Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

Senator Dick Durbin (D-IL) and Representative John Conyers (D-MI) have introduced legislation that would strengthen the ability of employees to recover wages and benefits and restrict the awarding of bonuses in the event of their employer’s bankruptcy. According to a press release, the Protecting Employees and Retirees in Business Bankruptcies Act (S. 3033, H.R. 4677) would, among other things, “ensure that back pay awarded through [the Worker Adjustment and Retraining Notification (WARN) Act] damages would be given priority in the bankruptcy claims process.” Specifically, as stated in the release, the bill would do the following:

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With the Obama administration’s renewed emphasis on job creation, a number of lawmakers have introduced bills that focus on employer incentives. On Wednesday, Senators Chuck Schumer (D-NY) and Orrin Hatch (R-Utah) released details about the Hire Now Tax Cut Act of 2010 (S. 2983), legislation that would exempt any employer that hires a worker who has been without full-time work for at least 60 days from paying the employer’s share of Social Security taxes on that worker for 2010. According to its sponsors, the advantage of structuring a tax incentive in this fashion is that it would provide businesses with an immediate benefit, instead of rewarding them with a tax credit in 2011. Additionally, the benefits to an employer would increase the longer it retains and the more it pays the employee, up to the maximum Social Security wage of $106,800.

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Today President Obama outlined his plan to promote the growth of small businesses as a way to stimulate the economy and reduce unemployment. During his State of the Union Address, Obama proposed using $30 billion repaid funds that financial institutions received through the Troubled Asset Relief Program (TARP) to increase the ability of small businesses to obtain loans. In addition, he called for tax incentives for businesses to invest in new plants and equipment, and the elimination of capital gains taxes on small business investment. 

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The fiscal year 2011 federal budget (pdf) released on Monday contains provisions to combat misclassification of employees as independent contractors. Included in this $3.8 trillion spending measure is a proposal to be jointly administered by the Departments of Labor and the Treasury to eliminate legal incentives for employers to misclassify their employees. Funds are appropriated to enhance the ability of both agencies to penalize employers that misclassify employees as independent contractors, and restores protections to employees who have been denied them due to the misclassification. According to the budget, this proposal will increase Treasury receipts by more than $7 billion over 10 years. The budget allocates an additional $25 million to hire 100 new enforcement personnel to target worker misclassification and establish competitive grants to encourage states to address this issue.

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Sen. John Kerry (D-Mass.) has introduced legislation that would make it more difficult for employers to classify workers as independent contractors for employment tax purposes. The Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (S. 2882) would revise section 530 of the Revenue Act of 1978, known as the “safe harbor” provision, which currently allows employers to designate workers as independent contractors “regardless of the worker's actual status under the common law test, unless the employer has no reasonable basis for such treatment or fails to meet certain requirements,” according to a statement issued by Sen. Kerry’s office.

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Last week, Rep. Rosa Delauro introduced the Keep Americans Working Act (H.R. 4135) in the House of Representatives. An identical bill (S. 1646) was introduced in the Senate by Sen. Jack Reed (D-RI) in August. This bill would encourage employers to implement temporary work share programs as an alternative to layoffs, and entitle those employees working reduced hours to receive proportionate unemployment benefits.

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Senators Bernie Sanders (I-Vt.) and Charles Grassley (R-Iowa) have introduced legislation that would prevent large companies that conduct mass layoffs from hiring foreign labor through guest worker programs. The Employ America Act (S. 2804) (pdf) builds on similar prohibitions included in the American Recovery and Reinvestment Act (ARRA or “Economic Stimulus”), which prevents companies receiving funds through the Troubled Asset Relief Program (TARP) from replacing laid-off citizen workers with foreign labor. Under the terms of the Employ America Act, no guest worker visa petitions would be approved unless the employer provides written certification that it has not provided a notice of a mass layoff pursuant to the Worker Adjustment and Retraining Notification (WARN) Act in the past 12 months, and does not intend to do so. The provisions of the WARN Act apply to employers with more than 100 employees that lay off at least a third of their workforce and 50 or more workers. If such a large employer has instituted a mass layoff, any visa applications already approved would expire 60 days after the WARN notice is provided. An employer would be exempt from this requirement if it provides written certification that the total number of its citizen workers employed in the United States have not and would not be reduced as a result of the mass layoff.

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Legislation introduced in both chambers of Congress would extend for one year a tax incentive program that encourages small businesses to provide wage differentials to their employees called to active duty. The Small Business and Military Family Assistance Act of 2009 (H.R. 4042, S. 2748) would provide a tax credit for employers with fewer than 50 employees that chose to pay the difference between their employee reservists’ regular wages and their military pay while in active service. This bill would provide these small businesses with a credit equal to 20 % of the pay differential, up to $4,000.

