The nation's focus turns to Cleveland (and lots of snow)

Today's snowstorm here in Cleveland notwithstanding, there will be a Democratic debate tonight. In honor of the debate, I suggest that anyone who has an interest on the candidates' position on labor and employment issues check out Presidential Politics – Predictions for the Workplace, by John Phillips. Even though the article was written almost two months ago, it's over-inclusive in its coverage of candidates. Because Senators Obama and Clinton have not changed their positions, the piece is as timely as to them as it was when is was written. Employment law issues have not gotten a lot of play in the campaign, and John's piece is the best primer on the subject I've come across.

There really is not all that much of a fundamental difference in the two candidates' positions on labor and employment law issues. If McCain (the presumptive Republican nominee) wins the general election, we can largely expect a maintenance of the status quo. If, however, either Senator Obama or Senator Clinton becomes our next POTUS, then it safe to assume that we will see some combination of the initiatives presented in the Civil Rights Act of 2008, the Fair Pay Restoration Act, the ADA Restoration Act, the Employment Non-Discrimination Act, and the Employee Free Choice Act. Just one more factor to consider as everyone goes to the polls on March 4 and in November.

ADA Restoration Act unnecessarily seeks to broaden the definition of "disability"

An editorial in this morning's New York Times calls for Congress to pass legislation to undo recent Supreme Court precedent limiting the reach of the employment discrimination laws. By way of example, the editorial points to the Fair Pay Restoration Act and the Civil Rights Act of 2008, both of which are currently pending in Congress.

The Americans with Disabilities Restoration Act of 2007 is another currently pending bill in the same vein. It would amend the ADA to:

1. redefine "disability" as a physical or mental impairment, a record of a such impairment, or being regarded as having a such impairment, eliminating the requirement that it substantially limit a major life activity;
2. in determining whether an individual has an impairment, prohibit any consideration of the impact of any mitigating measures the individual may be using or whether any impairment manifestations are episodic, in remission, or latent;
3. consider actions taken because of an individual's use of a mitigating measure to be actions taken on the basis of a disability; and
4. shift the burden of proving that one is a "qualified individual with a disability" from the employee to the employer, as an affirmative defense.

This bill would radically alter the order of proof in ADA cases, and overturn a more than a decade of Supreme Court precedent on the definition of "disability."

George Lenard, at his Employment Blawg, asks the question, Does the ADA Need "Restoration"? George's opinion:

There have been some cases in which the definition of "disability" has been construed too narrowly, preventing individuals with quite substantial impairments from having their day in court. But the definition as it now stands is a sound one, and the Supreme Court cases were correctly decided under this definition.… But vastly more people would be within the "protected class" of individuals with disabilities, so increased litigation would be a given, including not only accommodation cases, but also ordinary disability discrimination claims (e.g., discharges allegedly due to trivial impairments). Even if employers would fare relatively well, litigation costs would rise. This is a legitimate concern.

George is spot on with his take on this bill and its likely effects. Let me add one more thought, that largely the current law takes care any concerns over the perceived narrowness of the definition of "disability." Remember, the ADA does not just protect those who meet the definition of having a disability, but also those who are "regarded as" disabled by their employers. As recently pointed out by the 6th Circuit in Gruener v. The Ohio Casualty Ins. Co.:

The ADA’s regarded-as-disabled definition of disability … protects employees who are "perfectly able" to perform a job, but are "rejected … because of the myths, fears and stereotypes associated with disabilities." Accordingly, it applies when "(1) [an employer] mistakenly believes that [an employee] has a physical impairment that substantially limits one or more major life activities, or (2) [an employer] mistakenly believes that an actual, nonlimiting impairment substantially limits one or more [of an employee's] major life activities." Either application requires that the employer "entertain misperceptions about the [employee]." (quoting (quoting Sutton v. United Air Lines, 527 U.S. 471, 489–90 (1999)).

Indeed, just last week the conservative 4th Circuit decided Wilson v. Phoenix Speciality, upholding a $200,000 verdict in favor of an employee who was regarded as disabled because of his medically controlled Parkinson's disease. The ADA already protects those who need to be protected. Expanding the coverage of those who qualify as truly "disabled" as envisioned by the ADA Restoration Act will only serve to undermine the original spirit of the law, the elimination of the misconceptions and stereotypes about the ability of the disabled to fairly compete for jobs.

