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Virginia Governor Creates Task Force on Worker Misclassification and Payroll Fraud

The following information was sent out yesterday (August 21, 2014) by members of our Labor & Employment team in Virginia.  If you have employees in Virginia, you need to read this and consider how it may affect your company.

Virginia Governor Terry McAuliffe signed Executive Order 24 on August 14, 2014, to establish an interagency task force on worker misclassification and payroll fraud.

The Executive Order is a response to a 2012 finding (by the Joint Legislative Audit and Review Commission (JLARC) of the Virginia General Assembly) that one-third of audited employers in certain industries misclassify employees, resulting in a failure to provide workers’ compensation insurance and unemployment insurance, to pay payroll taxes, and to comply with minimum wage and overtime laws.  These employers are able to save up to 40 percent in costs, giving them a competitive advantage over complying employers.  JLARC found that worker misclassification also lowers state income tax collections by up to $28 million each year.

The task force will be made up of representatives from the Virginia Employment Commission, the Department of Labor and Industry, the Department of Professional and Occupational Regulation, the State Corporation Commission’s Bureau of Insurance, the Department of Taxation, and the Workers’ Compensation Commission, and will be chaired by the Secretary of Commerce and Trade.  The task force is aimed at better coordinating the efforts of these agencies and developing a comprehensive plan to reduce worker misclassification and payroll fraud in Virginia.

The Executive Order provides seven specific roles for the task force:

  1. Reviewing statutes and regulations related to worker misclassification and payroll fraud;
  2. Evaluating current enforcement practices of the agencies involved;
  3. Developing procedures for more effective inter-agency cooperation and joint enforcement;
  4. Implementing a pilot project for joint enforcement;
  5. Developing educational materials for and an outreach strategy to employers;
  6. Advising on any technological improvements in worker misclassification and payroll fraud detection; and
  7. Recommending any appropriate changes to relevant legislation or administrative rules.

The task force will develop a plan and present a progress report to the governor by December 1, 2014.

Governor McAuliff’s Executive Order follows a 2013 attempt by the legislature to create a task force with similar responsibilities. Although a bill was introduced in the Senate, it never made it out of the House of Delegates.

Virginia is not the only state to operate a task force focused on worker misclassification and fraud.  In 2009, Maryland created a Workplace Fraud Task Force, which was given similar responsibilities.

Governor McAuliffe’s action – and action by other states – should prompt employers to conduct self-audits of worker classifications, to ensure that they do not become the subject of government scrutiny.

August 21, 2014   No Comments

Have You Begun Updating Your Affirmative Action Plans? Step Six of Seven Towards Full Compliance with the New OFCCP Regulations

As we have discussed in our prior blog posts in this series on the new OFCCP Regulations (which became effective on March 24, 2014), most of the new Regulations do not go into effect until the beginning of the contractor’s first plan year following March 24, 2014.  Many contractors have delayed implementing these new requirements because their new plan year has not yet begun.  The time for delaying is quickly coming to an end!

In this post, we continue with Step Six towards full compliance with the new Regulations.  This step must be implemented by the beginning of your first new affirmative action plan after March 24, 2014.

Step 6.    Disseminate Your Affirmative Action Program Internally 

There has always been a requirement to engage in efforts to disseminate information about the affirmative action policy within the workplace.  For example, it has always been “recommended” that contractors put their affirmative action policy in their handbook and notify any union that represents company employees of such affirmative action policy.  Also, it has always been a requirement to provide notification to the union of the minorities/females affirmative action policy (and to post that notification).  However, that notification has not been required for veterans/disabled persons affirmative action policy.

Under the new Regulations, contractors are now specifically required to include their affirmative action policy in their employee handbook or (if there is no handbook) to otherwise make it available to employees and to provide their employees’ union(s) with notice of their affirmative action policy and request their cooperation.  However, it is not entirely clear what specific “policy” language must be published in the employee handbook.  The safest course is to include the entire “Policy Statement” referred to in 60-741.44(a) and 60-300.44(a).  However, a contractor might choose, instead, to include a simpler policy that states that the contractor has an obligation to engage in affirmative action efforts to employ and advance in employment qualified individuals with disabilities and veterans (as well as minorities and women).  Whether the OFCCP would find this shorter policy statement fully compliant remains to be seen.

