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Obama Will Bring Change for Employers

Now that President Barack Obama has been sworn into office many expect to see more new workplace regulations in the upcoming months than at any time in the last two decades. This article discusses of some of the proposed legislation that could affect employers in the areas of civil rights (the Civil Rights Act of 2008), family and paid sick leave (including expansion of the Family and Medical Leave Act (FMLA) and the Health Families Act), and worker classification (the Independent Contractor Proper Classification (ICPC) Act).

The following bills were proposed in 2008 but not passed. By mid-January 2009, the bills had not been resubmitted to Congress for consideration in 2009 although they may be introduced later in the year. All three were supported by Obama in 2008 when he was a Senator and are issues he said he favors during his presidential campaign.

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Civil Rights Act of 2008
According to its sponsors, including President Barack Obama when he was a senator, the goal of the Civil Rights Act of 2008 (CRA) was to “strengthen accountability when civil rights and workers’ rights are violated.” Sponsors claim that “[r]ecent court decisions have weakened America’s civil rights laws in ways that Congress never intended . . . [and that this] legislation will ensure accountability for violations of our civil rights and fair labor laws and give individuals the right to challenge practices that have unjustified discriminatory effects based on race, color, national origin, disability, age or gender.”

The CRA proposed such sweeping pro-employee changes in employment law that even if only some of the measures are passed, consequences for employers could be dramatic. Among other things, the Civil Rights Act of 2008 would have:

  • removed caps on damages under Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act (ADA);
  • amended the Fair Labor Standards Act (FLSA) to allow for the recovery of compensatory and punitive damagesin addition to remedies currently available, including back pay, which can be doubled if your violation is found to be “willful”;
  • amended the Equal Pay Act to increase penalties and to allow the “bona fide factor other than sex” defense only if you can show that the factor was job- related and was actually used to further legitimate business purposes;
  • allowed disparate-impact claims under the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), and other statutes applicable to recipients of federal funds, using the same standard of proof applied in Title VII disparate-impact cases;
  • allowed recovery of monetary damages for harassment claims filed by individuals under the ADEA (and other statutes applicable to recipients of federal funds);
  • permited recovery of compensatory and punitive damages, attorneys’ fees, expert witness fees, and costs by an individual who is a “prevailing party”;
  • allowed the National Labor Relations Board (NLRB) to award back pay to undocumented workers for employee rights violations under the National Labor Relations Act (NLRA);
  • amended the Federal Arbitration Act to prohibit arbitration of employment disputes unless, after the dispute arises, the employee knowingly and voluntarily consents to submit the dispute to arbitration or the arbitration provision is part of a collective bargaining agreement;
  • required state programs and activities that receive federal funds to waive their sovereign immunity against claims for monetary damages under the ADEA, the FLSA, and the Uniformed Services Employment and Reemployment Rights Act (USERRA); and
  • permited a private right of action for disability discrimination against air carriers under the Air Carrier Access Act of 1986.

If enacted into law, these measures would potentially expose employers to increased liability and lawsuits.

Expansion of family, sick, and paid leave
Obama has said that more generous family leave is an essential part of his plan to “reclaim the American dream.” The Family and Medical Leave Act (FMLA) provides employees with up to 12 weeks (up to 26 weeks in certain circumstances) of unpaid, job-protected leave per year. Obama’s official campaign website sets forth the following goals with respect to expanding the FMLA:

  • cover businesses with 25 or more employees (currently the FMLA covers only business with 50 or more employees);
  • provide leave for eldercare needs;
  • allow parents up to 24 hours of leave each year to participate in their children’s academic school activities;
  • provide leave for employees to care for individuals who reside in their home for six months or more; and
  • allow leave to employees to address domestic violence and sexual assault.

In addition to expanding the FMLA, Obama supports proposed legislation that would expand workers’ rights to paid leave.

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Healthy Families Act
Although some employers already provide paid sick days, many do not. The Healthy Families Act (HFA) was sponsored in 2008 by Senator Ted Kennedy (D-Massachusetts) and co-sponsored by then Senator Obama.

The Act would have required employers with 15 or more workers to provide seven paid sick days to employees working 30 or more hours per week or 1,500 hours per year to care for their own or a family member’s medical needs. Currently, employers aren’t required to provide paid sick leave. Employees working fewer than 30 hours per week would have received paid leave on a prorated basis.

Advocates and opponents of the measure testified in February 2008 before the Senate Committee on Health, Education, Labor and Pensions.

Changes for worker classification
Obama, along with Senator Richard Durbin (D-Illinois), introduced the Independent Contractor Proper Classification (ICPC) Act in 2008. The goal of the bill was to reduce the misclassification of employees as independent contractors for employment tax purposes. Although the proposed legislation was aimed at the recovery of tax revenue, if passed, it would have imposed certain obligations on the U.S. Department of Labor (DOL) and thus might ultimately affect the classification of employees as independent contractors under federal wage and hour laws.

If enacted, it the bill would have:

  • eliminated the ban on the IRS issuing regulations or revenue rulings on employee/independent contractor status;
  • eliminated the “industry practice” defense (i.e., others in the industry classify certain types of employees as independent contractors);
  • directed the IRS to develop a process for workers to ask for an evaluation of their proper classification;
  • protected employees from retaliation and require employers to pay a misclassified employee’s attorneys’ fees;
  • directed the IRS to audit an employer if an employee requests an evaluation of his classification and the IRS finds that the employee was misclassified;
  • directed the IRS to inform the DOL of misclassification practices;
  • required the IRS and DOL to issue annual reports on misclassification and their efforts to curtail the practice;
  • required the DOL to conduct investigations in industries that IRS data show have high rates of misclassification for tax purposes;
  • required the DOL to track cases involving misclassification of independent contractors involving the Wage and Hour Division (WHL);
  • directed the DOL to provide information on any poster required under the FLSA explaining an individual’s right to challenge his status as an independent contractor;
  • required employers to notify an independent contractor of his federal tax obligations as an independent contractor, the labor and employment law protections that do not apply to independent contractors, and the right of the independent contractor to seek a classification determination from the IRS; and
  • required employers to retain a list of the independent contractors they have hired for the past three years.

Proponents of the law assert that it was created in response to various studies and reports indicating that many employees are misclassified as independent contractors. They argue that some studies have found that a significant percentage of employees are misclassified as independent contractors, especially in certain industries such as construction.

Bottom line
In anticipation of these substantial potential changes, you should conduct a self-audit of all employment-related practices and policies to ensure you are operating properly and in full accord with applicable law and carefully monitor new developments.

Evaluate your company’s policies and practices with the Employment Practices Self-Audit Workbook