Congress Heats Up For The Summer: A Summary of Potential Changes to Federal Employment Laws
The economy, the military, the debt ceiling—Congress has its hands full this Summer. Notwithstanding the nation’s current challenges, federal employment laws remain an area of focus for our lawmakers. This article summarizes some of the new legislation that has been proposed and how the new legislation, if passed, may affect your company.
THE SMALL BUSINESS ENCOURAGEMENT ACT (H.R. 1663)
Current status of law: The Internal Revenue Code allows employers to take a Work Opportunity Tax Credit (WOTC) for hiring new employees under certain circumstances. The WOTC is a federal tax credit incentive that encourages private-sector businesses to hire individuals from nine target groups who have consistently faced significant barriers to employment.
What would change: This proposed legislation would amend the Internal Revenue Code to temporarily provide the WOTC for small businesses hiring unemployed individuals, saving employers up to $12,000 a year per hire in some areas of the country. To qualify, small businesses must have gross receipts in the preceding taxable year not exceeding $20 million, or they must employ less than 100 full-time employees. Employers seeking the tax credit will be required to hire unemployed individuals for at least one year, full-time, with a start date during or after January 2012. The credit will also extend for employers hiring unemployed Americans in 2013.
What this means to employers: This legislation may provide the necessary support for certain employers to start hiring again. New employees are costly, but this type of offset minimizes the employer’s risk and expenditure.
Likelihood of becoming law: This bill is one of the rare pieces of legislation that started with bipartisan support. It has received similar across-the-aisles support in the press. While its journey through the legislative process has just begun, the odds are already in its favor.
10K RUN FOR THE BORDER ACT (H.R. 43)
Current status of the law: The Immigration and Nationality Act (INA) sets forth the conditions for temporary and permanent employment of aliens in the United States and imposes a strict enforcement scheme. Unlike some other federal employment laws, the INA applies to all employers, of any size.
What would change: This proposed legislation would amend the INA to substantially, and we mean substantially, increase employer penalties for violations. Some of the changes would include the following:
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The penalties for knowingly hiring or recruiting an undocumented worker, or continuing to employ an illegal alien when the employee’s legal status changes or becomes known would increase to between $10,000 and $80,000 for each violation, an increase from the current $250-$2,000 penalty range.
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For an employer with a prior violation, the penalties would be increased to between $80,000 and $200,000, up from $2,000 to $5,000 per violation under current law.
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For a repeat offender, the fine skyrockets to a range of $120,000 to $1.6 million. The current fine for such a repeat offense is a minimum penalty of $3,000 and a maximum of $10,000.
What this means to employers: Ouch! Those figures are painful to an employer of any size.
Likelihood of becoming law: Previous versions of this bill have fared poorly. However, between the positive signs surrounding the proposed E-LAW Act (addressed in the last Legislative Update, available here) and the Supreme Court’s approval of Arizona’s law in U.S. Chamber of Commerce v. Whiting, the bill’s time may have come.
THE PAYROLL FRAUD PREVENTION ACT (S. 770)
Current status of the law: The Fair Labor Standards Act (FLSA) requires, among other things, that non-exempt employees be paid minimum wage and overtime, and dictates the standards for exemptions from this rule. Employers
who misclassify employees as independent contractors or who misclassify non-exempt employees as exempt are vulnerable to DOL investigations and collective action FLSA lawsuits, which are notoriously difficult to defend, and expensive.
What would change: This bill would change the existing law in numerous ways. It would create the presumption that individuals working for an employer are employees, rather than independent contractors. The bill would also increase penalties for employers who intentionally misclassify their employees as independent contractors, impose new reporting requirements on employers, increase penalties for exempt/non-exempt classification violations, and offer whistleblower protections for workers who believe they have been misclassified.
What this means to employers: If you thought the law was unfavorable to employers before, just wait. Not only does this impose greater penalties for violations, it increases costs for compliant employers as well. Further, the whistleblower protections make it increasingly likely that employees will challenge employer classifications.
Likelihood of becoming law: Somewhat unlikely. Republicans control the House, so this bill, whose predecessor failed to pass last Congress, doesn’t have the best chance.
HEALTHY FAMILIES ACT (H.R. 1876, S. 984)
Current status of the law: The Family and Medical Leave Act (FMLA) provides up to twelve weeks of leave for an employee’s serious health condition; however, no federal law requires employers to pay employees for this time away from work. Under many employers’ leave policies, employees are first required to exhaust all paid leave (such as vacation or other paid time off), but their remaining time off is unpaid.
What would change: This bill, introduced in both the House and Senate on May 12, 2011, would require employers to provide paid sick leave to employees. It would allow employees to earn one hour of paid sick time for every 30 hours worked, up to a maximum of 56 hours (seven days) annually. Employees could take this leave to attend to their own or a family member’s illness, or use the paid time off for preventative care such as medical appointments. In addition, the bill provides leave for employees who are the victims of domestic violence, stalking, or sexual assault. The law would apply to employers with 15 or more employees.