This is also a good time for contractors to review the list of recommended steps in the Regulations for internal dissemination of the policy to determine which of those steps would also be appropriate.  These recommended steps include:

(i) Inform all employees and prospective employees of its commitment to engage in affirmative action to increase employment opportunities for individuals with disabilities and protected veterans.  The contractor should periodically schedule special meetings with all employees to discuss policy and explain individual employee responsibilities;

(ii) Publicize it in the company newspaper, magazine, annual report and other media;

(iii) Conduct special meetings with executive, management, and supervisory personnel to explain the intent of the policy and individual responsibility for effective implementation making clear the chief executive officer’s support for the affirmative action policy;

(iv) Discuss the policy thoroughly in both employee orientation and management training programs;

(v) Include articles on accomplishments of individuals with disabilities in company publications; and

(vi) When employees are featured in employee handbooks or similar publications for employees, include individuals with disabilities and disabled veterans.

Finally, remember that contractors are required to train all personnel involved with selection and recruitment in the affirmative action program.  If employment decision-makers do not understand the policy, it is not likely there will be proper compliance.

August 1, 2014   No Comments

Labor Unions Want Your Email System Too!

– Re-published from Information Intersection blog site.

If you have a union in your workplace, or if unions have tried to organize workers in your workplace, you know that unions need ways to communicate with your employees.  Before the current digital age, unions relied primarily on communicating through informational picketing and leafleting, posters and mailings, and individual and group meeting to encourage unionization or to communicate with members and represented employees.  Today, with the modern workplace and internet-connected workers, communications can be conducted far more quickly, efficiently, cheaply and often more effectively through electronic means, such as email.  But historically, unions have not been permitted access to company email systems.  The current rule is that “employees have no statutory right to use the[ir] Employer’s e-mail system” for non-work-related purposes. If unions and the current Presidential administration get their way, that all might change.

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July 29, 2014   No Comments

The Risky Business of Background Checks, Online and Otherwise

We recently posted on one of our firm’s other blogs, Information Intersection, about the joint guidance that was recently issued by the EEOC and FTC on employment background checks.  While much of the content of both the employer and employee directed guidance is not new or surprising, these publications further confirm the gist of our previous publishing on these topics.

The complete blog post is available at this link.

May 13, 2014   No Comments

President Employs More Executive Measures to Press Equal Pay Agenda

Yesterday, President Obama signed an executive order and issued a presidential memorandum pressing his equal pay agenda.  The executive order establishes that workers cannot be prevented from discussing their pay with other employees or applicants.  Its declared target is to support efforts to eradicate gender-based pay disparities.  Its aim though is probably more akin to using a hand-held mirror to shoot over your shoulder at the target.

Protecting an employee or applicant because they’ve “inquired about, discussed or disclosed the compensation of the employee or applicant or another employee or applicant” will have only a minimal effect, if any, on pay equity.  Its greater effect will be to offer employees a means to claim retaliation if, for instance, no pay raise results or any similar adverse job action occurs after the employee was known to have discussed his pay.  This executive order will at least spur employers to redouble their efforts to keep comprehensive HRIS data and use vigorous disposition codes for documenting all types of workplace results for applicants and employees alike.

The presidential memorandum mandates that the Department of Labor create a rule requiring federal contractors and subcontractors to submit summary data on the compensation paid to their employees, including data by sex and race.  Obviously, such a rule would normally include classifying the compensation by not only sex and race, but by job title, job grade or some measure differentiating the types of jobs involved.  However, this summary data is likely going to be calculated merely by dividing the total compensation for all employees of a particular sex or race by the number of employees of that race or sex.  Federal contractors already compile comprehensive information examining their compensation practices annually as part of their affirmative action obligations, but now they will be required to submit a snapshot of that data to the Department of Labor each year.  The federal government claims it needs this information because of a “lack of data as a barrier to closing the persistent pay gap for women and minorities.”  However, if the Department of Labor’s past practices are any indication, the compensation data will be collected in such a summary fashion that it is virtually worthless as a statistical indicator of pay discrimination.  Soon the Department of Labor will be able to claim that overall disparities in compensation between genders or races (which could be driven by one or two highly-paid individuals or which could be the result of perfectly defensible pay decisions) justifies launching a widespread investigation of the employer.  How this new data ends up being used against employers in the future will determine whether underpaid workers are benefited or instead whether employers are bludgeoned by submitting unreliable data that will supposedly reveal unlawful pay practices.

So the new federal executive order and presidential memorandum are not nearly as precise as the President intends.  At least the approach of requiring a wage disclosure notice (as New York and California have done) where new employees are alerted to the wage rate for each position protects workers from being shortchanged in straight-time and overtime pay.  These new orders are not nearly so precise nor useful to the workplace.

April 9, 2014   No Comments

Fines To Increase For Failing To Post Notice Of Anti-Discrimination Rights

 

The EEOC recently announced that it will double its fine for employers who violate the notice posting requirements of Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Genetic Information Non-Discrimination Act, from $100 per violation to $210.   The new rule will go into effect on April 18, 2014.

