California DLSE Creates Information Portal for New and Small Businesses

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The California Division of Labor Standards Enforcement recently opened a separate page on its website designed to help new and small California businesses.  The web portal appears designed to help small business owners, new business owners, and businesses based out-of-state understand many of the requirements in the California Labor Code and related regulations in an easy to understand way.  Access to the portal is available by clicking here.

Three New NLRB Members Added By Obama as Recess Appointments

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On January 4, President Obama appointed Democrat Sharon Block (currently works at DOL and is former Labor and Employment Counsel for Senate HELP Committee under Senator Edward Kennedy), Republican Terence Flynn (former Crowell and Moring attorney and current counsel to NLRB Board Member Brian Hayes) and Democrat Richard Griffin (General Counsel for IUOE) to the NLRB as recess appointments in order to fill the vacancies recently created by Wilma Liebman's retirement, the expiration of Craig Becker's term as well as an existing Republican vacancy.  This move is very controversial and brings great uncertainty to the situation.

History

The great men who founded our nation did not anticipate that Congress would remain in session almost all year long.  As a result, they allowed the President to bypass the confirmation process and make interim "recess" appointments during periods when the Senate was unavailable to play their important role of vetting and confirming (or denying confirmation) of presidential appointees.  The theory was that this would avoid having critical posts left vacant for many months while the Senate was in recess.  Presidents have often used this loophole as a way to put nominees that they believe could not pass the hurdle of Senate confirmation into key posts.  Presidents as far back as Washington have used recess appointments.  In fact, William Brennan was appointed to the United States Supreme Court by President Eisenhower through a recess appointment (although he was subsequently confirmed). 

Last year, in the United States Supreme Court case of New Process Steel, the Court held that the NLRB needed at least three members in order to have a quorom and decide cases.  Last week, Obama used recess appointments to ensure that the NLRB maintained a quorom, but at the same time sidestepped Senate Republicans who had deadlocked the nomination process.  Although the recent disputes between Congressional Republicans and the NLRB are more complex to explain than this blog allows, the dispute really boils down to an interpretation of the NLRB's role.  Congressional Republicans view the NLRB's role to be a "union neutral" government agency that is designed to enforce the NLRA and help regulate union-management relations in the United States.  The Democratic members of the Obama NLRB, starting with former chairperson Wilma Liebman, have taken the view that the NLRA was enacted to promote unionization and that therefore the NLRB is an agency that should be looking to promote unionization and is a "pro-union" government body. 

Unprecedented Controversy

Many prior recess appointments have caused controversy.  However, the actions of Obama on January 4 have raised the bar even further, for the following reasons:

1.    There is a real question as to whether the Senate was in recess on January 4.  The Senate was holding "pro forma" sessions during the holiday break in an attempt to prevent Obama from being able to make recess appointments.  Obama ignored this fact and made the recess appointments anyway.  If the Senate was not in recess legally speaking, then these appointments are void.  The legal test that is considered the proper measuring test for this analysis is whether the adjournment of the Senate is of such duration that the Senate cound not receive communications from the President as a body in making appointments.  Many feel the President's unilateral declaration that Congress was in recess is wrong and improper, and that these appointments do not pass constitutional muster.  This question will likely have to be answered by the court system.

2.    Most recess appointees (although certainly not all) were, like Craig Becker, somehow nominated or at least floated by Congress before being given a recess appointment.  The new NLRB appointments were never previously nominated or floated by Congress or Congressional leadership and thus, are completely unvetted. 

3.    The NLRB's actions in (a) filing a complaint against Boeing for moving its Dreamliner plant to South Carolina, a right to work state, (b) engaging in rulemaking procedures to modify the election process to make it easier for unions to get certified, and (c) enacting rules to require additional postings for employers has commenced an unprecedented battle between Republican members of Congress and the NLRB.  Obama making these recess appointments with this battle in the background is the equivalent of dropping 1,000 gallons of gasoline on an already expanding campfire and only escalates the situation.  Certain Congressional Republicans are on a mission to shut down the NLRB.  Certain NLRB Members and many in the union community are determined above all else to win this battle with the Republicans in Congress or, if not, to do whatever in their power to implement a pro-union anti-employer agenda as long as they can, in part to send a message to the Congressional Republicans as part of this battle.

What Does This Mean and Where is This Heading?

These recess appointments are likely to lead to the following consequences:

1.    This is going to be a hot election topic as Republicans will use the pro union NLRB position to try to alienate anti-union and union neutral voters from reelecting Obama, while Democrats will attack Republicans for improperly using political gamesmanship to prevent the President from filling important NLRB posts.

