Latest Department of Labor employment guidelines place greater pressure on noncompliance
Let’s face it: the way you work today will change inexplicably within the next several years. Advancements in technology are driving greater worker flexibility, with ever-increasing adoption in cloud, mobile, collaboration, and other innovations.
But it means that the traditional employer/employee relationship is waning. Gone are the days of people being completely office-bound, chained to a 9 to 5 working day. The new norm is a melting pot of subcontractors, outsourced workers, contingent employees and temp workers scaled up or down according to labor needs.
Sounds like a win-win, right? People achieve greater mobility and work/life balance while being empowered to work on their terms, while businesses are saved from the hassles of adding people to payroll when the demand is not there.
Unfortunately, the argument is not that clear-cut – particularly when it comes to wage and hour compliance. Misclassification of workers has ballooned to be a billion-dollar liability – the newer, “on-demand” companies (which include Uber, Lyft and GrubHub) are facing costly class action lawsuits alleging that their workers have been misclassified as independent contractors. And even more established companies are taking the hit – FedEx settled an independent contractor mislabeling case last year for a whopping $228 million.
The U.S. Department of Labor (DoL) has recently decided to take a more aggressive stance on wage and hour regulations based on the new workforce norm of people being employed by more than one business simultaneously. Its detailed guidance in essence says that both employers need to be wage and hour compliant for the person they employ.
The DoL’s latest guidance is an acknowledgement not only of the pervasive misclassification violations taking place, but also the inability for labor rules to catch up with how people work. We’ve seen the DoL focus increasingly on misclassification class action lawsuits over the years, with more than $74 million in back wages found through DoL investigations in 2015 alone. It’s therefore critical for businesses to continually assess employee descriptions to determine whether these are accurate and reflect the roles of people they hire, clearly communicate employment policies to workers, and foster open lines of communication to avoid any ambiguity regarding wages.
In this U.S. presidential election year, when minimum wage increases and other labor reforms take center stage, we will undoubtedly see more guidance being proposed over the next 12 months. But as how, when and where people work continues to evolve at the same breakneck speed as technology advancements, it will be interesting to see how this aligns with the latest wage and hour regulations.