For more information on COBRA, check out this page from the Department of Labor.
President Obama Nominates Wilma Liebman to Chair NLRB
Late last month, President Obama appointed Wilma B. Liebman to chair the National Labor Relations Board (NLRB), the agency that enforces federal labor law. Click here to read the NLRB's press release on the appointment. Chairman Liebman has served on the Board since November 14, 1997. First appointed by President Clinton, she is now serving her third term, which will expire on August 27, 2011.
Chairman Liebman is considered one of its most union-friendly members, and was often a strongly dissenting voice on the Board during the eight years of the Bush administration. Her appointment was not unexpected, and confirms predictions that the NLRB would shift to the left during the Obama administration.
Don't think the Board will change under Liebman's watch? Watch her testify before congress regarding some controversial decisions under the Bush Board, and perhaps you will change your mind:
President Obama Signs Three Executive Orders Affecting Federal Contractors
On January 30, 2009 President Obama signed three executive orders affecting federal contractors and their employees. Two of the three orders affect union rights. (Click the title of each order to download it).
- Economy in Government Contracting. Denies federal contractors reimbursement for funds spent on activities designed to persuade employees to join or to not join a union, such as printed materials, consultants or meetings (activities sometimes known as "union busting").
- Notification of Employee Rights Under Federal Labor Laws. Requires all federal contracts to require contractors to post a notice informing employees that they have a right either to join or to not join a union. A prior order from President Bush, required contractors to post a notice informing employees that they had a right not to join a union.
- Nondisplacement of Qualified Workers Under Service Contracts. Requires all federal contracts to include a provision requiring any contractor who assumes the contract from a previous contractor to retain that previous contractor's qualified employees.
The orders are part of President Obama's Task Force on Middle Class Working Families and, according to the White House, are designed to "level the playing field for workers and the unions that represent their interests." If you're curious about what labor unions think of the orders, check out this uncurbed enthusiasm from the AFL-CIO. We haven't seen a lot of reaction from employers groups, but we'll make the bold prediction that they won't be too happy. Keep in mind: these orders only affect federal contractors; if you don't sell goods or services to Uncle Sam, they probably don't apply to you.
E-Verify Delayed (Again) Until May 21
Another delay for implementation of the mandatory E-Verify system: The Department of Homeland Security's Citizenship and Immigration Services announced today that it will delay mandatory use of E-Verify until May 21, 2009. Click here to read DHS's press release. Why the delay? The Obama Administration wants additional time to review this and other rules that carried over from the Bush era.
As previously reported in the World of Work, President Bush's executive order would have made using E-Verify mandatory starting January 15, 2009 for federal contractors with projects exceeding $100,000 and for sub-contractors with projects exceeding $3,000. A coalition of employer's groups sued, seeking an injunction against the rule. Because of the lawsuit, the effective date of the new rule had previously been delayed until February 20, 2009.
President Obama to Sign Ledbetter Fair Pay Act on January 29, 2009
As expected, the Lilly Ledbetter Fair Pay Act passed Congress (the House passed the Senate version 250-177 on January 27). President Obama has announced he will sign the bill into law--the very first bill he will sign--on January 29. The Act will overturn a U.S. Supreme Court decision that limited the time frame for bringing pay discrimination claims. (For more information on the Act and its history, check out this previous post here at the World of Work).
Here's an important wrinkle: as passed, the Act will be retroactive, and will apply to all claims of discrimination in compensation that are pending on or after May 28, 2007. This may have an impact on many pending unfair and unequal pay lawsuits.
Employee Free Choice Act Tops List of Anticipated L&E Legislation
In case you missed it, Barack Obama will be the next President of the United States! And both houses of Congress will be controlled by Democratic majorities. Wondering what this will mean for labor and employment law? So are we! But we've gone a step further and made some educated guesses on what to watch out for.
- The Employee Free Choice Act (EFCA). The EFCA would be the most wide-ranging revision to federal labor law in 50 years. It would, among other things, require employers to recognize a union as the exclusive bargaining agent for its employees based solely on a "card check" process rather than a secret ballot election. If passed, it is expected to drastically increase union organizing and unionization rates. The World of Work will be watching this one very closely.
- The Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers Act (RESPECT). No, it's not an Aretha Franklin song. The "RESPECT" Act would reverse the NLRB’s recent rulings that clarified the requirements to be a "supervisor" under federal labor law. RESPECT would dramatically increase the number of employees who could unionize. Sock it to me!
- The Paycheck Fairness Act and the Equal Remedies Act. These statutes—competing versions to address the same issue—would reverse the U.S. Supreme Court’s recent Ledbetter ruling addressing the statutes of limitations under Title VII. Both would enable plaintiffs to press viable claims going back much further in time.
- The Civil Rights Act of 2008. The proposed amendments to the civil rights laws would make numerous changes including removal of damage caps on sex, religion, and disability discrimination, as well as retaliation lawsuits.
- The Employment Non-Discrimination Act (ENDA). ENDA would amend Title VII to add sexual orientation as a protected class.
- The FOREWARN Act. This amendment to WARN would increase the notice period for plant closings or mass layoffs from 60 to 90 days.
- Minimum wage. President-elect Obama has also expressed his support for raising the minimum wage to $9.50 per hour by 2010.
- Family and Medical Leave Act (FMLA). President-elect Obama has also indicated his support for expanding the Family and Medical Leave Act to cover companies with 25 or more employees (currently 50).
The World of Work will be watching this legislation closely and will bring you updates as they occur. For more information now, check out this update on pending legislation from Stoel Rives.