President Bush signs bill amending the FMLA

President Bush has signed the National Defense Authorization Act that he had previously vetoed. Its changes to the FMLA go into effect immediately.

As amended by the NDAA, the FMLA now permits a "spouse, son, daughter, parent, or next of kin" to take up to 26 workweeks of leave to care for a "member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness." It also permits an employee to take FMLA leave for "any qualifying exigency ... arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation." The DOL will define "qualifying exigency" in subsequent regulations.

According to the DOL, employers are required to act in good faith in providing FMLA leave under these circumstances while it works to prepare comprehensive guidance on rights and responsibilities under this new legislation.

The Department of Labor's website has available for download the full text of the FMLA, as amended by the NDAA.

Congress introduces the Civil Rights Act of 2008

20 Democratic Senators (including Clinton and Obama) have sponsored the Civil Rights Act of 2008. It's basically a laundry list of pro-employee changes to virtually every federal employment statute. For example, it proposes to:

• eliminate damage caps under Title VII and the ADA.
• limit the "bona fide factor other than sex" defense under the Equal Pay Act.
• add compensatory and punitive damages to FLSA claims.
• amend the Federal Arbitration Act to prohibit clauses requiring arbitration of federal statutory claims.
• allow winning plaintiffs to recover expert fees.
• give the NLRB authority to award back pay to undocumented workers.
• require that ADEA disparate impact claims be analyzed the same as Title VII claims.
• condition states' receipts of federal funds on waivers of sovereign immunity under various federal employment statutes.

This bill has zero chance of becoming law under the current administration. It gives insight, however, into the labor and employment platform of whomever becomes the Democratic candidate for President. These changes would potentially be devastating for businesses litigating employment claims, and is one issue to keep in mind as you go the polls now and in November. [Hat tip: Workplace Prof Blog]

Take two in FMLA expansion for military families

Both the House and Senate have again overwhelmingly signed the National Defense Authorization Act that President Bush vetoed at the end of last year. It now sits on President Bush's desk where he again is expected to sign it. While I've been burned on this once before, I am optimistic that the President will sign the bill this time. A White House spokesman has said that President Bush is expected to sign the revised legislation. The bill will expand the FMLA to provide FMLA leave because of exigencies related to active military duty, permit an eligible employee to take up to 26 weeks of FMLA leave to care for an injured servicemember, and adds "next of kin" to the family members entitled to take such FMLA leave.

[Hat tip: The FMLA BLog]

Congress expected to revisit expanded FMLA leave for military families

This morning's New York Times is reporting that Congress is expected to quickly revisit the National Defense Authorization Act that President Bush vetoed at the end of last year. The House and Senate overwhelmingly passed the legislation, which would, among many other things, amend the FMLA and provide up to 6 months of leave to family members (i.e., spouse, son, daughter, or parent) of combat-injured service members to care for their loved ones. The President vetoed it out of a concern that a provision in the bill could lead to legal claims by victims of Saddam Hussein's government against Iraqi assets held in U.S. banks. The Times quotes Congressional aides, who say that Congress will likely send the bill back to the Armed Services Committee, where the disputed provision can quickly be corrected. Congress hopes to have the measure brought back for a final vote by the end of the week. These issues should not affect the FMLA amendments in the bill, and with the amendments, President Bush is expected to sign it.

Ohio to prohibit discrimination based on "military status"

I try to stay on top of all issues that impact Ohio employers, but this one simply fell beneath my radar. On December 20, Governor Strickland signed into law House Bill 372 – The Ohio Veterans Package.

Of importance to employers, the law, which will go into effect on March 18, 2008, adds "military status" to the list of classes protected from discrimination in employment by Ohio Revised Code chapter 4112. "Military status" means a person's status in "service in the uniformed services," which includes active duty, active duty for training, initial active duty for training, inactive duty for training, full-time national guard duty, and performance of duty or training by a member of the Ohio organized militia, in addition to any period of time a person is absent from work for a fitness for duty exam for such service.

Ohio now joins a handful of other states in which it is illegal to discriminate based on military status. This law does will not affect the rights that employees already enjoy under the federal Uniformed Services Employment and Reemployment Rights Act (USERRA). Now is as good a time as any to educate your supervisors and managers that "military status" will be joining the list of employment law no-nos in Ohio, alongside race, sex, age, disability, religion, national origin, color, and ancestry.