Every employer covered by Title VII, ADA, or GINA must post the EEOC’s “EEO is the Law” notice describing these laws. It must be posted in a prominent and accessible place where notices to employees and applicants are customarily maintained.  Of course, the original notice requirements were put in place before the invention of the remote desktop, so consider posting these notices in multiple places, including the company intranet, or another electronic method, in addition to a physical office location.

The EEOC’s announcement should also serve as good reminder to review other federal, state, or local notice posting requirements to ensure that you are in compliance with the law.

For more information, you can go to the EEOC’s website and even download copies of the “EEO is the Law” poster or contact a member of the Troutman Sanders LLP Labor & Employment Section.

April 2, 2014   No Comments

Important Court Ruling: Employee Waivers of “Collective Action” Right Are Enforceable

Have you (or others at your company) considered using mandatory arbitration agreements with your employees?  The idea is to require an employee who ends up in an employment dispute to handle that dispute before an arbitrator, rather than by filing a lawsuit.  But are these agreements valid and enforceable?  A recent decision by the Eleventh Circuit Court of Appeals (which handles cases from all federal courts in Georgia, Alabama and Florida) has a lot to say about the overall effectiveness and enforceability of mandatory arbitration agreements.

Last week, the Eleventh Circuit joined four other Circuit courts in holding that an arbitration agreement that waives an employee’s ability to participate in a “collective action” (a little different than but similar to a class action) brought under the Fair Labor Standards Act (FLSA) (the federal wage and hour law) is enforceable under another law known as the Federal Arbitration Act (FAA).

In the case of Walthour et al. v. Chipio Windshield Repair, LLC et al., a group of window repairers originally filed suit against their employer in federal court in Georgia for allegedly failing to pay them overtime wages.  The employer tried to take the case out of court because the employees had signed mandatory arbitration agreements.  In line with an increasingly popular trend among employers, the arbitration agreement also included a waiver of the employees’ right to take part in a class or collective action (allowing each one to only bring an individual claim).  The employees opposed the effort to force them out of court and into individual arbitrations, arguing that their right to file a collective action under the FLSA was a non-waivable, substantive legal right and that the arbitration agreements were invalid because they purported to waive that right.

Following a recent series of pro-arbitration U.S. Supreme Court decisions, the Eleventh Circuit found that the arbitration agreement’s waiver of each employee’s ability to participate in a collective FLSA action was legal and enforceable under the FAA.  The court noted that the FAA embodies a broad federal policy favoring arbitration agreements and seeks to relieve congestion in the courts by providing parties with an alternative method for dispute resolution that is speedier and less costly than litigation.  In accordance with this federal policy favoring arbitration, the Eleventh Circuit ruled that courts are obligated to enforce arbitration agreements as written absent a “contrary congressional command.”  Looking to the FLSA, the FAA, and other appellate court decisions across the country, the Eleventh Circuit held that even though the FLSA allows for collective actions to be brought, that right is not substantive, and it can be waived by employees – and it was in this case.

In an upcoming article in Troutman Sanders LLP’s Employment & The Law newsletter, we will discuss in detail the pros and cons of implementing mandatory arbitration agreements in the workplace.  Ultimately, it is a decision each employer should make (in consultation with a trusted employment lawyer).  This Eleventh Circuit decision in the Walthour case certainly is something important to consider as part of your company’s decision-making on using or not using mandatory arbitration agreements.

March 27, 2014   No Comments

Today’s the Deadline…Are You Ready? Step Five of Seven to Compliance with the New OFCCP Regulations

Today is the deadline for compliance with the first two steps of the new OFCCP regulations – which we discussed in our Steps One and Two blog post here.  We hope you are ready!  (You might want to call us if you are not.)

Assuming you are now in compliance with the first two steps, it is time to continue with Step Five.  This step must be implemented by the next time you develop an affirmative action plan after today.  However, we recommend implementing this step now, as explained below.

Step 5.  Take concrete steps to engage in outreach and recruitment activities and assess those activities.

While contractors have long been encouraged to work with third parties to recruit disabled individuals and veterans to their workforce, the new regulations clearly indicate that some of those efforts are now affirmatively required.  For example, contractors are now required to provide notification of their affirmative action policy to its covered subcontractors.  This was previously only recommended by the OFCCP.

In addition, we anticipate that the OFCCP will be asking for more information related to the specific organizations with whom the contractor has partnered in order to recruit veterans and disabled individuals to its workforce.  The OFCCP recently released a database where contractors can find such organizations.  Also, DirectEmployers, a nonprofit association of employers, is a great resource for providing job posting information to hundreds of organizations and also includes a list of disabled and veteran (as well as minority and female) focused organizations on their website.

