April 30, 2010

In an attempt to reduce labor violations -- like employers not paying overtime and improperly classifying workers are contractors in an attempt to reduce their benefits -- the U.S. Labor Department plans to require companies to prepare and adopt compliance plans. These compliance plans have to be effective in avoiding labor violations. The effort will require companies to document many of their labor decisions and share that information with their workers and the government. For example, one proposed idea is that if companies classify workers as independent contractors -- which is often done to avoid paying Social Security taxes, circumventing wage laws, and denying benefits to the employee -- they will have to prepare a written explanation of why those workers should be considered contractors rather than employees. Companies would then have to give these workers the explanation.

The goal is to reduce the violation of wage, job safety, and equal employment laws. The Deputy Labor Secretary, Seth Harris, said that the goal is to foster a culture of compliance among employers. He said that many companies do already have a culture of compliance, but too many others violate labor laws and have a "catch me if you can" mentality. Companies need to see that the cost of not complying outweigh the benefits of breaking the law. Department officials hope the plan will greatly reduce violations in industries with widespread wage violations, like restaurants and discount retailers, and in industries with widespread safety violations, like coal mining and construction.

The plan is still being drafted and no specifics have been decided on yet in regards to what companies would be required to do. Mr. Harris said that businesses will have a chance to respond before any final rules are issued. The process will probably take more than a year. An employment law professor at NYU praised the plan and said, "It is important to activate internal corporate efforts for compliance." Though she said that violations will probably still continue and that there's no fix-all solution. She said that some companies will engage in "cosmetic compliance."

Business groups attacked the idea and said it would impose new burdens on employers without necessarily improving compliance with labor laws (but the employers are the ones responsible for compliance...So if "burdens" do not translate into compliance, isn't that their own fault?). A senior vice president from the U.S. Chamber of Commerce complained that this plan will "open the door to a Department of Labor compliance officer second-guessing employers on a wide range of issues and micromanaging how employers run the workplace." Colorful language aside ("micromanaging", "second guessing", "run the workplace" -- I expect nothing less from the U.S. Chamber of Commerce), that essentially is the duty/role of the Labor Department. Companies are beholden to labor laws. And the Labor Department is supposed to make sure those laws are being followed. That is in fact their job. They don't tell you how to run the workplace, they just say if you don't run the workplace legally, you're going to get in trouble. Or at least that's the idea. Too often companies are allowed to get away with these violations. And the thought of this administration increasing the department's efforts to enforce compliance is obviously the last thing companies want to hear (if they are violating labor laws). If companies aren't violating laws, they shouldn't have a problem with this plan or with documenting their labor decisions. Labor Department officials aren't going to "second guess" the employer if there's no reason to. If an employer classifies someone as a contractor even though they're actually treated like a regular employee, yeah, you're going to get "second-guessed", because you're breaking the law. And, really, why shouldn't there be an explanation for why certain labor decisions are made -- like why someone is classified as a contractor instead of an employee or why overtime was denied? Documenting/explaining a decision and making it available to employees can help reduce decisions being made arbitrarily, it can help employees to understand why decisions were made, and it can serve as a check on abuse of labor laws. (Full Story)