About: Lisa Guerin

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Overtime, Independent Contractor Status on Regulatory Agenda for Department of Labor

A couple of weeks ago, the federal Department of Labor announced its regulatory agenda for the immediate future. The DOL does this twice a year, and the announcement indicates what its rulemaking and enforcement priorities will be.

The Wage and Hour Division will be busy in the coming months. According to the agenda, the DOL is looking at amending the Family and Medical Leave Act regulations to explicitly include same-sex spouses (following the Supreme Court’s decision in U.S. v. Windsor), and possible changes to child labor rules to clarify how old an employee must be to operate patient lifting equipment.

Two entries on the list follow directly from President Obama’s efforts to work outside of Congress to move his agenda forward: The DOL plans to propose rules raising the minimum wage for certain federal contractors to $10.10 an hour, and to consider revising the overtime exemptions for professional, administrative, and executive employees (the so-called “white collar” exemptions).

Finally, the DOL is continuing to look at problems of employee misclassification as independent contractors. in 2011, the DOL launched its “misclassification initiative,” intended to reduce misclassification and step up enforcement against employers whose “independent contractors” really should be classified as employees. As the DOL points out, this problem leads directly to reduced tax revenue to the state and federal governments. It also denies a range of benefits and protections (from minimum wage and overtime to family and medical leave and protections from discrimination) to the employees who are misclassified.

The DOL has already stepped up enforcement; check out the long list of press releases announcing these actions at its Employee Misclassification as Independent Contractors page. The DOL has also surveyed employees, to find out what they know about their rights and their status. In the regulatory agenda, the DOL proposes regulatory action to its record keeping rules, requiring employers to tell employees what their job status is (employee or independent contractor) and how their pay is calculated. There’s no timeframe or proposed “next steps” for this action, however. (In fact, the regulatory agenda says “next action undetermined.”) But it’s clearly a continuing enforcement priority for the DOL.

Noncompete Madness

contractHere in California, we don’t have to give much thought to noncompete agreements: contracts by which, typically, an employee agrees not to go work for a competitor or start a competing business for a certain period of time after leaving a job with the employer. The reason? These contracts are illegal in California. California law plainly states that a noncompete is an impermissible effort to limit the employee’s ability to earn a living in his or her chosen field. California employers have tried to get around this prohibition in different ways over the years, without success.

An article in the New York Times illustrates how far employer overreach can go in states that don’t protect employees in this way. The article (“Noncompete Clauses Increasingly Pop Up In Array of Jobs“) describes noncompete arrangements mostly in Massachusetts; the employees asked to sign them include a hairdresser, a pesticide sprayer, an intern at an electronics firm, and a camp counselor. And, the article explains that some employees are driven out of the workforce altogether for the length of the noncompete, because they fear being sued if they take a job in their field near their home. (Believe it or not, the hairdresser actually was sued for going to work for a nearby salon. And he lost.)

Employers use noncompetes for a variety of reasons. Many have a legitimate concern with protecting their trade secrets. However, some employers cited in the article took a broader view of their rights. Because they had invested in employee training, for example, or had a particular business model that was successful, these employers felt entitled to avoid giving these assets to competitors. The problem is that, in these cases, the “assets” are people, with careers they have invested in, bills to pay, and homes they don’t want to leave. Forcing them to change fields, move, or spend a stint unemployed in order to get a job is problematic at best.

A spokesperson for a group that opposes proposed protections for Massachusetts employees in this area said that noncompetes are working just fine, “to the seemingly mutual satisfaction of employers and individuals.” That seemingly says a mouthful: What interest would an employee possibly have in signing a noncompete, significantly limiting his or her rights in the future? Typically, employees sign them only because they are required to do so in order to get or keep a job. These agreements offer no benefit to employees, only to employers. This doesn’t make them illegal (in most states), but it should at least change the terms of the dialogue a bit.

If you’re faced with a noncompete agreement — or your company plans to require employees to sign one — check out our article Understanding Noncompete Agreements.

How Does COBRA Work With Obamacare?

cobra-240x203Last week, the federal Department of Labor issued proposed regulations dealing with COBRA notices. The regulatory proposal is quite uninteresting: Basically, the administration is removing the model notices from the Code of Federal Regulations and providing them instead on the Department of Labor’s website. This allows the notices to be changed much more quickly and easily, without resort to the federal rulemaking process.

The Labor Department also posted the new model versions of these notices: The general notice employees receive when they sign-up for employer-provided healthcare, and the election notice employees receive when a qualifying event occurs and they have to actually decide whether or not to continue their health insurance through COBRA. (You can find links to both new versions at the DOL’s COBRA Continuation Coverage page.)

