CURRENT TRENDS AND PENDING LEGISLATION: PREGNANCY AND EMPLOYEE MISCLASSIFICATION

Posted on April 28, 2010 by Daniel Burnick

PREGNANCY CLAIMS.  A study of EEOC statistics shows that the number of pregnancy discrimination claims are on the rise.  Since 2005, the number of pregnancy discrimination claims have risen 31%.  This pace is 7% higher then the 24% rise in all job-bias claims filed during this time.  For FYE 2009, there were 6,196 pregnancy claims filed, and a total of $16.8 million was paid to settle pregnancy claims during 2009.  The EEOCwebsite defines pregnancy discrimination as : "Pregnancy discrimination involves treating a woman (an applicant or employee) unfavorably because of pregnancy, childbirth, or a medical condition related to pregnancy or childbirth." 

Practice pointer.  Why is there an increase in pregnancy discrimination claims?  I believe there are a number of factors, including the fact that the depressed economy has resulted in more pregnant women working for fear of losing their jobs or because their spouse may have lost his job, there are more single mothers, and more women are willing to bring  a claim because they have nothing to lose.  I anticipate a continued rise in pregnancy discrimination claims for 2010.

EMPLOYEE MISCLASSIFICATION.  I have written before about the increased scrutiny the government is placing on the correct classification of employees: either as employees or independent contractors.  Congress has now gotten involved, with the proposed Employee Misclassification Prevention Act, introduced last week, that would amend the FLSA to specifically prohibit the misclassification of employees and place additional requirements on employers for record keeping purposes.  Some of the proposed requirements include providing written notice to employees of their particular status, and keeping records for each contractor hired that are similar to employee records.  The current proposal gives employers 6 months from the bill's effective date to notify existing employees/contractors of their classification.  There is a proposed civil penalty of $5,000 per violation if the employer does not comply with the record keeping requirements of the proposed law.  Treble damages would be available if there is a wilful violation of the proposed law.

Practice pointer.  The DOL has already hired numerous Wage and Hour Division investigators, and if this proposed legislation passes, there will be additional burdens placed on businesses to comply with the law.  Now is the time to review how your employees/contractors are classified to make sure that employers are in compliance with the law. Misclassificaiton of workers will continue to be a major focus of the DOL, and perhaps other governmental agencies, such as the IRS.  If the proposed law passes, the scrutiny will be even greater.  The best way to avoid adverse consequences is for employers to properly classify their workers, as either employees or contractors. 

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INDEPENDENT CONTRACTOR VS. EMPLOYEE: GOVERNMENT CRACKDOWN ON MISCLASSIFICATION

Posted on February 21, 2010 by Daniel Burnick

The President.  The Department of Labor.  The IRS.  There is a great deal of pressure being exerted on employers to properly classify workers as either employees or independent contractors.  According to Inc.  President Obama's 2011 budget includes funding for an additional 100 IRS employees to help crack down on the misclassification of workers as independent contractors.  It is estimated that this will add an additional $7 billion in revenue over the next 10 years for the government.  The IRS is also beginning a 3 year audit of 6,000 companies chosen by random, rather than issues with the company's returns.  The use of independent contractors can save companies as much as 30% in costs since they don't have to pay for social security and medicare taxes, workers' compensation, unemployment compensation, health insurance, vacation or sick leave.  Last week, USA Today ran an article entitled IRS, States crack down on independent worker status abuse.

The New York Times published an article on February 18 entitled "U.S. Cracks Down on 'Contractors' as a Tax Dodge".  The story referred to a federal study that concluded that 3.4 million workers were illegally misclassified as independent contractors instead of employees.  The attorney general from Ohio believes that there are 92,500 misclassified workers in Ohio alone, costing the state over $363 million in lost unemployment insurance taxes, workers' compensation premiums and income tax revenue.  The article notes that the most frequently misclassified workers are "truck drivers, construction workers, home health aides and high-tech engineers."   Misclassification of workers as independent contractors also prevents those contractors from receiving overtime if they would have been entitled to it if they were properly classified as non-exempt employees. 

Finally, closer to home, a study in Tennessee found that 20% of construction workers in Tennessee were either misclassified as independent contractors or paid under the table. 

Practice pointer.  I routinely am involved in representing clients who misclassify employees, usually unintentionally.  With the looming crackdown in misclassification by the federal government, now is a good time to review the classification of workers to make sure that they are being properly identified as either employees or independent contractors.  Companies that are caught misclassifying employees as independent contractors face enormous financial penalties, including income tax, medicare and social security with holdings, and claims for overtime.

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