Pushing Back on Right to Know

The U.S. Department of Labor's request for comment on a survey that lays the groundwork for its controversial Right to Know proposed rulemaking is creating quite a stir among employers.

Monday, April 29, 2013
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Innocuous as it may seem to some, the U.S. Department of Labor's prospect of surveying workers to find out what they know about how they're classified and how they're paid has the employer community lashing out and sounding off on what such a survey really might portend.

The initial backlash from the business community occurred in the fall of 2010, when the DOL first proposed its "Right to Know Under the Fair Labor Standards Act," which has yet to be passed. According to the DOL's description of the proposed regulation, posted on its website, its intent is "to update the record-keeping regulations under the [FLSA] in order to enhance the transparency and disclosure to workers of their status as the employer's employee or some other status, such as an independent contractor, and if an employee, how their pay is computed." It also says it wants to "foster more openness and transparency in demonstrating employers' compliance with applicable requirements to their workers, to better ensure compliance by regulated entities, and to assist in enforcement."

The proposed survey, in essence, lays the groundwork for the eventual, possible additional "Right to Know" FLSA rulemaking, which would require employers "to provide every independent contractor and exempt employee a written legal justification for why they do not receive overtime," says a statement issued March 22 by the Washington-based HR Policy Association.

The DOL's "Proposed Information Collection Request for the Worker Classification Survey; Comment Request," published in the Jan. 11, 2013, Federal Register, should have been fairly innocuous, says Marc Freedman, executive director of labor law policy for the Washington-based U.S. Chamber of Commerce."This [comment request] is really only a requirement of the 1980 Paperwork Reduction Act, which says if the government [or government agency] is going to put out a form or document that requires you to submit additional information ... that agency must put it out for comment," Freedman says. "It's highly unusual for employer associations to get engaged in the PRA process at this point."

But engaged they have gotten.

In its statement, the HRPA describes comments filed March 12 with the DOL by Michael Peterson (HRPA vice president of benefits and employment policy and associate general counsel) as expressing "concern that the proposed survey could produce biased results on highly complex legal issues that not even the department's own investigators and lawyers get right every time. Particularly troubling," it goes on, "is the fact that some of the questions are purely speculative and likely to produce invalid responses from most respondents who are not familiar with the law."

For example, it says, "one question asks: 'Earlier you indicated that you are self-employed. Do you agree with this classification or do you think that, legally, you should be an employee?' "

In his letter to the DOL, Peterson details, for one thing, how "worker classification determinations are complex, so responses to some survey questions are likely to be inaccurate and invalid. Defining and determining who is an 'employee' is complex and involves a variety of laws," he writes.

According to Freedman, actual survey questions were hard to come by for members of a working group that joined to comment together, including the Chamber of Commerce, the National Association of Manufacturers and the Society for Human Resource Management. "The fact that this is a survey, not a rulemaking, means you can't really find much information out there on it," he says. "It wasn't posted anywhere, like rules would be. Those who obtained it had to submit requests."

In his 17 pages of comments, many of them responses to specific proposed survey questions, Michael P. Aitken, SHRM's vice president of government affairs, stresses that employee classification "is a core function of human resource professionals" and that, "because the planned 'Right to Know' regulations would impose significant additional administrative burdens and costs on employers, the survey will have a significant impact on the HR profession."

Aitken goes on to state that the survey and sampling methodology, "if not corrected, will lead to invalid results." He also provides extensive explanations behind his claims that: "1) DOL has not sufficiently established the necessity for conducting a worker-classification survey, 2) DOL has not provided sufficient time for review of the survey instrument and sampling methodology, 3) the planned employee sampling size is inadequate [because it's based on global estimates of proportions of workers who are self-employed or correctly classified], 4) the survey plan should include a pre-testing component, and 5) the survey questionnaire is flawed."

Beginning with the survey's introductory statements, writes Aitken, "DOL proposes to use language which is a potential source of bias [by informing respondents] that the purpose of the interviews is to conduct 'a national study on American work experiences and benefits' in order to allow DOL 'to improve policies and benefits for American workers' and to 'help the Department's efforts to promote fair hiring practices, and access to critical workplace benefits, opportunities and protections.'

"There is not proposed similar language," he states, "discussing the benefits of independent-contractor status such as being able to set your own schedule, not having to punch a time clock and owning your own business. Thus, such language will ensure that the respondents attempt to discern and provide answers that trend toward employment status, rather than independent-contractor status, in order to ensure their own 'critical workplace benefits, opportunities and protections,' which DOL obviously views as only available to employees."

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Calls for comment to the DOL's Office of Public Affairs were not returned.

As much as the survey is raising the hackles of businesses, the much greater concern, says Michael Jones, partner in the Philadelphia office of Reed Smith, is that it sounds the gong that the much-feared "Right to Know" rulemaking wasn't really shelved.

"If I'm an employer," he says, "I'm not so concerned about a survey; I'm concerned about this being a signal that the proposed 2010 rulemaking is coming back."

And what makes the rulemaking so feared?

In Jones' estimation, it's "going to require every employer to affirmatively document the basis for every classification of employee up front," with a new document for every new classification and a copy provided to every employee, explaining which exemption they fit in to and why.

The problem, he says, is "if they were ever sued, you'd be basically glued to what you did according to that document. Even if the classification was correct, that reasoning might be incorrect," and the employer could still be sued based on that faulty reasoning.

"The DOL," he says, is "going to make employers make these classifications up front, well before the job might even be filled. Five years later, when the employer is being audited, that employer would be held to something someone, perhaps without a law degree, wrote."

Jones and others expect the rulemaking won't be pushed and acted on until after the mid-term elections, for political reasons. But the survey bodes ill for major work and hand-wringing ahead, particularly for HR.

"Here at Reed Smith," says Jones, "no one has ever sat me down and told me I was classified [as] an exempt professional; no one has given me a document; we have been in existence since the 1880s and no one has sat me down and told me how I am classified. That doesn't mean I am incorrectly classified. That doesn't mean every employer should have to draft up an entire document for every classification.

"Also," he adds, "even in the same company, an accountant 2 in Minneapolis may be doing something entirely different than an accountant 2 in the Charlotte office. This means you would have to do all this paperwork beforehand."

It appears, says Jones, that a more antagonistic and non-business-friendly DOL under the current administration "wants to lock employers into something created by non-lawyers. I think it's a bit of 'gotcha.' "


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