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Labor Department Prioritizes Employer Engagement to Meet Goals

March 24, 2022, 6:05 PM

The U.S. Labor Department’s Wage & Hour Division urges employers to develop a relationship with their local offices to prevent wage-hour violations, an agency official said March 21.

“Develop a relationship with your local wage and hour office,” said Jessica Looman, acting administrator of the Wage & Hour Division. “We want to have really strong relationships with practitioners.”

Employers should contact their local Wage & Hour office if they discover a payroll violation or need clarification on wage-hour rules and guidance, she said. They can also review the Wage & Hour Division’s website and read opinion letters that provide guidance on specific wage-hour issues.

“It’s never too late, it’s never too big of a risk to do the right thing,” she said at American Payroll Association’s Capital Summit in Washington, D.C.

Worker Misclassification

The Wage & Hour Division is focusing on protecting the rights and wages of low-wage workers, and employers can disadvantage low-wage workers by misclassifying them as independent contractors, Looman said.

“An independent contractor is an independent business,” Looman said. “We really encourage employers to think about how they’re contracting, why they’re contracting, to whom they’re contracting, and making sure that they have that strong business-to-business relationship.”

Employers and employees sometimes misclassify workers or themselves because they are basing their classification on unimportant factors, Looman said.

“Just because you call somebody an independent contractor or they call themselves and independent contractor doesn’t make it so,” she said. “Just because you provide a 1099 or they request a 1099 doesn’t make it so,” Looman added, referring to the series of IRS forms used to report payments to independent contractors.

Employers may have difficulties classifying workers when employees also operate as third-party vendors providing services to the same employers, Looman said.

If individuals, in their roles as employees and as third-party vendors, have similar or the same job duties, the individual might be considered employees for both roles under federal law, Looman said.

Employers should request a list from the vendor that contains the names of the vendor’s other clients, said Becky Harshberger, the vice president of payroll tax for Entertainment Partners.

If a vendor is only providing services to one employer, that vendor is not an independent business, Looman said.

Employers should also see if the vendor carries their own separate workers’ compensation coverage, Looman said. If the vendor does not have workers’ compensation coverage, the employer may be liable for workers’ compensation if the vendor is injured, and the state does not provide state disability insurance.

Remote Employees

Telecommuting also presents unique challenges by allowing remote employees to work after the conclusion of the workday, said Harshberger.

Employers should set boundaries for employees working from home, Looman replied.

“Employers can manage their employees,” Looman said. “If they were in your facility, how would time be treated?”

Keeping memorandums of employer actions on certain wage-hour issues can also be helpful, Harshberger added.

Some examples of memorandums include documenting when employees took breaks and summarizing conversations with employees relating to wage-hour laws.

Employers can also review the Wage & Hour Division’s online guidance on how to best comply with recording work hours.

“Don’t be afraid of us,” Looman said. “We’re here to help.”

To contact the reporter on this story: Emmanuel Elone in Washington at eelone@bloombergindustry.com

To contact the editor on this story: William Dunn at wdunn@bloombergindustry.com