New laws expand workers rights

April 8, 2012

An expansion of workers’ rights in the areas of wage and hour and whistleblower protections could mean trouble for Washington area employers who choose to ignore them.

More stringent penalties can now be imposed for employers who miscategorize employees as independent contractors. And new provisions in another law provide more protections to individuals who blow the whistle in the workplace.

Over the last year, the Labor Department and states have identified more and more instances of employers miscategorizing workers as independent contractors. Most individuals are employees unless they operate their own business using their own tools and set their own schedule. In this tough economy, employers may be tempted to miscategorize an employee as an independent contractor in order to skirt requirements to pay unemployment insurance, Social Security, workers compensation and other employee benefits.

Now, facing loss of revenue, many states are passing statutes that stiffly penalize employers for this growing practice. In Maryland, an employer found to have violated the law could be required, among other things, to pay restitution to the misclassified worker and a civil penalty of up to $1,000.

But it’s also important for employers based in this region who operate national branches in other parts of the country to be aware of labor laws in other states. For instance, under California’s law, which went into effect this year, an employer breaking the law can be subject to a penalty of $5,000 to $15,000 for each violation, and a fine of $10,000 to $20,000 if the employer has engaged in a “pattern or practice” of these violations.

New case law implementing the Dodd-Frank Act and the Sarbanes-Oxley Act of 2002 will provide federal whistleblower protection to more employees.

The Dodd-Frank Act has created a national whistleblower standard that applies not only to employees at publicly traded corporations but also to corporations that are regulated by the Consumer Financial Protection Bureau — such as payday lenders, private education lenders and mortgage finance companies.

Ultimately, there has been no singular national law that protects an individual for disclosures of violations of law in the workplace. Employers and employees alike have had to look to a patchwork of state laws and 21 other statutes that protect individuals who work in niche industries such as the air and land public transportation industry and the nuclear industry.

Previously, workers seeking damages from employers for termination had to prove that their whistleblowing was the principal reason for the firing. Now the standard is much lower — they only have to prove it was among the factors. The penalties can be enormous — employers violating the law are subject to paying two times the amount of the fired workers’ back pay as well as the person’s lost income potentially until retirement.

The Labor Department also is reining in wage abuses in certain industries not traditionally covered by protections, including the home health care industry. Home health workers will soon be protected by federal minimum wage and overtime law.

Currently, 16 states ensure that most in-home care workers receive minimum wage and overtime protection; five states and the District require that such workers receive the minimum wage but do not mandate overtime eligibility; and nearly 29 states do not give home health-care workers either minimum wage or overtime protection.

In the wake of these new laws, employers must be more careful in how they pay their workers and must be more rigorous in their human resources compliance.

R. Scott Oswald is managing principal of The Employment Law Group, a District-based law firm.

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