2.    If Congress and the President/NLRB cannot find another solution (unlikely in this election year and with the current environment), there is going to be great uncertainty on the status of the NLRB and its power until the United States Supreme Court rules on whether these appointments were consitutional.  Such a ruling will take many months and probably will not occur until after the election in November.

As a result, it appears as if this is heading to another Court battle similar to the one in New Process Steel.  Sometime in the near future, the existing NLRB is going to issue a decision that has a material adverse impact on an employer or group of employers.  I would expect that after that happens, a lawsuit (or even series of lawsuits) will be filed challeging the decision on the grounds that three of the five NLRB members were appointed in a manner that violates the United States Constitution and that therefore the NLRB did not have a quorom to issue the decision according to New Process Steel, and, as a result, the NLRB decision is void. 

Thus, for 2012, no matter which side of the fence you sit on, you should expect great uncertainty and increased controversy in the regulation of labor-management relations in our country.

NLRB Postpones Start Date for Contested New Poster

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The NLRB announced today that it is postponing the implementation date for its recently issued employee-rights notice.  The new effective date is January 31, 2012.  The NLRB's stated reason for the postponement is to "allow for further education and outreach" in light of "queries from businesses and trade organizations . . . about which businesses fall under the Board's jurisdiction."   Coincidentally, however, the NLRB's newly required poster currently is under both legislative and legal attack.  As reported in our prior post, legislation has been introduced to block implementation of the new poster, and lawsuits have been filed by various groups seeking to enjoin implementation.  Stay tuned for further developments on this contested issue.

IRS Introduces Partial Amnesty Program for Independent Contractor Misclassification

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On September 21, 2011 the Internal Revenue Service introduced the Voluntary Worker Classification Settlement Program that offers employers the opportunity to gain certainty regarding potential past federal tax liability associated with misclassifying workers as independent contractors.  The Program allows employers to voluntarily reclassify workers that were improperly classified as independent contractors into employees and pay a minimal payment (federal payroll taxes, interest and penalties) to cover past federal payroll tax obligations for the contractor-turned-employee.  A link to the IRS announcement with more details about the Program is here.

To be eligible for the Program, an employer must:

(1) Consistently have treated the workers in the past as nonemployees,
(2) Have filed all required Forms 1099 for the workers for the previous three years, and
(3) Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.

With the federal and state authorities increasing their enforcement in this area, the primary benefit of this Program is that it allows employers that believe they may have missclassified workers as independent contractors to be assured, by paying the minimal amount to the IRS (10% of the back payroll taxes owed), that they will have not have any further past federal tax liability.

There are, however, significant risks with using this Program.  This program is not a complete amnesty program.  There are many areas where an employer can be liable when it misclassifies employees as independent contractors other than federal payroll taxes.  This Program only provides relief for federal payroll taxes.  Participation in this Program would still leave the employer with potential liability to state taxing agencies, the employer's workers' compensation carrier, and directly to the misclassified worker.  In fact, using this Program and then reclassifying the workers as independent contractors may alert the state agencies to the possibility of liability for unpaid state payroll taxes and unemployment contributions.  If your workers' compensation carrier becomes aware of the misclassification it can seek payment for past unpaid workers' compensation insurance premiums under the theory that the workers should have been on the payroll used to calculate the amount of the premiums.  The reclassification of the workers may also alert them to potential recovery on a variety of issues, including but not limited to unpaid overtime, missed meal and rest breaks and unpaid employee benefits that they did not receive during the time period they were misclassified (such as retirement/pension benefits, stock options, health insurance, and vacation).  Moreover, using this Program may be seen as an admission that, in fact, the workers were not independent contractors, thereby making it easier for the state agencies and individual employees to pursue these potential damages.  Finally, the Program includes a provision whereby the employer is subject to future payroll tax audits from the IRS for a six year period as opposed to the normal three year statute of limitations.

Although the Voluntary Worker Classification Settlement Program offers certainty regarding past federal taxes, use of the Program could lead to other issues.  We recommend that employers think carefully about the risks to their workforce before using this Program and consult with competent attorneys and/or tax advisors before doing so.

