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Employers Beware: The Department of Labor is Specifically Targeting Employee Misclassification

The Department of Labor (DOL) recently released its Final Strategic Plan for the next five years. While the document itself does not provide binding regulations, it outlines general goals and provides insight into where the DOL will focus resources, enforcement efforts and regulatory activity in the upcoming years. Employers should pay particular attention as much of the Plan demonstrates a significant shift in enforcement strategies, which could be a significant burden. Specifically, the DOL will begin a comprehensive initiative targeting employee misclassification. The DOL Wage and Hour Division (WHD) will spearhead this compliance initiative, working closely with the Department of Treasury.

High Risk Industries

As part of the initiative to target employee misclassification, the DOL has identified what it calls “high-risk” industries that can expect an increased level of investigation and overall presence. For these industries WHD will raise its directed investigation level and increase its presence. Furthermore, WHD will also target specific employers who are identified as having misclassified employees or groups of employees.

The targeted industries are ones in which the employment relationship is splintered and the beneficiary of the labor is distanced from the workers providing the labor. These industries include: construction, janitorial work, home health care, child care, transportation and warehousing, meat and poultry processing and other professional and personnel service industries. The construction industry has been deemed the most likely to see an increased level of investigations.

Employers in the targeted industries should be especially aware of potential investigations into employee classification and should take a proactive approach to complying with DOL regulations. A proactive approach will not only help to protect the employer, but it will also insulate it in light of the new DOL enforcement strategy.

The New Enforcement Strategy: Plan/Prevent/Protect

The DOL has coupled its strategic goals, including targeting employee misclassification, with a “Plan/Prevent/Protect” initiative that places the burden on employers to “find and fix” their own labor violations. This is a departure from previous enforcement guidelines that focused on DOL investigations to find problems and enforce the law. Throughout this initiative, DOL agencies such as the WHD are proposing regulatory changes and other actions that require employers to develop and effectively implement programs to address certain employment compliance issues.

This enforcement strategy places three distinct burdens on employers. First, employers must create a plan for identifying and correcting risks of legal violations and other risks to the worker. Such plans must also be made available to workers or their representatives directly. Posted notices will no longer be sufficient. Second, employers must implement such plans in a manner that prevents any illegal violations. Thus, such plans must be fully implemented and demonstrate to workers that the plans are in use. Third, such plans must actually ensure that workers are being protected, and violations of workplace rights are being eliminated.

This initiative places the burden on employers to detect and correct potential violations. While it is unknown how each DOL agency will implement the initiative, current agency actions may be indicative of future regulatory changes.

Implementing Enforcement Strategies: Potential Changes to FLSA Regulations
The effort to increase compliance with federal employment regulations coupled with the DOL enforcement initiative has led many DOL agencies to seek to change regulations as well as other requirements placed on employers. The Federal Labor Standards Act (FLSA) recordkeeping regulations under development by the WHD are an example of this.

Currently, FLSA recordkeeping regulations require covered employers to post general notices in their workplace about the FLSA. Employers are also required to keep specified payroll records and other information. Existing regulations do not require that such information regarding a worker’s status or exemption status be disclosed to the worker.

The FLSA regulations under development will require covered employers to notify each of their workers of their rights under the FLSA. Employers will also be required to provide employees with information regarding their hours worked and wage computations. This effort to educate and inform workers is a prime example of the Plan/Prevent/Protect strategy. Furthermore, this effort does not stop with the WHD. The Office of Federal Contract Compliance Programs and the Occupational Safety and Health Administration also propose establishing similar requirements that employers notify workers of their employment status.

While many of the new initiatives and strategies proposed by the DOL may be worrisome, they should be assessed not only as a warning, but as a blue print for employers to protect themselves. Employers should begin the protection process now by evaluating policies and practices, auditing current compliance status, taking steps to achieve compliance and implementing compliance plans. Employers considering managing the DOL Plan’s initiatives may want to consult legal counsel for guidance.

  • Partner

    Andy is the Chair of the Labor & Employment Practice Group. Working exclusively in the areas of labor and employment law, Andy provides advice, counsel and litigation defense to employers in all areas of employment law, including ...

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