Proposal Aims to Keep Employees Informed About Their Rights

Companies may be required to divulge more information about their decisions regarding workers’ rights under a new proposal from the Department of Labor (DoL).  The proposal, which aims to make worker classifications and wrongful exclusions of benefits more transparent, is just one of many regulations in circulation regarding the issue.

The proposed regulation is part of the DoL’s overall effort to better educate workers of their rights under existing laws.  Further, it is intended to expand companies’ current recordkeeping requirements to foster more transparency in demonstrating employers' compliance with requirements to workers.  Experts say this will prompt companies to reexamine their policies, conduct self-audits and provide additional analysis and documentation on how they categorize individual workers for tax and human resource purposes.

Though full details have not yet been revealed, the proposal is expected to require companies to record the analysis used when exempting employees from the Fair Labor Standards Act (FLSA) and share that data with affected workers.  This will make it much more difficult for employers to wrongly exclude employees from benefits they should be receiving.  Currently, this level of information sharing is unusual prompting the DoL to predict that if the regulation is passed they will be making a sizable number of enforcement actions for violations of minimum wage and overtime rules.

Typically, an employee’s FLSA status is fairly obvious.  Issues arise, however, when there are grey areas such as when an hourly worker’s job evolves over time and the company does not evaluate whether that employee’s status should change.  Typically, mid-level roles raise more classification questions than executive and rank-and-file positions.

From the employee’s standpoint, transparency would appear to be an improvement in corporate communication.  However, it may potentially impact morale and productivity -- not to mention the administrative drain it will place on companies.  Defense attorneys further predict that such regulations could raise companies’ litigation in the short term by leading to an increase in complaints from workers who believe they have not received their due rights.

Other issues arise when companies are required to provide an analysis of an employee’s classification, since companies tend to analyze employees’ status through internal or outside counsel.  This would require employers to waive attorney-client privilege, and disclose internal documents that could later be used against them.

Further, companies must deal with state regulations which can differ on whether a worker should be deemed a full-time employee or independent contractor.  This becomes particularly challenging when employees do similar work at different locations for the same company.  If the DoL regulation is passed, these issues will be further complicated.

How companies will react to the proposal when details are revealed remains to be seen, but they will have the opportunity to voice their opinions when the regulation opens for public comment in August.

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