During the past several months, several significant federal
labor and employment laws have been enacted into law. In addition,
legislation currently pending in Congress will have an impact on
employers, if enacted.
HIRE Act
The HIRE Act, which took effect March 18, 2010, provides tax
credits to employers that hire new employees who were unemployed or
employed for less than 40 hours during the 60 days before they
started work. (Public Law No. 111-147). The Act provides two tax
benefits, a payroll tax exemption, and a new hire retention
credit.
Under the payroll tax exemption, employers are exempted from their
6.2 percent share of the employee's social security tax payment
for all wages paid to the qualified employee between March 19, 2010
and December 31, 2010. The qualified employees are still required
to pay their own social security tax, and the act does not affect
payment of Medicare taxes, which must be paid as usual.
The second tax credit is the new hire retention credit. If an
employer retains a new qualified employee for at least 52
consecutive weeks, the employer can claim a tax credit equal to an
additional 6.2 percent of wages paid to the employee over the
previous year, up to a maximum of $1,000 per new employee.
Employers must obtain a signed affidavit from a qualified employee,
certifying that they have not worked more than 40 hours in the 60
days before they started their new job. The IRS provides Form 941
for this purpose, but companies may create their own form.
Paycheck Fairness Act (Pending)
Following his success in obtaining an extension of
unemployment benefits, President Obama has recently directed his
attention to the Paycheck Fairness Act. (S. 182). The act passed
the House of Representatives in January 2009 (H.R. 12), but has yet
to pass the Senate.
By amending the Equal Pay Act of 1963, the Paycheck Fairness Act
would require employers to demonstrate a "bona fide
factor" other than gender, such as "education, training,
or experience" that justifies a difference in pay between men
and women that perform the same job. A "bona fide factor"
cannot be "based on or derived from a sex-based
difference," must be "job-related," and
"consistent with business necessity." Employers would
still be able to make pay decisions on a seniority, merit, or
earnings-based system.
Any employee could challenge a disparity in pay and require the
employer to prove that the difference was not based on gender and
was consistent with business necessity. Furthermore, an employee
could defeat this defense by demonstrating that there is an
alternative employment practice that would serve the same business
purpose without producing a pay disparity. The bill would allow an
employee to sue an employer for compensatory damages if they do not
remedy pay disparities and punitive damages if the employer acted
with "malice or reckless indifference."
In an effort to remedy some of the circumstances that cause pay
disparities, the bill would also establish grants for programs that
provide training in negotiation skills for girls and women, and
require the Equal Employment Opportunity Commission and Bureau of
Labor Statistics to collect additional data on pay equity.
Employee Misclassification Prevention Act
(Pending)
Another bill that has been slowly progressing through the
legislature is the Employee Misclassification Prevention Act. (H.R.
5107). U.S. Department of Labor Deputy Secretary Seth Harris spoke
on July 17, 2010 in support of the bill before the Senate Committee
on Health, Education, Labor, and Pensions. The bill seeks to
prevent misclassification of employees as independent contractors,
and provide significant penalties for employers that deliberately
misclassify their employees to avoid paying taxes or complying with
labor laws.
The legislation would require employers to maintain documentation
of all nonemployees who perform labor or services for payment, and
establish administrative penalties for businesses that misclassify
employees or pay unreported wages to employees without proper
recordkeeping. Some studies show that forcing businesses to
classify independent contractors as employees could increase labor
costs between 20 to 40 percent.
While the Obama administration has been aggressively promoting this
bill, nearly identical legislation during the 110th Congress never
made it out of committee.
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