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Independent Contractor Misclassifications Targeted in DOL’s New and Expanded Budget

EverythingHR Staff | 07/15/2021 | Blog, Compensation & Research, Featured

Employers are advised to take some time to carefully read the tea leaves, as more and increasingly clear indications are coming out of Washington that significant increases in workplace enforcement are on the horizon.  The just-released FY 2022 federal budget includes a 14% increase in the DOL’s budget with the bulk of that increase benefiting enforcement agencies.

Of particular focus will be independent contractor misclassifications.  This has been a top priority for Secretary of Labor, Marty Walsh.  Looking beyond the tea leaves, employers may also want to become familiar with Massachusetts’ and California’s ABC test for determining independent contractor status and the economic realities test, which has been under review and possible revision by the administration.

For an overview of the implications of the DOL’s windfall in the 2022 budget, please continue to read.

Biden FY 2022 Budget Portends Increased Workplace Enforcement

The U.S. Department of Labor (DOL) budget proposed by President Joe Biden requests an average 14% increase over previous years with its key enforcement agencies receiving the largest appropriations.

Independent contractors targeted

Increased spending to identify and penalize worker misclassification is a clear budget goal with both the Wage and Hour Division (WHD) and the Equal Employment Opportunity Commission (EEOC) announcing their intent to focus on the volatile topic. The additional goal of bringing more independent contractors under the protection of the labor and employment laws is likely to be pursued by the DOL’s various agencies, including the WHD, the EEOC, the Office of Federal Contract Compliance Programs (OFCCP), and the National Labor Relations Board (NLRB).

Some of the efforts, which are overtly targeted at the so-called “gig economy,” will likely be deferred until the Senate has acted on the Protecting the Right to Organize (PRO) Act because it includes new definitions and standards that would significantly limit employers from classifying as many workers as independent contractors. If the legislative effort fails, as is widely anticipated, a combination of new regulations and Executive Orders is expected in short order.

Federal government contractors, already ordered to pay a $15 minimum wage, will be the “laboratory” for a number of proworker measures, from classification to joint-employer liability to neutrality in labor organizing. The OFCCP, the agency overseeing federal contractors, will receive a 43% increase, the largest proposed at the DOL.

OSHA, EEOC, NLRB staffing up

OSHA’s budget will increase by $70 million, much of it targeted toward rebuilding the staff, principally the field enforcement team, which Labor Secretary Marty Walsh wants to expand by 188 positions to 639 by year’s end. Significant additional funds will be designated for worker education and whistleblower protections.

Long-term budget plans also were announced for the EEOC, which appears to be the administration’s principal vehicle for social justice and equity. In the short term, EEOC Chair Charlotte Burrows has already announced her intention to add 450 new employees to the agency staff, an achievable goal in light of the $42 million budget increase.

The NLRB, which has been reduced in size for the last four years, is scheduled to increase its field staff by more than 100 positions to process an anticipated increase in unfair labor practice charges. Some of the agency’s goals will be delayed until the majority of the Board shifts to Democratic hands, when both new regulations and “union-friendly” decisions will likely be forthcoming.

Takeaway

The Biden administration is putting money where its stated priorities are—to increase and expand the enforcement of labor and employment laws.

Article courtesy of content partner BLR.  Authors are attorneys with Fortney & Scott, LLC, in Washington, D.C.