Post-elections Implications for Labor Bills in Congress

Now that the midterm elections are decided — with Republicans winning back the House and the Democrats retaining a narrow majority in the Senate — what are the prospects for major pieces of employment legislation that were pending when Congerss adjourned before the elections?

Better than some than for others.  Not looking so good are:

  • the Employee Free Choice Act. This bill, which would make it easier for unions to organize workers by eliminating the secret ballot in favor of allowing a majority to ascent to union representation by checking off their choice on a card, was on life support before the election and clearly isn’t going anywhere in its original form. Media reports in the election run-up had the AFL-CIO hoping that some new members of Congress would at least be open to a compromise version of the bill.
  • the Fair Pay Act. The bill would amend the Fair Labor Standards Act, the principal federal law covering minimum wage, equal pay, overtime requirements, and other labor-related issues. While the Equal Pay Act currently prohibits only paying men and women differently for substantially similar work, the Fair Pay Act would expand the EPA to prohibit gender discrimination between men and women performing dissimilar work in equivalent jobs. The business community opposes this because it fears it would lead to wages being set by the government. It is not likely to advance as is in the new Congress.

On the other hand, there could be an opening for two pieces of legislation addressing the issue of misclassifiction of employees as independent contractors, a subject of increasing scrutiny by the U.S. Department of Labor.

One, the Fair Playing Field Act of 2010, would close a tax loophole in Section 530 of the Internal Revenue Code that has given employers a safe harbor to treat workers as independent contractors for employment tax purposes as long as the company has had a reasonable basis for such treatment and has consistently treated such employees as contractors by reporting their compensation on a 1099 Form.

The second bill — the Employee Misclassification Act of 2010 — would amend the FLSA to create a new labor law offense of misclassifying an employee as an independent contractor.

In addition, once enacted, the act would also impose strict recordkeeping and notice requirements upon businesses as to workers treated as independent contractors, expose such businesses to fines of $1,100 to $5,000 for each misclassification of an employee as an independent contractor, and award triple damages for violations of the minimum wage or overtime provisions of the FLSA for misclassified employees.

According to Richard Reibstein of Pepper Hamilton LLP “the need for federal legislation in the area of misclassification is hard to argue against.”  Congress can take corrective steps, he argues, “to avoid placing businesses and workers in an untenable position, where they may be found by the same court to have properly classified an individual under one of the two new proposed laws but improperly classified him or her under the other.”

If both sides agree on the need for legislation, that opens the door for compromise that would allow a modified version of one or both of these bills to pass.

It’s doubtful any of these bills would come to the floor of the House or Senate during the upcoming lame-duck session where the Democrats still hold the majority. Rather, any action on labor legislation is likely to wait until the new Congress — with its larger Republican numbers — is seated in 2011.

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