Notably, the new rule will not be applied retroactively.  However, moving forward, employers are no longer permitted to cease dues deductions upon contract expiration.  Failing to abide by a dues checkoff provision will now violate Section 8(a)(5) of the National Labor Relations Act.

By way of background, 50 years ago Bethlehem Steel, 136 NLRB 1500 (1962) held that despite the general requirement to maintain the status quo upon expiration of a collective bargaining agreement, certain contractual provisions expire along with the contract.  Since that time, dues checkoff and arbitration provisions, among other provisions, have not survived contract expiration.  

As a result, employers engaged in contract negotiations that extend beyond the contract expiration date routinely ceased deducting dues, resulting (intentionally) in reduced administrative burdens on their end and increased administrative hassle to the union, which then has to collect its own dues.  At a time when the collective bargaining agreement has expired, and the parties are presumably embroiled in tense negotiations, the last thing that a union wants to deal with is spending time to collect dues.  As a result of this recent NLRB decision, employers can no longer employ that strategy and must be mindful of continued compliance with a dues checkoff provision even after contract expiration.

Under the FLSA, an employer may credit against its minimum wage obligations the “reasonable cost” to the employer of furnishing the employee with lodging.  The FLSA regulations define reasonable cost as the actual cost of the lodging provided, i.e. “the cost of operation and maintenance,” meaning that the employer cannot make a profit.  29 C.F.R. § 531.2 et seq.   As an example, if a hotel employer furnishes a room to an employee that costs guests $100 per night, the hotel may not simply consider $100 per night as the employee’s wages, but may only account for its actual cost for the room.  This is the case except in the unlikely event that the actual cost is greater than the fair rental value, in which case the fair rental value is used.

Similarly, Connecticut law provides that wages may include the reasonable value of lodging if that condition is known to and accepted by the employee.  Unlike the FLSA, however, Connecticut law states that where housing consists of more than 1 room, the reasonable allowance that may be deducted is “guided by the prevailing rentals for similar quarters including those authorized by the local housing authority in privately or publicly funded housing.”  Conn. Agency Regs. § 31-60-3(f).   

Connecticut courts have recognized the distinction between federal and state law.  In turn, where an employer improperly credits the value of lodging, an employee is entitled to recover an amount equal to whichever calculation provides the greater remedy.  Thus, where the FLSA generally sets the higher bar by authorizing an employer to account only for the actual cost of the lodging provided, as opposed to the prevailing rental value as authorized by CT law, employers are encouraged to abide by the FLSA calculation. 

Significantly, the FLSA and the case law provide that an employer may not account for the value of lodging if the employee is required to live on the employer’s premises for the benefit of the employer.  For example, an on-site hotel manager that is required, as a condition of employment, to live at the hotel and be available to greet guests arriving late at night or to be on-call for similar duties for the employer’s benefit is entitled to that lodging without the value being factored into wages. 

Lastly, it is important to note that the employer is required to maintain records that prove the cost of the lodging.  Where an employer fails to provide evidence of the cost to furnish an employee with housing, courts have routinely denied offsets under the FLSA.

Though broader issues concerning compliance continue to arise, employers should take care to observe the seemingly minor points of the law, including the requirement to display posters in English and Spanish.  The law imposes this requirement on all employers subject to the law, irrespective of the composition of their work force.

The English and Spanish posters are available on the DOL website.

Both the guidance document and the poster are available on the DOL’s website

The Spanish version of the poster is forthcoming.

We provided a detailed review of the sick leave law in a post last month.

Though the guidance document does not appear to contain any major revelations, it does provide clarification of certain points and is in a format that is easier for employers to navigate that the Public Act.

• In determining whether an individual performs work on a “per diem” basis, the DOL will look at how businesses have traditionally defined per diem employees.  The DOL recognizes that an individual may be exempt even where his/her assignment is for a term longer than one day where the employment has the characteristics of a traditional per diem relationship.

• Compensation for use of paid sick leave at the worker’s “normal hourly wage” does not include overtime or commissions.

• The requirement to work 680 hours prior to becoming eligible to use accrued time is a one-time requirement.  Once the service worker meets the hours, he/she never has to meet it again for the same employer.

• For the purpose of the requirement that leave accrues at the rate of one (1) hour for every 40 hours worked, only time actually worked counts, i.e. vacation and other forms of paid time does off does not count towards the 40 hours worked.

• The ability of an employer to require reasonable documentation verifying the purpose of leave where leave is for three (3) or more consecutive days includes partial days.  Thus, if a worker uses only a partial day of leave on three (3) consecutive work days (not calendar days), the employer may request reasonable documentation.