In a press release Klein stated: “Many small businesses voluntarily choose to support our troops by making up the difference between military and civilian pay when one of their employees is called to active duty service. This is the right thing to do, and these businesses should be supported and rewarded with tax incentives.” If enacted, this tax credit would be extended to December 31, 2011.

The Senate version of this bill has been referred to the Senate Finance Committee. The House companion bill has been referred to the House Committee on Ways and Means. 

Photo Credit: soldiersmediacenter
 

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On Monday, President Obama issued an executive order to promote the federal government’s hiring of veterans. The executive order, Employment of Veterans in the Federal Government, creates an interagency Council on Veterans Employment – chaired by the Secretary of Labor and the Secretary of Veterans Affairs – that will advise the President and the Director of the Office of Personnel Management on the veterans’ employment initiative (“Initiative”) created by the executive order, and serve as a national forum for promoting veterans’ employment opportunities in the executive branch. Under the Initiative, most federal agencies will be required to establish a Veterans Employment Program office that will be responsible for helping veterans find jobs within those agencies. In addition, these offices will be in charge of implementing veteran’s recruitment programs and training programs for veterans with disabilities, providing mandatory annual training to the agency’s human resources personnel and hiring managers, coordinating employment counseling to help match veterans’ career goals with the needs of the agency, and transitioning service members into the workforce, among other responsibilities.

According to a press release, the Initiative “underscores to federal agencies the importance of recruiting and training veterans, aims to increase the employment of veterans within the Executive Branch, and helps recently hired veterans adjust to service in a civilian capacity.”

Photo credit: Captainflash

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Last week, lawmakers introduced legislation that would increase employer tax credits to encourage hiring. The Helping Invigorate and Revive our Economy Act of 2009 (HIRE America Act) (H.R. 3784) would expand the Work Opportunity Tax Credit (WOTC) and increase employer-provided child care credits, in addition to making the WOTC permanent. As it stands, the WOTC is set to expire on August 31, 2011.

In a press release, Rep. Tom Rooney (R-Fla.), who along with Rep. John Boccieri (D-Ohio) introduced the bill, explained that the legislation would increase the income tax credit for employers for each employee who is eligible under current WOTC criteria up to 50 percent. The bill would also create a new income tax credit for all other hires outside the current WOTC up to 30 percent. In addition, the bill would increase the maximum wage eligibility for veterans under the current WOTC from $12,000 to $16,000, and boost tax credits for employers who offer childcare services or benefits to employees up to 35 percent.

This bill has been referred to the House Committee on Ways and Means.
 

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Last week Senator Jack Reed (D-RI) introduced legislation that would provide employers with an alternative to layoffs. The Keep Americans Working Act (S. 1646) would encourage employers to implement temporary work share programs, and entitle those employees working reduced hours to receive proportionate unemployment benefits. According to Sen. Reed, 17 states already have work share programs in place.

Under the terms of this bill, employer participation in short-time compensation programs would be voluntary. Those participating would need to certify that reducing employees’ hours was a measure taken in lieu of implementing temporary layoffs, and submit written work share plans for state agency approval. If unionized, the employer would also need to provide a written plan describing the short-time compensation program for union approval. In addition, employers would be required to certify that the reduced hours program would not impact the receipt of health or retirement benefits. Employees whose workweeks are reduced by at least 10 percent would be eligible for the pro rata portion of unemployment compensation they would have received if totally unemployed. For a period of two years, the bill would provide states with temporary federal financing for 100 percent of the work share benefits paid to employees for up to 26 weeks.

This bill would not authorize payments to be made for work share programs implemented by employers whose workforce had been reduced by more than 20 percent in the three months leading up to the date the employer submits its short-time compensation plan for approval. Moreover, employers that hire workers on a seasonal, temporary, or intermittent basis, or those currently engaged in labor disputes would be similarly ineligible to participate. The legislation would direct the Department of Labor to establish an oversight and monitoring process for state agencies to ensure that participating employers adhere to the terms of their work share plans. Employers found in violation of their plans and/or act in bad faith by failing to retain their employees would be required to reimburse the state for the amount expended under the program.

This bill has been referred to the Senate Committee on Finance.
 

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Last week Rep. Jim McDermott (D-Wash.) reintroduced the Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (H.R. 3408), a bill that would entitle individuals deemed independent contractors by their employers to petition the Internal Revenue Service (IRS) for a determination of whether they are properly classified as independent contractors, significantly increase employer penalties in the event of misclassification, and make it more difficult for employers to avoid employment tax liability for such misclassification.