The changes to the notices mostly involve Obamacare: specifically, the interface between Obamacare and COBRA. The notices explain that employees (and other beneficiaries) who are losing their employer-provided coverage may continue that coverage for at least 18 months by paying the full premium, pursuant to COBRA. However, employees also have the option of foregoing COBRA coverage and instead buying insurance through the Health Insurance Marketplace.

Ordinarily, anyone who wants to buy insurance on the Marketplace must wait for an open enrollment period. One just closed; the next one doesn’t start until mid-November. So what if you get laid off between now and then? The new notices explain that there is a 60-day “special enrollment” period triggered by losing job-based coverage. In other words, a laid-off employee has 60 days to choose a new health plan through the Marketplace; the same 60-day period applies to choosing COBRA coverage.

The new election notice provides some good answers to questions about switching coverage, too:

  • If you choose COBRA coverage, but decide you want to buy through the Marketplace instead, you may do so during the initial 60-day special enrollment period. If you miss this deadline, you’ll have to wait until open enrollment rolls around, just like everyone else (unless you have a second event that triggers a special enrollment period, like having a child).
  • If you choose Marketplace coverage, but decide you should have taken advantage of COBRA, you are out of luck. Once you decline COBRA coverage, it’s gone.
  • Once your COBRA coverage ends, you get another 60-day special enrollment period in which to sign up for Obamacare.

Where Do Employers Get Sued the Most?

USAccording to a very interesting article in the Insurance Journal, employers are most likely to be sued by current or former employees in California, Illinois, Alabama, Mississippi, and the District of Columbia. I’m sure no one is surprised by that first entry on the list: Our great Golden State is famous for its employee-protective laws. The District of Columbia and Illinois both offer plenty of workplace protections as well. In fact, Illinois might be more progressive than California on this score. For example, it recently became the first state (I believe) to prohibit job discrimination against the homeless, by making it illegal for employers to make job decisions based on the fact that an employee does not have a permanent address or uses the address of a shelter or social service provider as a mailing address.

The article features quotes from some lawyers, who pointed to two reasons states made the list: state laws that are very protective of employees (and apply to smaller employers) and state laws that don’t cap damages available to employees (as federal discrimination laws do, for example). All well and good, and quite explanatory of California, Illinois, and DC. But what about Alabama and Mississippi? These states don’t have their own comprehensive discrimination laws (which leaves aggrieved employees to sue under federal law, under which those limits on damages apply). In case you were thinking employers there are facing big wage and hour class action cases, they might be. But only if employees are suing under the federal Fair Labor Standards Act, because Alabama and Mississippi also don’t have their own minimum wage or overtime laws. Or their own laws requiring meal and rest breaks. Or state laws requiring family and medical leave.

Of course, employees could be suing under federal laws governing these topics. But that’s true in all 50 states. The article doesn’t explain — and I have no easy answer for — why employees sue more often in Alabama and Mississippi. But if you’re wondering what grounds you might have for a lawsuit in your state, I’ve got an assist for you: Check out our 50-state (plus DC) set of articles over on www.wrongfulterminationlaws.com on state wrongful termination laws.

Is it Retaliation to Cut Employee Hours to Avoid Obamacare Mandate?

pillsAfter a couple of delays, the employer mandate portion of Obamacare is now scheduled to take effect at the beginning of 2015. At least, a partial mandate is scheduled to start then for some employers. Companies with at least 100 employees will have to cover at least 70% of their full-time employees by then. At the beginning of 2016, the mandate will kick in for companies with 50 to 99 employees. And larger employers will have to cover at least 95% of their full-time workforce.

Because a full-time employee is one who works at least 30 hours a week, there has been a lot of speculation that employers will cut employees hours to avoid having to provide health insurance. In fact, it has gone beyond speculation: A number of major employers, both public and private, have announced that they will change employee schedules to avoid having to comply with the mandate. Many more have quietly made the same decision, perhaps not advertised in public pronouncements, but made clear to their managers and employees in workplace memos, job descriptions, and policy changes. (Check out a list, along with links to supporting documents, in ObamaCare Employer Mandate: A List of Cuts to Work Hours, Jobs, from Investor’s Business Daily.)

A couple of weeks ago, the lawyers started speaking up. According to an article in the San Francisco Daily Journal (available only by subscription — sorry!), management lawyers said they would be concerned if a client came to them proposing to cut hours to avoid the mandate. The reason? The law includes a retaliation provision, prohibiting employers from taking adverse action against employees because they have health insurance.

Some open questions were identified in the article, including whether the retaliation prohibition protects employees whose hours are cut now, well in advance of the mandate, and whether it offers any protection to new employees who are hired at less than 30 hours a week. Like much else about Obamacare, these issues will have to be resolved in the courts.

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