NLRB Continues to Make Things Easier for Unions

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After the EFCA card check bill died on the Congressional vine in 2009, Former NLRB Chairperson Wilma Liebman, made it clear that because she believed that Congress was unable to create a fair playing field for unions, she and fellow Democratic NLRB Board Members Craig Becker and Mark Pearce were going to use their Democratic majority to "level the playing field" for the unions. She cited declining union membership in the private sector as a major problem, and vowed to use whatever legitimate power the NLRB had through rulemaking and other procedures to help ensure that the National Labor Relations Act was able to be used as it was intended when enacted (to promote union membership and organization).

A number of efforts have already been undertaken by the NLRB board to help make it easier for unions to organize in the private sector. One such effort was commenced in December 2010, when the NLRB proposed a rule that required all private sector employers to inform their employees about the employees' rights to organize, as well as other related rights. Last week, in its latest effort to "level the playing field," Liebman and the NLRB turned that proposed rule into a Final Rule.

Under the Final Rule, effective November 14, 2011, private-sector employers whose workplaces fall under the National Labor Relations Act (note that this includes most employers, other than railroads and airlines covered by the Railway Labor Act and very small employers) will be required to post an NLRB employee rights notice where other workplace notices are typically posted. Also, employers who customarily post notices to employees regarding personnel rules or policies on an internet or intranet site will be required to post the Board's notice on those sites as well.

Copies of the notice will be available from the Agency's regional offices on or before November 1, and it may also be downloaded from the NLRB website, when it becomes available. The NLRB notice will state that employees have the right to act together to improve wages and working conditions, to form, join and assist a union, to bargain collectively with their employer, and to refrain from any of these activities. The notice will provide examples of unlawful employer and union conduct and instructs employees how to contact the NLRB with questions or complaints. For a summary of the Final Rule click here and for a complete explanation of the Final Rule and its basis, click here.

Note: Some may wonder why we listed Wilma Liebman as the Former NLRB Chairperson. Well, effective Saturday August 27, Ms. Liebman's term expired. The NLRB is now down to 3 members (New Chair Democrat Mark Pearce, Democrat Becker, and Republican Hayes), which is the minimum number that can enact rules and make case decisions. Becker's term expires at the end of December 2011. Thus, if Obama does not move quickly to make another appointment, we should expect that the NLRB will be moving very quickly to finalize its proposed rules to streamline the union election process and make other moves to make it easier for employees and unions to exercise their rights to organize and bargain under the National Labor Relations Act. We will continue to keep you posted on these developments which are important to unionized employers as well as non-union employers, where the threat of unionization exists.

IRS Mileage Rate Increases July 1

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The IRShas announced a 4.5 cent increase in the standard mileage rate to be in effect for the last six months of 2011. Effective July 1, 2011, employers who use the IRS rate to reimburse employees for business mileage must pay 55.5 cents per mile. We will post any further changes here.

Can the NLRB Tell You Where to Open Your Next Facility?

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If you read the newspaper or follow the news, you are aware of the dispute between National Labor Relations Board and Boeing Company regarding the location of Boeing's new South Carolina plant as a second assembly line to build its 787 Dreamliner. The dispute has been widely covered by the media since last month when the NLRB filed a complaint demanding that the Boeing facility be shut down and that all the jobs be moved from South Carolina, a right to work state, to the state of Washington.

The NLRB complaint alleges that Boeing's 2009 decision to open the South Carolina facility constituted an unfair labor practice against a Machinist and Aerospace Workers local that represents employees in Washington and Oregon. South Carolina is a right-to-work state, meaning workers don't have to join unions even in organized workplaces. The NLRB complaint alleges that Boeing violated the National Labor Relations Act ("NLRA") because its executives noted that the risk of labor strikes and the costs associated with such strikes is one of the reasons they chose to open the plan in South Carolina. The NLRB claims that this proves that Boeing acted out of "anti-union animus." The NLRB complaint demands that the plant be opened in Washington stating: "To remedy the alleged unfair labor practices, the (NLRB) acting general counsel seeks an order that would require Boeing to maintain the second production line in Washington State." According to Boeing's CEO, this NLRB demand is made in the face of union contracts that expressly allow Boeing to open new facilities at its discretion and further points out that since the decision was made, Boeing has added over two thousand union jobs in Washington.

The complaint has sparked shock and anger in the employer community. Many view the allegations against Boeing as an escalation of the NLRB's "anti-business and pro-union" sentiment. Senate Republicans are already meeting to propose legislation to amend the NLRA to guarantee employers the right to decide where to open their business without such interference by the NLRB. South Carolina's lawmakers are especially outraged by the NLRB's actions. Yesterday, Boeing's CEO specifically struck back at the NLRB with an article in the Opinion section of the Wall Street Journal. Boeing's CEO, Jim McNerney, wrote that the NLRB's actions "assaulted the capitalist principles" that sustain our country's competitiveness in the international marketplace and the actions by the NLRB are likely to accelerate the overseas flight of good paying American jobs. A copy of the Wall Street Journal article is available here.