(Hat tip to John Phillips' Word on Employment Law.)

Deconstructing the Ohio Healthy Families Act

Last week a colleague asked me for my opinion on the proposed Ohio Healthy Families Act that is now pending in the state legislature. I figured I'd share it with the world. I think that the OHFA is largely a political agenda that, at the end of the day, will do nothing more than create yet another avenue for employees to sue their employers, while at the same time creating an administrative mess for Ohio businesses. Sick Days Ohio, the group lobbying for this bill, estimates that 2.2 million Ohio employees cannot earn paid sick days. I have no idea where they get their numbers from, but it seems like a gross exaggeration to me. According to the 2000 census, Ohio has approximately 6.7 million people of working age. I find it hard to believe that one-third of all Ohio workers do not have access to paid days off.

Essentially, the OHFA will grant all employees working for companies with 25 or more employees 7 paid days off per year for (1) their own physical or mental illness, injury or medical condition, (2) their own professional medical diagnosis or care, or preventive medical care, and (3) the same for an employee's child, parent, or spouse. Employees who work less than 30 hours per week or 1,560 total hours per year will receive a pro rated amount of paid time off. Sick leave will begin to accumulate immediately, but employees will not be able to use it until they have been employed for 90 days. The paid sick leave must accrue at least monthly, and except for the initial 90 days of employment, employees will be able to use it as it is accrued. Employers will not be able to prohibit employees from carrying over up to 7 days of unused paid time off per year.

Similar to the FMLA, but without the FMLA's level of specificity, the OHFA will also allow for the use of incremental (i.e., less than a full day) time off, certification by a health care professional when an employee is out for more than 3 consecutive work days, an anti-retaliation provision, and a private right of action for aggrieved employees. It also will forbid employers from counting the use of paid sick leave under a no-fault attendance policy. It is unclear if this prohibition applies only to paid leave under this statute, or any paid leave granted by an employer. Finally, it will require employers to keep records documenting hours worked and paid sick leave taken by employees for a period of 3 years.

Proposed O.R.C. 4114.07(B) is what I believe to be the saving grace for most employers, and why I think the OHFA will not result in monumental practical changes for the vast majority of companies that already provide paid time off. That section provides: "An employer with a leave policy providing paid leave options shall not be required to modify such policy, if such policy offers an employee the option at the employee’s discretion to take paid leave that is at least equivalent to the sick leave described in this section." As I read that section, and this is where my colleague and I differ, if a company has a leave policy that already provides for at least 7 paid sick days, it will not have to grant any additional paid leave.

The limited practical effect of this legislation notwithstanding, the cons of the OHFA far outweigh its pros. First and foremost, that last thing that businesses want is another statute under which employees will be able to sue, especially when it provides for treble damages and attorneys fees. Take a look at proposed O.R.C. 4114.10(C)(2): "No employer shall discharge or in any manner discriminate against any employee for opposing any practice made unlawful by this Act, including ... using paid sick leave taken pursuant to this Act as a negative factor in an employment action, such as hiring, promotion, or a disciplinary action." "Negative factor" is far too lenient of a standard, and will hamstring employers from taking action against any employee who is out for even a day with an illness.

There are other serious gaps in the statute. For example, the OHFA states that it covers all employers with 25 or more employees. If a company has 1,000 employees nationwide, but only maintains one Ohio facility with 15 employees, will the OHFA apply to that employer? What does "physical or mental illness, injury or medical condition" mean? What type of certification by a health care professional will support an extended leave? Can an employer dispute such a certification and obtain a second opinion?

The legislature, and if necessary, Ohio's voters, should take a long, hard look at these serious deficiencies in the OHFA, and should not merely knee-jerk vote in its favor because paid time off is viewed by most employees (and most of us are employees) as a "good thing." If this statute becomes law in its current form, it will take a herculean effort by the director of commerce to draft clear and comprehensive rules and regulations that make this law workable for businesses, instead of leaving myriad unanswered questions for the courts to sort out at the expense of those companies who will have to defend their individual interpretations.

