Labor Department Sharpening Focus on Misclassification

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By K. W. Mitchell

In combating employee misclassification, the Labor Department is taking strategic misclassification enforcement to the next level by placing greater priority on measures that are tactical and swift, a department official said.

“To carry out our job, we must be prudent and strategic in our enforcement actions,” said David Weil, administrator of the Labor Department's Wage and Hour Division.

“We need to create ripple effects that impact compliance far beyond the workplaces where we physically conduct investigations, or the organizations to which we provide outreach directly,” Weil said Oct. 31 in a blog post.

Additionally, the division needs to be persistent in discovering ways to “make our investigation of one employer resonate throughout that particular sector and influence the behaviors of employers across that entire industry, to promote compliance across networks of business organizations,” Weil said.

Plan of Action

To accomplish the goal, Weil said the department needs to:

•increase the cost of noncompliance associated with misclassification, including debarments, civil penalties and damages;

•identify all potential employers involved; and

•publicize the results to educate other employers on responsibilities and encourage compliance.

“We're identifying the contracting stream, or supply chains, so those at the top of the chain will evaluate the compliance practices of those below them and consider whether it's worth their own good name and possibly their own bottom line to utilize the services of subcontractors or suppliers who skirt the law,” Weil said.

More than 7.3 million employers and 135 million workers are covered by the laws enforced by the department, Weil said. The success of enforcement initiatives, however, is best shown by improving compliance “so that when we enter workplaces in the future, we find fewer and fewer violations,” he said.

Although the Labor Department aims to be more deliberate in its enforcement efforts, it maintains focus on large industries that generally hire low-income workers, said Michael Kravitz, communications director for the department's Wage and Hour Division.

The department seeks to make  its enforcement efforts resonate through entire industries.

The division targets industries involving workers with “limited English language proficiency, and workers who are unaware of their rights or who are reluctant to file a complaint when subject to labor violations,” Kravitz said Nov. 13 in an e-mail to Bloomberg BNA.

The division focuses on such industries “because of high rates of violations or egregious violations, the employment of vulnerable workers, or rapid changes in an industry,” Kravitz said.

“The Wage and Hour Division conducts investigations for a number of reasons, all having to do with enforcement of the laws and assuring an employer's compliance,” Kravitz said, adding that the division will “continue to focus on industries where workers have been historically exploited and denied their rights to the minimum wage, overtime and other worker protections.”

In addition to internal division initiatives, the Labor Department continues to work with states to enter into agreements known as memorandums of understanding (MOUs) to combat misclassification.

“The department welcomes the opportunity to work with our state partners to sign new MOUs with additional states,” Kravitz said. “Working with the states is an important tool in ending misclassification and our collaborations continue.”

Cooperation With States

The department has MOUs with 17 states, including New Hampshire, which signed its agreement Nov. 12. The other states are Alabama, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington.

From a federal standpoint, the Labor Department was asked March 13 by President Barack Obama to modernize and streamline the existing Fair Labor Standards Act overtime regulations for executive, administrative and professional employees. The White House request was made in a memo to Labor Secretary Thomas Perez.

The department, however, did not meet its November deadline. Although the proposal remains months away, it should be rolled out in early 2015, Solicitor of Labor M. Patricia Smith said Oct. 2 at a client briefing hosted by the law firm Epstein Becker Green, as reported on the website Law360.com.

The department last updated the regulations as a part of its 2004 Fair Pay and Overtime Initiative, revising the white-collar exemption under the FLSA for employees whose duties are considered executive, administrative, outside sales, computer professional and professional.

Such workers earn a minimum weekly salary of $455, a minimum annual salary of $23,660 and are exempt from overtime pay.

The department continues “working diligently to construct an updated overtime rule that reflects the president's directive and the input we've sought from a wide array of stakeholders, including workers and their employers,” Kravitz said.

To contact the reporter responsible for this story: K.W. Mitchell at kwmitchell@bna.com

To contact the editor on this story: Michael Trimarchi at mtrimarchi@bna.com.