Specifically, the new legislation would add a new section to Chapter 25 of the Internal Revenue Code (IRC) that would enable employers to avoid employment tax liability only if they are able to demonstrate that they had no reasonable basis for classifying the independent contractor as an employee. This new Section 3511 would supplant the safe harbor provisions of Section 530 of the IRC. Under the more stringent terms of Section 3511, an employer’s decision would be deemed “reasonable” if the employer reasonably relied on a written determination addressing the employment status of the individual or another individual holding a substantially similar position with the employer, or a concluded employment tax examination that did not find that the individual (or one holding a substantially similar position) should be considered an employee. In addition, the employer or its predecessor must not have treated any other individual holding a substantially similar position as an employee for employment tax purposes for any period beginning after December 31, 1977. The assessment of whether an individual holds a substantially similar position held by another would be made using criteria established by the Fair Labor Standards Act.

Employers that misclassify employees as independent contractors would be subject to the following penalties:

• A minimum of $250 (up from the current $50) per incorrect tax return, up to $3,000,000 (currently $250,000) per year. Lower penalties would be imposed if the returns are corrected within a specified period of time, although the amounts are significantly greater than those currently imposed on employers for misclassification.
• Smaller employers (those with gross receipts not exceeding $5,000,000) would be subject to fines of up to $1,000,000 per year, up from the current $100,000 limitation.
• In the event of intentional disregard for the filing requirement, employers would be subject to a $500 fine per tax return, up from the current $100 amount. The $3,000,000 per year penalty ceiling would not apply in this instance.

If enacted, the provisions of this bill would apply to information returns required to be filed after December 31, 2009. This bill has been referred to the House Committee on Ways and Means.
 

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On Thursday, members of both the House and Senate reintroduced the Federal Oversight, Reform, and Enforcement of the WARN (FOREWARN) Act (H.R. 3042, S. 1374).  This legislation would amend the Worker Adjustment and Retraining Notification (WARN) Act by requiring more and smaller employers to notify workers of mass firings or plant closings and increasing employer penalties and enforcement mechanisms.

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A couple of bills introduced in recent weeks would have significant impact on the health care industry. A bill introduced last week by Rep. John Conyers (D-MI) would require the establishment of a safe patient handling and injury prevention standard for direct-care registered nurses and other health care workers. The Nurse and Health Care Worker Protection Act of 2009 (H.R. 2381) would order the Secretary of Labor to propose a standard under the Occupational Safety and Health (OSH) Act within one year of the bill’s enactment. The final standard – which would, among other things, eliminate manual lifting of patients through the use of assistive patient handling equipment and other mechanical devices – would be issued within two years of this date.

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Recently-introduced legislation would require employers to provide Worker Adjustment Retraining Notification (WARN) Act notices to employees in the event of mass layoffs that occur at more than one worksite, and would double the penalties for violations. The Alert Laid off Employees in Reasonable Time (ALERT) Act (H.R. 2077), introduced by Rep. Luis Gutierrez (D-Ill) and co-sponsored by four others, expands the current WARN requirement that employers provide 60 days’ notice of an impending mass layoff affecting either 500 employees or 33 percent of the workforce impacting at least 50 employees at one particular worksite.

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Senator Richard Durbin (D-IL) has reintroduced a bill in the Senate designed to use the tax code as a carrot to encourage U.S. companies to create and maintain domestic jobs with specific pay and benefits standards and maintain neutrality toward union organizing efforts. The Patriot Employers Act (S. 829) was initially introduced by Durbin – and co-sponsored by former Senator Obama – in 2007. While the current bill has not yet been released for publication, it is believed to contain the same provisions set forth in the earlier version. That bill would provide “Patriot Employers” with a 1 % tax credit if they do the following:

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Legislation introduced by Rep. Thaddeus McCotter (R- MI) would amend the Internal Revenue Code to provide employers with a tax credit for hiring veterans. The Veterans’ Employment Transition Support Act of 2009 (VETS Act of 2009) (H.R. 1647) would grant a one-time tax credit to employers, and apply to the employment of any veteran certified as such by the designated local agency.

Employers would be granted credit in the amount of 40 percent of the employee’s first-year wages. A greater tax credit is available for the hiring of disabled veterans. The Act creates a sliding percentage tax benefit scale based on the degree of the employee’s disability. The amendments made by this Act would apply to veterans who begin work after the date of enactment.

This bill has been referred to the House Committees on Energy and Commerce, Education and Labor, and Ways and Means.