President Bush expected to veto FMLA expansion

In what can only be described as a surprising turn of events, and in a lesson that would make any grade school civics teacher proud, President Bush is expected to use a pocket veto to kill the National Defense Authorization Act for Fiscal Year 2008. That bill includes an expansion of FMLA leave rights for the families of wounded service members. A couple of weeks ago, I reported that the President would be hard pressed to veto a bill that authorized $696 billion in military programs. Now, as the New York Times is reporting, the White House has stated that the President will veto the bill. At issue is one specific section over which the Iraqi government is concerned that Iraqi assets in American banks could be vulnerable to claims from victims of Saddam Hussein.

Given the overwhelming majority this bill passed both the House and Senate, one could assume that these issues will be resolved after Congress resumes in the new year. I'm done making predictions about this legislation, however, after my last prediction turned out to be wrong. All I can is to watch this space for further updates about this potential expansion of FMLA rights.

Hat tip to the Connecticut Employment Law Blog.

Ohio Supreme Court upholds constitutionality of tort reform legislation

Arbino v. Johnson & Johnson, decided today by the Ohio Supreme Court, upheld the constitutionality of legislation that caps the amount of non-economic and punitive damages available in Ohio tort actions. The at-issue legislation applies to all "tort" claims except medical, dental, optometric, and chiropractic claims, and civil actions for damages for a breach of contract or another agreement. There is no exception for employment-related claims, such as intentional infliction of emotional distress, defamation, or wrongful discharge public policy claims.

The tort reform statute caps non-economic damages at the greater of $250,000, or 3 times the economic loss, to a maximum of $350,000 for each plaintiff or $500,000 for each occurrence that is the basis for the claim. There is no statutory cap for economic losses. Punitive damages are capped at 2 times the total amount of compensatory damages. However, for small employers (5o0 or less employees for manufacturing companies, and 100 or less employees for all others) and individuals, punitive damages are capped at the lesser of 2 times the total compensatory damages, or 10% of the small employer's or individual's net worth measured at the time the tort was committed, up to a maximum of $350,000.

No court has yet to rule whether this tort reform legislation specifically applies to statutory employment discrimination claims. While there is a clear distinction between common law tort claim, and statutory claims, one could certainly argue that discrimination claims, which are claims for harm to the person, are tort claims covered by the statute. Most likely, however, these claims are not covered by this tort reform because of their statutory nature. Regardless, this case marks another milestone in what has become a very business-friendly Supreme Court.

House passes expansion of FMLA for military families

By an overwhelming vote of 370-49, the House yesterday approved legislation that would, among other things, expand FMLA leave rights for the families of wounded service members. President Bush will be hard-pressed to veto a bill that also authorizes $696 billion in military programs. If enacted, the legislation will amend the FMLA and provide up to 6 months of leave to family members (i.e., spouse, son, daughter, or parent) of combat-injured service members to care for their loved ones. Click here for the text of section 675 of the National Defense Authorization Act for Fiscal Year 2008.

Hat tip to The FMLA Blog.

Congress debates legality of English-only rules

In June, I wrote that under the EEOC's regulations, English-only workplace rules are presumptively illegal unless required by business necessity. See English-only workplaces spark lawsuits. The debate over the appropriateness of these regulations has now reached the floors of both houses of Congress. Conservative lawmakers were spurred to action after the EEOC sued the Salvation Army over the termination of two Hispanic employees for speaking Spanish while sorting clothes. In April, Republican Senator Lamar Alexander, with the support of three Democrats, attached an English-in-the-workplace provision to the EEOC budget bill. That bill, which passed the Senate in June, would make it unlawful for the EEOC to bring lawsuits challenging English-only workplace rules. In the House, meanwhile, Hispanic members narrowly won a vote in July to reject a similar provision. Last week, however, the House took a non-binding vote of 218-186 urging House negotiators on the underlying budget bill to accept Alexander's language. Meanwhile, Speaker Nancy Pelosi has promised that Alexander's English-only provision will be killed, and House-Senate negotiations on the underlying bill have been put off indefinitely. Fox News quotes Senator Alexander: "One way to make sure that we have ... a little more unity that is our country's greatest accomplishment is to make certain that we value our common language.... And that we not devalue it by allowing a federal agency to say that it is a violation of federal law for an employer in America to require an employee to speak English on the job."