What this means to employers: If your company doesn’t provide paid leave, or if your paid leave policy is less generous than the provisions of the bill, you’ll need to find room in your budget for additional paid sick leave for employees. And, remember, if this bill passes it applies to your company even if you are not a covered employer under the FMLA (i.e., if you have fewer than 50 employees).
Likelihood of becoming law: Next to none. When the Democrats had control of the legislature, the bill was seen as a slam dunk, but nothing happened. The legislation’s chances this time around pale in comparison.
PAYCHECK FAIRNESS ACT (H.R. 1519, S. 797)
Current status of the law: The Equal Pay Act (EPA), enacted in 1963, prohibits discrimination on account of sex in the payment of wages by employers. Class members must affirmatively give written consent to opt in to any action. Employers have an affirmative defense to claims under the EPA if a discrepancy in pay is due to “any factor other than sex.”
What would change: The Paycheck Fairness Act would amend the EPA by narrowing the employer’s affirmative defense from discrepancies due to “any factor other than sex” to discrepancies that are “not based upon or derived from a sex-based differential in compensation,” are job-related with respect to the position in question, and are consistent with business necessity. The bill would also allow for previously unattainable compensatory and punitive damages, plus opt-out (rather than opt-in) class actions.
What this means to employers: If passed, the Paycheck Fairness Act would make gender-based pay discrimination claims more prevalent, more difficult to defend, and more costly.
Likelihood of becoming law: Similar proposals have been introduced for the last 14 years. Last year the proposed law stalled in the Senate, failing to receive enough cloture votes for consideration. We’ve been reporting on it for quite some time because it would create substantial changes. It is unclear how well the bill will fare this year, as presumably last year was its best shot, and that didn’t go so well.
JOB PROTECTION ACT (H.R. 1976, S. 964)
Current status of the law: Under the current law, the National Labor Relations Board (NLRB) has the authority to bring suit against employers for retaliation against union employees. A recent example is the Board’s decision to file a complaint against a large manufacturer of airplanes, alleging that the company’s decision to locate an assembly plant in South Carolina (a right-to-work state), rather than Washington (where a substantial number of union members were located), represented illegal retaliation against union employees. According to the NLRB, the company’s decision was made solely to avoid the likelihood of further strikes at the company’s Washington facility.
What would change: If an employer were to give advance notice to the union of the economic reasons for relocating, closing a facility, or transferring work, the NLRB would be unable to prevent the closure, relocation, or transfer. An employer’s comments regarding the costs associated with having a unionized workforce could not be used as evidence in an anti-union discrimination claim.
What this means to employers: This legislation is one of many bills moving through Congress that attempts to limit the power of the NLRB (see S. 504 and H.R. 2118 as well). Under the bill, an employer would have more freedom to relocate to right-to-work states without worrying about consequences from the NLRB. Legislation like this is one symptom of a broader dispute about the role of unions in the workforce.
Likelihood of becoming law: Not likely. The right-to-work issue is highly partisan, with great support from the GOP and next-to-none from the Democrats. So, the bill likely won’t clear all the obstacles on the road to becoming law.
JOBS ACT OF 2011 (H.R. 1745, S. 904)
Current status of the law: Under the current scheme, states pay the first 26 weeks of unemployment insurance benefits for workers who lost their jobs through no fault of their own. During recessions, Congress temporarily provides additional weeks of federally-funded benefits, and during the current jobs crisis, the federal government has given the long-term unemployed in 25 states an unprecedented 73 weeks of extra aid (although this federal program expires at the beginning of next year).
What would change: The Jobs, Opportunity, Benefits and Services Act (JOBS Act) of 2011 would allow states to use the remaining $31 billion in federal unemployment funds for this year to replenish their underfunded accounts instead of raising payroll taxes. According to a press release issued by the bill’s backers, under current law, that money could only be spent for unemployment benefits stretching up to 99 weeks in many states. Under the JOBS Act, states could also use the money to prevent unemployment tax hikes or for programs designed to get unemployed workers back on the job. The JOBS Act also would require those individuals close to exhausting their benefits to strengthen their job searches and engage in education or training.
What this means to employers: Did you WANT an unemployment tax hike? We didn’t think so.
Likelihood of becoming law: Likelier than some, but still not great. On May 11, 2011, the House Ways and Means Committee, by a vote of 20 to 14, favorably reported the bill out of committee. The bill will be sent to the House floor for consideration. A parallel bill has been introduced in the Senate. Things are moving, but numerous hurdles still stand in the way, such as the approval of the Senate and the President’s signature. The bill’s effect on the unemployed is highly polarizing, which does not bode well for its ultimate success.