Small businesses might want to take note of some recent activity regarding the Department of Labor Wage and Hour Division (WHD) under the Fair Labor Standards Act (FLSA).
In January, WHD announced it would be gathering comments from the public about a project to get data “about employment experiences and workers’ knowledge of basic employment laws and rules so as to better understand employees’ experience with worker misclassification.”
This process began in 2011, when WHD announced a planned rulemaking known as “Right to Know.” It focuses on the enforcement of the FLSA.
It wasn’t until this year that WHD decided to pursue the “Right to Know” rulemaking.
In one important element of the “Right to Know” initiative, WHD plans to survey workers to determine if they are being correctly classified by their employers.
Classification of employees is of growing importance to the Department of Labor (DOL) lately. As more businesses consider increasing their usage of independent contractors and part-timers to keep their number of employees below certain thresholds (i.e.: 50 full-time employees where the employer mandate in Affordable Care Act applies), employee classification becomes a hot topic.
The National Association of Electrical Distributors (NAED) is concerned that the “Right to Know” survey could be little more than a means of targeting unwitting companies for costly Labor Department investigations into what are sometimes baffling compensation rules.
“Several years ago, another DOL survey regarding gender pay equity was found to yield a high percentage of false positives that subjected law-abiding employers to the expense of defending themselves against groundless DOL pay discrimination investigations,” said Ed Orlet, vice president of government affairs for the NAED.
These kinds of investigations can end up costing businesses Orlet explained. He advises distributors to be prepared.
“Classification of employees continues to be a focus of federal regulators. Whether we’re talking about ‘Right to Know’ or the Affordable Care Act, employers need to make sure the way they classify their people can stand up to regulatory scrutiny,” Orlet said.
Both the National Association of Wholesaler-Distributors (NAW) and NAED will be following this issue as it makes its way through the DOL.
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