While Congress and the EEOC hash out these issues, employers should tread lightly if considering implementing an English-only rule. Such policies should only extend as far as necessary to reach the articulated business reason, and employment counsel should be consulted to evaluate whether the policy is not discriminatory as written or as applied.

House approves law to protect gay workers

35 Republicans joined 200 Democrats yesterday to pass the Employment Non-Discrimination Act of 2007, which falls short of the 280 total votes needed to override a likely Presidential veto.

The Act grants broad protections against discrimination in the workplace for gay men, lesbians, and bisexuals, making it illegal for employers "to fail or refuse to hire or to discharge any individual, or otherwise discriminate against any individual with respect to the compensation, terms, conditions or privileges of employment of the individual, because of such individual's actual or perceived sexual orientation." It would put sexual orientation on the same footing as race, sex, religion, national origin, ancestry, age, and disability under the federal employment discrimination laws.

The version that passed the House did not contain measures to extend similar protections on the basis of gender identify, which would have included transsexual and transgender individuals. A broad exemption for religious organizations has also been written into the latest version of the Act.

Today's New York Times is reporting that Senator Edward Kennedy said he would quickly introduce a similar bill in the Senate, and that some Senate Republicans are saying that it could pass early next year if worded properly (whatever that means). Opponents of the bill claim that it will make it impossible to operate a business without having to worry about being accused of discriminating against someone based on their perceived sexual orientation.

While this blawg definitely has a pro-employer spin, it is hard to say in 2007 that it is acceptable to condone intentional discrimination of an innate characteristic such as sexual orientation. I don't intend to get into a debate about whether sexual orientation is a matter of genetics or personal choice. I frankly have no idea, and really don't care one way or the other. The point is that sexual orientation is the one characteristic against which discrimination is still generally allowed and accepted. By the same token, I understand the impracticalities of extending the same protections to gender identity. A company should not be forced to accept a man dressed in drag if that is not the image its wants to project, or if it think such an image will harm its bottom line by driving away business or customers.

The full text of the Employment Non-Discrimination Act passed by the House is available here.

OCRC approves new maternity leave regulations

As predicted, today's Cleveland Plain Dealer reports that the Ohio Civil Rights Commission approved its new maternity rules that guarantee 12 weeks of leave for all pregnant employees of companies with 4 or more employees. 1 of the OCRC's 5 members voted against the new regulations. The proposal will now go the legislature's Joint Committee on Agency Rule Review, which will consider whether the OCRC overstepped its authority in enacting the new regulations. That Committee has no power to approve or reject the rules, but can merely recommend to the legislature that it invalidate improperly enacted rules. The new rules could go into effect by year's end, although business groups vow to lobby the legislature to invalidate them. Interestingly, yesterday's Plain Dealer reported that the rules did not spark much response from businesses prior to its approval.

For prior posts on this issue, see OCRC to vote on new maternity leave regulations, OCRC to vote on new maternity leave regulations - part 2, and The more things change the more they stay the same.

OCRC to vote on new maternity leave regulations - part 2

One short follow-up to this morning's post on the new OCRC maternity leave regulations. The USA Today article I linked to this morning talked about the rise of the "sandwich generation" — people who care both for children and an aging relative. This notion will have even greater meaning in Ohio if all employers have to provide 12 weeks of maternity leave to all employees. Take for example a pregnant employee who lawfully takes 12 weeks of FMLA leave during a year to care for a sick parent, and then in the same year gives birth. That employee would be entitled to an additional 12 weeks of leave under Ohio's new proposed regulations. Thus, pregnant women would receive double benefits. One modification to the hypothetical, however, illustrates the potential fundamental unfairness in the new regulations. Instead of the employee being a pregnant woman, let's suppose the employee is a man with a pregnant wife. If that man takes 12 weeks of leave to care for a sick parent, he would not be able to take even 1 day of extra leave for the birth of his child, and his employer would coldly have the right to terminate him in that situation. Everyone should be concerned about the potential disparities in implementing OAC 4112-5-05(G), both in its current and amended forms, and the potential for sex discrimination claims brought by male employees who are denied the same benefits as their female counterparts.

