Legal Update

A recent bill has been introduced in the US House (H.R 5107) and US Senate (S. 3254) that would amend the FLSA to require employers to keep record on and notify workers of their employment or independent contractor classification and their right to challenge that classification. If passed this legislation would impose civil penalties under the FSLA (up to $1,100 per employee for first offenders and $5,000 per employee for repeat or willful violations on employers that misclassify employees as independent contractors. Further, the Act would also amend the Social Security Act to establish administrative penalties for misclassifying employees, or paying unreported wages to employees without proper recordkeeping, for unemployment compensation purposes. The new record keeping would relate to exempt / non-exempt determinations and Independent Contractor determinations.

Suggested Actions:

1. Review independent contractor agreements to insure that they track the statutory tests applicable in the jurisdictions in which your company operates, and memorialize the facts creating a legitimate independent contractor relationship.

2. Conduct regular compliance audits to insure independent contractor classifications are up to date under state and federal law.

3. Audit directly employed or temporary workers for proper classification as exempt or non-exempt. It may help to have outside counsel involved in initial analysis to protect the legal review from disclosure under attorney-client privilege. NOTE – All TriStarr temporary employees are always properly classified as non-exempt employees.

If you have any questions regarding this issue please feel free to contact us and we would be happy to help in any way that we can. Our staff is continually monitoring this and other legislation and will continue to provide updates as we feel are relevant.