By Raj Narayanaswamy, CEO of Replicon
Ensuring compliance with wage and hour regulations is not top of mind until an incident occurs
The workforce continues to evolve at the same tempo as the pace of technology.
In the U.S., we’ve just reached the milestone of 10 million online gig economy workers, who are working on-demand to offset losses or boost pay.
Shared workspaces, initially the realm of startups, have now gone corporate, with established businesses starting to use co-working offices to save on expensive office rent while appealing to more current and flexible ways of working.
The transformation of the modern workplace has also shone a spotlight on wage and hour obligations, which have not caught up with how businesses have evolved.Today, it’s not uncommon for businesses to hire full-time employees, part-time or seasonal workers, and independent contractors–who sit in geographically dispersed locations and across multiple time zones.
And perhaps unfortunately for many businesses, compliance is like insurance–ensuring compliance with wage and hour regulations is not top of mind until an incident occurs.
The Department of Labor has been actively at loggerheads with businesses, particularly those in the on-demand economy for the last 12 months, reaching a crescendo with numerous class action lawsuits about employee misclassification.
In California, ride-sharing service Uber was ordered to pay more than $4,000 to one driver it ruled had been misclassified as an independent contractor, while Lyft has agreed to pay $12.25 million in compensations to drivers.
In 2015 alone, the Department of Labor uncovered more than $74 million in back wages from wage and hour violations.
Interestingly, the Department of Labor has now issued guidance that says that if a person is employed by more than one business (such is the norm when working in the on-demand economy), then both businesses need to be wage and hour compliant for that worker.
The onus of responsibility is squarely in the company’s court to understand, monitor and meet their wage and hour obligations.
The latest guidance is an acknowledgement not only of the pervasiveness of employee misclassification, but also the difficulty in creating rules that can catch up to the way we work.
Despite this, compliance continues to hover in the background for many businesses. Replicon recently surveyed over 120 human resources professionals regarding their attitudes towards wage and hour compliance, and found that a whopping 37 percent of respondents were not sure of how compliant their organization was, or believed that their company’s company’s compliance policies need improvement.Classifying a person as an independent contractor isfraught with risks–besides misclassification lawsuits, companies may also be liable to civil lawsuits under the Fair Labor Standards Act and/or state employment law.
Even more disturbing, over two-thirds (67 percent) of respondents believed that their company had not conducted a compliance audit in the last 12 months, or were not sure that it had taken place.
This is particularly worrying as 47 percent of the total respondents were also involved in compliance decisions at their organization.
Whether you’re a startup hiring independent contractors to help your business scale, or a global corporation with a diversified workforce, wage and hour compliance should be top of mind.
Businesses need to stay within the current labor obligations to avoid costly settlements and damages to brand reputation, while supporting the expectations and flexible demands of their workforce. In the US, it’s currently safer for businesses to refrain from hiring independent contractors, given their lack of favorability from a legal standpoint.
How regulations will evolve to acknowledge the changes to the workforce is anyone’s guess–but ultimately, providing the right framework to hire and retain the best talent will win out every time.
Original Source: BenefitsPro