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As expected, many of the failed labor and employment-related bills from the 110th Congress are being recycled this year. Just last week, the Eagle Employers Act (H.R. 989) was reintroduced by Rep. Jim Gerlach (R-PA). This bill would use the tax code as an incentive to encourage U.S. companies to create and maintain domestic jobs instead of outsourcing positions abroad. The Act would provide a 1% tax credit to employers with 50 or more employees that do the following:

• Maintain their headquarters in the United States;
• Pay at least 60% of their employees’ health care premiums;
• Maintain or increase the number of their full-time workers in the United States relative to their full-time workers outside of the country;
• Provide full differential salary and insurance benefits for all National Guard and Reserve employees called to active duty; and
• Provide its employees with certain higher levels of compensation and retirement benefits.

The bill may garner wider appeal and pass in some form during this legislative session for the following reasons: 1) the choice to become an “Eagle Employer” is completely voluntary; 2) the bill had bi-partisan support in the last Congress; and 3) President Obama has emphasized the need to create jobs for Americans.

This bill was referred to the House Committee on Ways and Means.
 

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As economic conditions decline, scrutiny over executive compensation increases. On February 17, President Obama signed into law the massive stimulus package (Pub. L. No. 111-5) containing a number of provisions limiting executive compensation for entities receiving funds under the Troubled Asset Relief Program (TARP). A new bill introduced last week would augment these provisions by creating additional government oversight for companies receiving TARP assistance.

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The stimulus legislation signed into law as the American Recovery and Reinvestment Act of 2009 (ARRA) by President Obama contains sweeping revisions to the group health plan continuation coverage provisions contained in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The ARRA also impacts other areas of employment law. For an in-depth analysis of these changes, see Littler's ASAPs: Stimulus Package: An In-Depth Look at the New COBRA Subsidy in the ARRA by: Steven J. Friedman, Susan K. Hoffman, and J. René Toadvine, and Besides COBRA: What Does the Stimulus Package Have for Employers by: Ellen N. Sueda, GJ Stillson MacDonnell, Patricia A. Haim, and Chadwick M. Graham.

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The massive $787.2 billion economic recovery package signed into law as the American Recovery and Reinvestment Act of 2009 (ARRA) by President Obama on Tuesday will impact employers in several ways. Embedded in this stimulus package are provisions relating to COBRA, business tax credits, executive compensation, and H-1B visas, among others areas.

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Given the bleak economic forecast, it is inevitable that layoffs will continue to occur as the next Administration takes office. As a result, expect the reintroduction of the Federal Oversight, Reform, and Enforcement of the WARN Act (FOREWARN Act), first introduced in both the House and Senate (and co-sponsored by President-elect Obama) in 2007 (S. 1792 and H.R. 3662). Given the almost daily announcements of major companies laying off significant numbers of employees, this bill could get immediate attention. If enacted, this law will:

• Revise the definitions of “employer,” “plant closing,” and “mass layoff” found in the Worker Adjustment and Retraining Notification (“WARN”) Act to cover more and smaller employers.
• Require an employer to provide a 90-day written notice (up from the 60-day requirement) to employees and appropriate state and local governments before ordering a plant closing or mass layoff, thus forcing employers to predict their economic futures.
• Require the employer to notify the U.S. Secretary of Labor within 60 days of a closing or layoff.
• Make employers liable for double back pay in the event of a notice violation.
• Empower the Secretary of Labor to bring civil action on behalf of employees.

In essence, more and smaller employers would be required to foresee economic downturns and notify workers of mass layoffs or plant closings, and would be required to give more notice and face stiffer penalties in the event of a violation. Because President-elect Obama emphasized his support for the unemployed and middle class, and because many in Congress might find it hard to explain a vote against giving laid off employees more notice in the current economic environment, employers can expect serious consideration of the FOREWARN Act or similar legislation.

This trend toward increased employee protection in the event of a layoff is already evident at the state level. A growing number of states have passed their own notice laws. New York’s new WARN Act, for example, requires employers to provide 90 days’ notice prior to a plant closing, mass layoff or relocation occurring on or after February 1, 2009. Contrary to previous written statements it has issued, New York’s Department of Labor is now stating that an employer planning a layoff shortly after February 1, would have to provide notice prior to the law’s effective date to meet the 90-day requirement. The New York law applies to private employers with 50 or more employees who lay off at least 25 employees. Thus, this act not only provides for broader coverage and notice requirements than those articulated in the federal WARN Act, but offers a lower threshold for triggering those requirements. Some other state laws do the same.
 

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