• A collective bargaining agreement in effect prior to January 1, 2012, including those that provide for less paid sick leave than required under the new law, shall remain in effect until it expires or is renegotiated.  Once expired or renegotiated after January 1, 2012, the new CBA must comply with the provisions of the law.

Employers subject to the new law are well advised to review the DOL’s guidance document and to stay tuned as further guidance will likely continue to be provided as questions continue to arise.

Prior to Public Act 10-12, amending Connecticut General Statute § 31-69a, employee misclassification resulted in a single $300 civil penalty.  While numerous penalties could add up, and criminal penalties existed for certain egregious misconduct, employers did not face a significant financial deterrent.  Commencing late last year, however, the financial penalty increased to $300 per day, with each day of continued misclassification constituting a separate offense.  To put this into perspective, misclassification of just three employees for the month of August could subject an employer to a penalty of almost $30,000.  At that rate, penalties, even for small employers, can quickly skyrocket. 

Importantly, the increase is part of a broader effort to ensure proper employee classification, with numerous states and the federal government having either recently passed or currently seeking to pass similar measures.    

One of the problems for employers is that there is no uniform standard for analyzing independent contractor status.  In fact, different tests apply to determine whether a worker constitutes an independent contractor for purposes of unemployment compensation, workers’ compensation, the United States IRS, and other laws, such as the National Labor Relations Act (for unionized private sector employers) and the Municipal Employer Relations Act (for unionized public sector employers).  The tests are intensely fact specific and the determination of whether a particular worker is an employee or independent contractor can vary based upon even a seemingly minor change in the worker’s duties or responsibilities.

Hiring independent contractors can benefit an employer in a number of ways, including cost savings in that the employer does not need to provide coverage under unemployment or workers’ compensation insurance.  However, employers should take care, now more than ever, to ensure that workers are properly classified, as additional scrutiny is being placed on classification and heavy financial penalties are in place.       

Of note, Governor Malloy has indicated his support for the bill and has stated that he will sign the Act if it reaches his desk.  Supporters argue that requiring business to provide paid time off to employees is a matter of fairness.  Those who oppose the bill, however, argue that employers will be forced to cover the extra cost by reducing benefits, cutting hours or eliminating jobs.  The Connecticut Business and Industry Association is among those aggressively opposing its passage.

The bill is scheduled to go before the Senate, where it is expected to pass.  If the bill passes and is signed into law, Connecticut would be the first state in the nation to mandate paid sick leave—once again affirming its reputation as an expensive state to do business in. 

The DOL is developing new strategies to better identify and remedy labor violations in an effort to effect change across the entire construction industry.  According to the DOL, some contractors are subcontractors “cut corners with respect to wages, hours and employment conditions” and the initiative is a means to protect workers against exploitation.  Of paramount concern for the DOL is that general contractors require and ensure FLSA compliance by all of their subcontractors. 

Included in the initiative is the investigation of general contractors and subcontractors on large projects, and aggressive pursuit of corrective action for violations of the law, including payment of back wages, civil money penalties, and liquidated damages.  Between 2000 and 2010, the DOL conducted nearly 300 investigations of construction industry employers in Connecticut and Rhode Island, resulting in the payment of $5.6 million in back wages to workers.  With this new focus, the DOL seeks to increase the number of investigations and the amount of back pay paid by employers to workers.  The DOL’s press release announcing the initiative can be found here.

Some of the major FLSA requirements and pitfalls that employers encounter include:

• Payment of at least the minimum wage.  While the federal minimum wage is $7.25 per hour, Connecticut law requires payment of $8.25 per hour and Rhode Island requires payment of $7.40 per hour.
• Payment of one and-one half times (1 ½) an employee’s regular rate of pay for hours worked over 40 per workweek.
• Proper determination of what constitutes an employee’s “regular rate of pay.”  Regular rate of pay can include more compensation than the employee’s hourly rate, such as shift differentials or pay incentives for hazardous work.
• Payment for all “hours worked,” as the term is interpreted under the FLSA.  Depending on the circumstances, waiting time, on-call time, travel time, and meal periods can all constitute work time for which an employer must compensate an employee.

Compliance with recordkeeping requirements, including maintaining specified information about each employee and his/her hours worked and wages earned.  In addition, employers are required to preserve at least 3 years of payroll records, collective bargaining agreements, and sales and purchase records.  Records must be open for inspection by a DOL representative.

Given the DOL’s initiative to identify and remedy FLSA violations, Connecticut and Rhode Island employers in the construction industry are well advised to review their current wage and hour practices to ensure compliance with the law.  Significantly, in some instances, failure to comply with the FLSA can result in an award of double the amount of back wages for the past 2 or 3 years, plus attorney’s fees and court costs.