OCRC to vote on new maternity leave regulations

Over the summer I reported on the Ohio Civil Rights Commission's proposed amendments to its pregnancy discrimination regulations, Ohio Administrative Code 4112-5-05(G), which would extend 12 weeks of guaranteed unpaid maternity leave virtually to all employees, not just those covered by the FMLA. See The more things change the more they stay the same, and OCRC appears to bend on pregnancy leave regulations. Now, after three months of inactivity on this issue, it appears that the OCRC is finally ready to act on these regulations. Today's Cleveland Plain Dealer is reporting that the OCRC will consider the new regulations today (see Ohio may expand maternity leave rights to all moms. As reported, the change would supersede the federal FMLA by extending guaranteed pregnancy leave to Ohio employees no matter how long they've worked at a company, to part-time workers, and to anyone at a company with at least four employees. As revealed by the text of the proposed amendment, the OCRC resisted lobbying by business groups to lessen the amount of available leave from 12 weeks to 8 weeks. It is expected that the OCRC will approve these regulations. The final step before they would go into effect is approval by a legislative subcommittee, which would probably happen fairly quickly. Once enacted, Ohio would join 18 other states that have granted maternity leave beyond that guaranteed by the FMLA.

Coincidentally, today's USA Today has an article on the growth of family responsibility discrimination ("FRD") lawsuits. While I still believe that the OCRC's new regulations do not substantively change the law, they will increase awareness about the rights of employees of small business to pregnancy-related leaves of absence. That awareness certainly will not do anything to slow down the trend of FRD lawsuits against Ohio businesses. Now is as good a time as any for all companies to review their maternity leave policies to ensure that they provide for 12 weeks of leave, so that new policies can be put in place if needed.

Ohio pushes to be on the forefront of paid sick leave

This morning's Columbus Dispatch reports that supporters of the proposed Ohio Healthy Families Act (a union-led, statewide coalition) have collected the required 140,000 signatures to put the statute before the General Assembly when it begins its 2008 session in January. If the legislature fails to act within 120 days, supporters could collect another 120,683 signatures to submit the issue to voters in the November election.

The proposed law would require all companies with at least 25 employees to give employees who work at least 30 hours a week 7 paid sick days a year. Part-time workers would receive a prorated number of paid days off. Employees would be able to use the sick days for themselves or to care for a child, parent, or spouse, and for physical and mental illnesses, injuries, other medical conditions, and preventative care. Employees would also be able to carry over a maximum of 7 unused sick days from year to year. The proposed law mirrors the FMLA on issues such as notice, medical certifications, and anti-retaliation.

While this law will clearly impact those small businesses that currently do not provide for any paid leave, even those employers who already provide paid sick leave should be concerned about this proposal. It will make it harder to monitor and enforce attendance policies, provide a potential disincentive for employees to return from sick leaves, and create a new cause of action employers will have to defend against. Additionally, the potential of a November 2008 ballot initiative adds intrigue to this issue. Will a liberal issue such as paid sick leave draw more Democrats to the polls and help carry Ohio for that party in the Presidential election? Does that risk create an incentive for the Republicans to act on this initiative in January? This law would put Ohio out in front of the curve on this issue, as it would be only the 4th state to enact a paid leave of absence law, fairly progressive for a state that is not known as such.

Click here for the full text of the Ohio Healthy Families Act.

Stripping independent contractor protections

Today's New York Daily News reports on the filing of a class action lawsuit against a chain of gentlemen's clubs. The lawsuit challenges the club's practice of skimming 10 cents off every dollar the dancers earn from a lap dance, paying less than minimum wage, and cheating employees out of overtime. The article quotes one of the club's dancers, "We're independent contractors. If a girl doesn't like it, she can go somewhere else." Another girl added, "I had no idea it was happening, I thought they were taking out taxes and stuff like that." (Insert your own joke here). The first girl is correct. If the dancers are independent contractors, then the club most likely has no liability, and certainly has no liability for any minimum wage and overtime violations. The wage and hour laws only apply to employees; they do not reach independent contractors.