This dispute appears to be headed for a long drawn out court battle that could even influence the 2012 Presidential election. The business and labor communities will be watching closely, as will we. In the meantime, the current lesson is that employers and their executives should be very careful about what they say publicly regarding how they feel about strikes and unions, because it may be used against them later to help prove alleged "anti-union animus."

DOL Launches Timekeeping Application for Smartphones

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The U.S. Department of Labor has launched a "timesheet" application for smartphones that allows employees to record their hours worked, break times, and overtime. The application also allows users to make notes regarding their work, view a summary of work hours and projected gross pay, and email the information as an attachment. Additionally, the application provides users with access to the DOL's information regarding wage laws and DOL contact information. To view the application, click here.

In its press release, the DOL stated that the intent behind the application is to provide workers with a tool that they can use to obtain wages they believe they are owed. Secretary of Labor Hilda L. Solis stated that, "This app will help empower workers to understand and stand up for their rights when employers have denied their hard-earned pay." The DOL further stated that the information in the application may be "invaluable" during an investigation by the Wage and Hour Division.

That information may also impact private litigation. As part of discovery the parties may access the information kept in this application as evidence of the employee's claims. Employers may also explore in discovery whether the employee's smartphone recorded the person's location at the time they allege that they worked. That information may allow employers to confirmwhether the person was at the job-site when they recorded time worked. Additionally, this move by the DOL stresses the importance of drafting and training managers to enforce clear timekeeping policies that direct employees to record all the time that they work.

NLRB Warns of Extended Shutdown and Furloughs

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NLRB Chairwoman Wilma Liebman announcedlast weekthat the NLRB budget would be severely impacted if the House budget bill was to pass. Liebman stated that the NLRB would lilkely have to furlough all of their employees for nearly three months (55 workdays) between now and September if the bill passes. A vote on the bill (HR1) is expected soon.

In her statement Liebman explained:

"Nearly all of the agency's budget is spent on salaries and rents; there are no programs to eliminate or postpone. The only way to meet this extreme and immediate reduction would be to furlough all of the NLRB's 1,665 employees for 55 workdays, or nearly three months, between now and the end of September. The great majority of these employees work far from Washington D.C., in 51 local offices, where every NLRB case begins. The economic impact of this cut would be felt by families and communities in 33 states.

If enacted, the House proposal could force the NLRB to curtail all agency operations, including investigating alleged illegal practices by private sector employers and unions, conducting workplace elections, and helping to settle election-related disputes. Regulation of a broad range of conduct, such as unlawful lockouts of workers, termination of union organizers, refusals to bargain with unions selected by workers, unilateral changes to contract provisions covering such things as health insurance and pensions, unlawful strikes, picket line violence, and secondary boycotts, would be stalled if this proposal were adopted."

Such a shutdown would be unprecedented and depending on where they are in negotiations/impasse, could even have some effect on whether we have an NFL season next year, given the timing outlined by Chairwoman Liebman. Stay tuned for further updates.

US CIS Releases New I-9 Manual

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U.S. Citizenship & Immigration Services (CIS) released a new I-9 manual on January 5. The manual is a big improvement from previous versions in that it helps clarify many issues and is easier to navigate through. It can be found at http://www.uscis.gov/files/form/m-274.pdf.

Also, it should be noted that Immigration & Customs Enforcement (ICE) has been aggressively fining companies for mere technical I-9 violations. Even where the company has no unauthorized workers, ICE has recently been coming down hard on mere technical violations.

For example, in September 2010, Abercrombie and Fitch was fined $1 million because it's digital I-9 software had a glitch which resulted in some I-9's having blank fields. Even though all of the employees in question were work authorized and all had I-9's, ICE still fined the company in order to send a message. The Officer in Charge of the investigation noted: "This settlement should serve as a warning to other companies that may not yet take the employment verification process seriously or provide it the attention it warrants. " The ICE press release can be seen at http://www.ice.gov/news/releases/1009/100928detroit.htm.

Until Congress creates a digital social security card to help employers through the process, I-9's that are not compliant will affect the value of your company and expose management to liability. Employers are encouraged to be proactive in this area and ensure compliant I-9 practices.