5 Labor-Regulation Changes that could Cost Contractors Money in 2016

While 2016 is expected to bring contractors more business, modifications taking effect in the way the Feds regulate labor this year hold new risks for employers

It is expected that 2016 will bring more business to concrete contractors. Unfortunately, 2016 comes with risks for employers as well.

The Department of Labor (DOL) will publish revised regulations affecting who is exempt from overtime. It is expected that the standard, salary exemption will roughly double to over $50,000. For most contractors, this change will not affect field laborers, but it will probably affect supervisors and office workers. In the past, these workers were exempt from overtime if they earned a salary of $455 per week and were employed in administrative, executive, professional, or outside sales positions. When the revised rules become final, many of these employees will no longer be exempt. This means that contractors will have to pay them overtime if they work more than 40 hours per week. The DOL is not presently scheduled to revise the “duties” test for these exempt positions, but that may happen in the future.

“Interpretive Guidance”

Last summer, the DOL issued “interpretive guidance” regarding who is an independent contractor not subject to minimum wage and overtime requirements. Effectively abandoning the “right to control” test, the guidance adopts an economic realities test. DOL rejects a “mechanical” application of the factors it considers in determining the economic reality. Since the test is subjective and very much unclear, this puts employers doing business with non-employees at risk. Concrete contractors need to be particularly careful about employment of persons paid on a 1099 basis.

The misclassification issue is still an active (and expensive) area. Tax collectors at the state and federal level are looking for income they missed during the economic downturn. That comes from finding employers have been treating workers as independent contractors — rather than employees — in order to avoid paying withholding, Social Security, Medicare, worker comp, etc. Today, states are much more aggressive auditing employer payrolls and practices. The concrete industry is especially vulnerable because government agencies believe that use of independent contractors or 1099 labor is rampant, particularly among smaller employers.

“Joint Employment”

Recently, the DOL issued more guidance about “joint employment” and how to determine who is liable. In essence, DOL takes the position that if two employers employ the same worker and are sufficiently related, both are liable for compliance with federal law affecting that worker. This guidance looks at horizontal and vertical joint employment relations and economic dependence. This guidance should not affect most concrete contractors who are properly classifying employees and paying overtime correctly. Note, however, that for contractors that “share” an employee with a related business, the hours worked for both employers are aggregated which may lead to overtime liability.
The National Labor Relations Board (NLRB) remains aggressive in protecting all workers’ Section 7 rights to engage in protected, concerted activity. Note that the NLRB jurisdiction extends beyond employers that are unionized, so all contractors need to be concerned about expanded efforts to protect workers. The NLRB is “chipping away” at employer policies such as confidentiality, social media, outside communications, etc. This trend is expected to continue while the majority of the five member Board supports unions and worker rights. Contractors should have their policies and procedures updated regularly to stay in compliance and avoid liability in the future.

Equal Employment Opportunity Commission

It is important to note that the Equal Employment Opportunity Commission (EEOC) has stepped up enforcement in several areas. These include age and disability discrimination, largely the result of the Baby Boomer generation getting older. Also included are genetic information proscriptions enacted in the Genetic Information Non-discrimination Act (GINA) and heightened scrutiny of the use of criminal background checks. While it may seem fairly obvious that employers should not rely upon genetic information to make employment-related decisions, the EEOC’s enforcement posture on background checks is a little more troubling. In essence, EEOC takes the position that you cannot use criminal background as the basis for not hiring someone unless you can demonstrate a clear correlation between the job and the crime. Note that you should never rely upon arrest information alone.

Finally, be aware that there are other things happening out there: OSHA is issuing new regulations making life more difficult for employers. Immigration reform remains an uncertainty. Wage and hour litigation continues unabated. Restrictive covenants can still help you. You still don’t want to hire LUZIRS (Lazy, Undisciplined, Zero-interest, Irresponsible, Rude, Slackers). The Affordable Care Act penalties may come into play. But otherwise, I hope you are successful and prosperous in 2016.