If Senator Barack Obama has his way, though, the scope of who qualifies as an independent contractor will narrow. The Senator introduced the Independent Contractor Proper Classification Act of 2007. Currently, Section 530 of the Internal Revenue Code has a safe harbor for employers who have classified workers as independent contractors. That safe harbor requires the IRS to excuse misclassifications and allow an employer to continue reporting employees as 1099 independent contractors if the employer (1) has been treating similarly situated workers as independent contractors, (2) has been consistently reporting the workers as independent contractors to the IRS and has been issuing 1099s to the workers, and (3) has a reasonable basis to classify employees as contractors. An employer has a reasonable basis if it relied on a long-standing practice of a significant segment of the industry or relied on a revenue ruling or court decision. The bill seeks to amend Section 530 by requiring employers to reclassify workers that had been misclassified as independent contractors, and by prohibiting employers from relying upon industry practice as a justification for misclassifying employees.

Independent contractor classifications have not necessarily been on the Department of Labor's radar up to now. The enforcement provisions of the Act, would place employee classifications squarely in the DOL's cross hairs. The Act directs the IRS to develop a process for workers to request an evaluation of their classification, requires the IRS to inform the DOL of discovered misclassification practices, and requires the DOL to conduct investigations in industries with high misclassification rates. The Act would also require each employer to notify any independent contractors of their federal tax obligations, that labor and employment law protections that do not apply to them, and their right to seek a classification determination from the IRS. Finally, the Act safeguards against employer retaliation and provides for the payment of attorney's fees to employees who successfully challenge their classification.

As with most other Democratic legislative initiatives coming out of the current Congress, it is unlikely the President would sign this bill into law even if Congress were to pass it. Nevertheless, the Independent Contractor Proper Classification Act is another good reminder that companies should not classify a worker as an independent contractor without first considering all of the risks, consulting with employment counsel, and putting in place a written agreement outlining the terms of the relationship.

Federal Judge indefinitely blocks Social Security "No Match" Rules

A California federal judge yesterday placed an indefinite hold on the Bush Administration's proposed rules for the handling Social Security "no match" letters. The rules would have required employers, upon receipt of a no match letter from the SSA to either verify the offending employee's immigration/ citizenship status or terminate the employee. Today's New York Times does a nice job summarizing the judge's order and the fall out from it:

The judge, Charles R. Breyer of the Northern District of California, said the government had failed to follow proper procedures for issuing a new rule that would have forced employers to fire workers if their Social Security numbers could not be verified within three months. Judge Breyer chastised the Department of Homeland Security for making a policy change with "massive ramifications" for employers, without giving any legal explanation or conducting a required survey of the costs and impact for small businesses.... If allowed to take effect, the judge found, the rule could lead to the firing of many thousands of legally authorized workers, resulting in "irreparable harm to innocent workers and employers." ...

Some conservative lawmakers who argue for vigorous enforcement of the immigration laws as a priority said they were outraged by the judge’s ruling. "What part of 'illegal' does Judge Breyer not understand?" asked Representative Brian P. Bilbray, Republican of California and chairman of the House Immigration Reform Caucus. "Using a Social Security number that does not belong to you is a felony. Judge Breyer is compromising the rule of law principles that he took an oath to uphold." ...

Judge Breyer found that the Social Security database that the rule would draw upon was laden with errors not related to a worker’s immigration status, which could result in no-match letters being sent to legally authorized workers. "There is a strong likelihood that employers may simply fire employees who are unable to resolve the discrepancy within 90 days," even if they are legal, he wrote.

This decision indefinitely blocks the new rules until the court conducts a trial sometime next year and reaches a final decision. It is unlikely, however, that Judge Breyer will change his mind. Most likely, the Bush Administration will continue to push this issue through trial and into the appellate courts. A Democratic Administration in 2009, however, would almost certainly bring an end to this cause.

Federal Judge blocks No-Match Rules

The San Francisco Chronicle is reporting that a U.S. District Court Judge Maxine Chesney has issued a nationwide Temporary Restraining Order blocking, at least until October 1, the Department of Homeland Security's recently enacted rules that require employers to terminate undocumented workers. I've previously detailed the new regulations, which specify the steps employers should take upon receipt of a no-match letter from the Social Security Administration. The judge has indicated that to save the regulations the government will have to present evidence showing a connection between a no-match letter and "a reasonable inference that the person is here illegally." The AFL-CIO, which brought the lawsuit, has argued that past experience with no-match letters shows that they are often sent mistakenly because of clerical errors and legal name changes. This issue is one in which employers might be served aligning themselves with labor unions. If the regulations are ultimately struck down, employers will receive a reprieve from the onerous task of re-verifying the employment status of innumerable employees.