Well folks, we made it. The New York metropolitan area has weathered through nine straight cloudy days to close out January (yes, that's actually true; and yes, you better believe pun intended). But it's now February – time to put that seasonal depression in our rearview mirror and get back on track in 2024. And what better way to accomplish that than some good ole fashion employment law updates.
We recently received a holiday gift from a vendor with the card stating that the January delivery date was intended to "stand out from the crowd." And while that attempted spin fooled no one (you know who are and you know we love you), it did spark a blog idea: everyone has their January 1st resolutions . . . but you know what people don't have – February 1st resolutions. And so, to stand out from those other employment law bloggers, here are some of our 2024 labor and employment law resolutions to help you avoid having déjà vu all over again this year (and yes, that was a Groundhog's Day the movie reference):
I Will Treat Independent Contractors Properly
I was tempted to title this section, "I will stop people from using the phrase '1099 employee'" but these newsletters are about you, not us. But to that end, the crackdown on independent contractor misclassification continues with the U.S. Department of Labor ("DOL") recently making headlines by announcing its final rule on worker classification under the Fair Labor Standards Act ("FLSA"). The rule, which goes into effect on March 11, 2024, is essentially a return to the pre-Trump administration era and focuses on a "totality of the circumstances" standard. In other words, there are six main factors the DOL will look at to determine whether an individual is an employee or a contractor. Those factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) the investments by the worker and potential employer; (3) the degree of permanence of the work relationship; (4) the nature and degree of control over performance of the work and working relationship; (5) the extent to which the work performed is an integral part of the potential employer's business; and (6) the skill and initiative of the worker.
If the DOL's new rule leads business owners to reassess whether their contractors and freelancers are properly classified as 1099s, good, because the reality is that most employers should already be doing this. Loyal followers of this newsletter likely read the prior paragraph and said, "hmm that sounds familiar" – and the reason for that is because this crackdown has been going on at the state level for a while now. New York has had a Joint Enforcement Taskforce for more than ten years. In New Jersey, Governor Murphy recently signed legislation imposing a variety of penalties for employers who engage in misclassification. And things have gotten so bad in California that you now get fined if you even say the words "independent contractor" (kidding, kidding – well only about the fine part, things are still really bad on the employment front for CA employers).
So, what's the takeaway? We have a motto here at Weinstein + Klein, and that's "try not to get sued." If you have (or are planning to utilize) the services of independent contractors, especially those performing work that is similar to the services offered by your business, you would be well-served to review those agreements and relationships to ensure you're not running afoul of any rules.
All Vendors Will Have Written Contracts
With all this talk of employee misclassification and California, there's probably an employer out there thinking, "gosh darnit, is it even possible to have independent contractors anymore?" The answer is yes, polite employer who doesn't curse, yes, it is possible to have actual 1099 individuals. For example, let's talk about freelancers.
In the middle of 2017, a New York City law went into effect called the Freelance Isn't Free Act ("FIFA" – well played, NYC). FIFA had two main components: (1) a requirement that all employers provide "freelance workers" (defined as basically any solo independent contractor) with a written contract; and (2) a requirement that all freelance workers be timely paid. Violations of FIFA carried steep penalties, including the potential for treble damages, attorneys' fees, and injunctive relief. Independent contractors were historically limited in their ability to go after clients who stiffed them on payment, and FIFA proved to be an incredibly powerful tool to level the playing field. But, FIFA was limited to NYC employers. If you were a graphic designer living in your parent's Long Island basement, you were likely out of luck (for a few reasons . . . ). But that's all about to change as of May 20, 2024.
The day before Thanksgiving, Governor Hochul signed into law a statewide version of FIFA. The new statewide FIFA largely mirrors the city version (yes, even down to the name) and provides similar protections to freelance workers. Notably, state FIFA will still exclude from the definition of freelance worker: sales representatives, licensed medical professionals, construction contractors, and practicing attorneys (still love that someone thought this one was necessary – like there's an attorney out there who would work with someone without a contract).
Remember the motto from above! If you're a New York business and your model relies on playing fast and loose with freelance workers, we'd strongly suggest a sit-down with someone to review your policies and implement more compliant systems.
I Will No Longer Be Afraid of New York Manual Workers
For nearly five years, New York employers have been besieged by "pay frequency" claims largely involving "manual workers" (defined as any employee who spends at least 25% of their time engaged in "physical labor" – and I genuinely believe this is why treadmill desks are not a thing in NY). The quick background here is that in 2019, the New York Appellate Division's First Department decided this case Vega v. CM & Associates Construction Management, LLC (for any attorneys reading this, don't you dare say anything about bluebooking – this is a newsletter for the masses), which allowed employees to file lawsuits for "late" wages. You see, under the New York Labor Law, certain employees must be paid at specific frequencies – for example, manual workers must be paid at least weekly. And so, if you had a biweekly payroll system that paid your manual workers every two weeks, you were violating the labor law by compensating these workers "late"; and, even though you paid these employees exactly what they were owed (even proper overtime), you were potentially liable for liquidated damages, interest, and attorneys' fees. This led to a flood of shakedowns litigation in matters where the employees were often paid in full.
Employers and management-side attorneys have been (impatiently) waiting for something to be done, either at the legislative or judicial level, to combat the Vega decision, and in mid-January we received help on both fronts. On January 16, 2024, Governor Hochul announced the Executive Budget Proposal and included reference to a change to the Labor Law that would eliminate Vega claims. The very next day, the New York Appellate Division's Second Department declined to follow the Vega holding and dismissed one of these "pay frequency cases".
While these are very promising developments, don't reintroduce those treadmill desks just yet. The Vega decision remains in effect and the Governor's proposal is still just a proposal. So, for now, keep that weekly payroll for anyone who is even questionably a manual worker, but help does appear to be on the way.
I Will Pay Attention to Salary Transparency Laws
As we turn the page to February, there are ten states (and some local jurisdictions) that have enacted some form of salary transparency legislation: Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island, Washington, Illinois, Hawaii . . . and hmm what's the tenth state, it's on the tip of my tongue . . . ah, yes, of course, it's California.
The laws all vary in scope and requirements but consistently require employers to disclose the salary range for open positions. Employers need to not only review their policies to ensure compliance, but as these laws gain more traction they also gain visibility. While the average person likely has no clue about "pay frequency" lawsuits, you better believe applicants are fully aware of these new laws – as well as the penalties for anyone who violates them – and it's a good idea to have trainings for anyone who conducts interviews to prepare them, not just for legal compliance, but to help avoid awkward interviews.
I Will Not Have California Employees
I kid, I kid (. . . we're not kidding).
Thank you for reading. If you enjoy this newsletter, be sure to check out our newest addition – the Business Blog! Check it out for helpful tips and updates (and less fearmongering) on all things business law related.
And as always, if you've got questions, you know we've got answers.
~ The W + K Team
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