What You Need To Know About RIght-To-Know

I can sum it up in two words: it's coming.

The proposed changes to record-keeping requirements under the FLSA - AKA Right-To-Know - were introduced in August 2010. Right-To-Know has two basic components: determination of exempt / nonexempt status of employees, and classification of individuals as employees or independent contractors.

The proposed changes would require employers to provide a written justification of its classification decisions regarding exempt employees and independent contractors. Employers would also be required to provide this written justification to the employee, as well as make it available to the Department of Labor for review.

Right-To-Know has stalled a couple of times, but there are some signs that the DOL is going to push forward. On January 13, 2013, agency requested comments on a public survey aimed at identifying the workforce's knowledge of wage and hour laws and the rules regarding employee classification. It's likely that this survey is directly related to Right-To-Know. 

As noted by Jennifer Neumann, "the DOL has directed a laser-like focus on worker misclassification issues in the past few years, and this latest action by the DOL may be another example of such focus." To me, the survey, combined with the start of a second term for President Obama with a yet-unknown new Secretary of Labor, is a clear signal that misclassification issues are a serious priority, right up there with gender pay discrimination.

My prediction: it's coming. Now is the time to examine your classification decisions and update them as appropriate. Remember that just because someone was properly classified last year doesn't mean they're properly classified this year. Job duties and responsibilities change over time, and your classification decisions need to keep pace.

Whether you use the IRS's concept of behavioral and financial control or the Wage and Hour Division's Six Factor Analysis for classifying workers, make sure your classifications can be justified. If you find errors in classification, correct them - you might even be able to take advantage of the IRS Voluntary Classification Settlement Program!

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

Comments

[E. James (Jim) Brennan]

This truly is scary. As covered in the past in http://www.compensationcafe.com/2011/03/could-you-be-accused-of-wage-theft.html and http://www.compensationcafe.com/2011/05/we-is-the-enemy.html and in other forums, it seems inevitable. Simply by tweaking administrative regulations fully under the control of the Executive Branch, Congress and the Courts can and will be bypassed.

The additional penalties under the PPACA ("the Affordable Care Act") for employers who fail to properly supply health benefits to their employees put extra fangs in these measures. If DOL WHD discovers that certain workers under your control are misclassified as independent contractors rather than as regular employees, you suffer draconian penalties and fines sure to please a cash-strapped government. Plus, there will be political advantages to those who rescue the helpless victims from their rapacious exploiting employers. Start thinking about how you are going to justify calling people "contractors" who work on your premises using your equipment and following your instructions just like your regular employees. Take care to confirm that your documentation of exempt status determination is complete, current and correct; because if your "exempts" aren't doing what you claimed when an examination inspector appears, you'll be slammed.