So, now is the time to get serious about posting jobs with more than just the local one-stop career center.  Why?  Contractors will now be required to assess in writing each year the adequacy of their affirmative action efforts as well as document the actions taken.  In making the assessment, contractors must consider the percentage of their veteran hires and the percentage of their disabled workforce when compared with their veteran benchmarks and the seven-percent disabled goal.  We anticipate that if the benchmark or goal is not met, then the OFCCP will be asking what steps the contractor has taken to address the failure to meet the benchmark or goal.  In implementing this step, documentation is critical, as the new regulations require contractors to keep records of these outreach and recruitment efforts for three years.

Ultimately, this step is where the rubber meets the road.  Contractors will no longer be able to just say, “Well, we’ve been conducting outreach, but it just hasn’t worked.”  Now, it has to be documented, and doing the same things that failed in a prior year (or years) to help reach the goals set or required will not be enough.  Plus, you can ensure that the OFCCP will be asking for that documentation in your next desk audit, especially if the goals and benchmarks have not been met.  You not only need to have the documentation, you need it to show good faith efforts to achieve your goals.

March 24, 2014   No Comments

President Pushes for More Overtime

President Obama instructed the U.S. Department of Labor (DOL) yesterday to change regulations to expand the Fair Labor Standards Act’s (FLSA) overtime provisions, in an effort to provide time-and-a-half wages to more employees.  The President signed a memorandum instructing his Secretary of Labor Thomas Perez to “update” the DOL’s regulations regarding which employees are exempt from the FLSA’s coverage, and which employees are non-exempt, and thus must be paid time-and-a-half their regular wage rate for all hours worked beyond 40 hours in a week.  The White House also issued a “fact-sheet” on the issue.

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While it is not clear exactly what the DOL may do in response to the President’s direction, many feel that one likely step will be an attempt by the DOL to amend the FLSA’s regulations to raise the salary requirement employees must meet to qualify as an exempt executive, administrative or professional employee.  The current salary requirement is at least $455 per week, an amount established with the last set of DOL changes to the FLSA’s regulations back in 2004.  (Prior to 2004, the salary amount was $250, a number which had stayed constant since 1975.)

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March 14, 2014   No Comments

Two Weeks to Go…Are You Ready? Step Four of Seven to Compliance with the New OFCCP Regulations

The Department of Labor says that contractors must follow the new OFCCP regulations for any affirmative action plans that are developed after March 24, 2014.  Will you be ready to assess your company’s compliance with the new requirement of seven percent (7%) disabled employees in each job group?  Will you be able to track your hiring of veterans against the new hiring benchmark?  Have you thought about the new narrative language that will be needed?

To be prepared, you will need to first follow step four of seven to getting into compliance with the new OFCCP regulations.

Step 4. Create new affirmative action plans for veterans and the disabled.  This step essentially consists of four subparts.

  1. Data Collection Requirements.  Contractors must begin collecting various data relating to job postings, jobs filled, and disabled and veteran applicants and hires.  This data must be compiled each year as part of the annual plan update and maintained for three years.  The data will be used for assessing the effectiveness of the contractor’s affirmative action efforts (something we will discuss more in step five).
  2. Benchmarks for Hiring Veterans.  Contractors must either follow the OFCCP national hiring benchmark (currently eight percent (8%)) for veterans or create their own benchmark and document the basis for it.  This benchmark will be used to assess the effectiveness of the contractor’s affirmative action efforts.
  3. Goals for Disabled.  Contractors must establish a placement goal of seven percent (7%) for individuals with a disability in their workforce.  For contractors with 100 or more employees, this goal applies not only to their entire workforce, but also each particular job group.  This is a real game changer.  If you have not met your 7%, we expect the OFCCP will be asking probing questions about what affirmative action efforts you have taken to recruit individuals with disabilities.
  4. Revisions to Plan Narratives.  In connection with the new data collection requirements, the veteran benchmark, and the goal for the disabled, contractors will need to update the language in their affirmative action plans to address these new requirements as well as others, including new recommendations for reasonable accommodation procedures, updated language in the policy statement, new terms for veterans, and a new assessment of one’s affirmative action efforts.

When we present step 4 to clients as part of our implementation presentation (as we’ve been doing a lot of recently), this is usually when clients get really quiet and then someone asks, “Are you sure we are really a covered federal contractor?”  An understandable question, for sure.

Stay tuned, if you can bear it, for more to come in steps five through seven.

March 13, 2014   No Comments