Department of Labor Creates App That Allows Employees to Track Work Hours

This past spring, the U.S. Department of Labor announced the launch of its first application for smartphones, a time sheet to help employees independently track the hours they work and determine the wages they are owed. Available in English and Spanish, users conveniently can track regular work hours, break time and any overtime hours for one or more employers. Glossary, contact information and materials about wage laws are easily accessible through links to the Web pages of the department's Wage and Hour Division.

Additionally, through the app, users will be able to add comments on any information related to their work hours; view a summary of work hours in a daily, weekly and monthly format; and email the summary of work hours and gross pay as an attachment.

This new technology highlights the importance of accurate time keeping for employers who typically bear the burden of proof in wage and hour cases.  Without accurate time records, employers may be very vulnerable in wage and hour litigation and during DOL investigations.  

The app can be found here.

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IRS Creates Incentive to Fix Worker Classification Errors

As we have written elsewhere in this blog, when an employer misclassifies a worker as an independent contractor, the employer exposes itself to a host of potential claims and liabilities, including but not limited to  payroll taxes, income tax withholding, workers compensation, unemployment insurance, overtime pay, and benefits.

To encourage employers to voluntarily fix worker classification errors, the IRS has created a new program known as the Voluntary Classification Settlement Program ("VCSP") pursuant to which eligible employers can significantly decrease their exposure as a result of misclassifying employees as independent contractors.

With the creation of the VCSP, employers that use independent contractors should re-evaluate their independent contractor relationships and confirm whether the facts support the independent contractor label.  If an eligible employer determines that one or more independent contractors should have been classified as employees, it may apply for relief under the VCSP.  

An employer participating under the VCSP: (i) agrees to prospectively treat a class of workers as employees; and (ii) pays to the IRS an amount equal to 10% of the employment tax liability that would have been due on compensation paid to the misclassified workers for the most recent tax year and will not be liable for any interest or penalties.  In exchange, the employer becomes exempt from an employment tax audit with respect to the worker classification for the group of workers reclassified under the VCSP.

While the relief offered under the VCSP is potentially significant, employers must keep in mind that the VCSP provides relief only from federal payroll tax liabilities. The program does not reduce the exposure relating to other potential claims and liabilities, such as state taxes, workers compensation, overtime pay, and benefits.  Accordingly, employers should ensure that they understand and weigh both the benefits and the potential risks of participating in the program.  For more about the program, the IRS website contains useful information.

Firm Settles Large Sales Commission Case Against Public Tech Company

Late last year, we began representing a sales executive of a publicly traded technology company with unpaid commission claims exceeding $1 million dollars.  Our client had greatly exceeded his assigned sales goals that triggered accelerators under his compensation plan that significantly enhanced his commissions. The unique legal issue in the case involved the employer's attempt to retroactively amend our client's compensation plan in an effort to offset the huge commission that had accrued.  In fact, after the plan was "amended," the company claimed our client actually had obligation to repay thousands of dollars in commissions that had been paid to him when the original compensation plan was in effect.  It was our position that such retroactive changes were permissible only with respect to future commissions, but were unenforceable for commissions that had already been earned. 

Recognizing its tenuous legal position, the company agreed to settle just prior to the initiation of binding arbitration.  After months of negotiations, the company agreed to pay a substantial portion of the commissions we claimed were owed.      

New Maryland Law Prohibits Employer Use of Applicant and Employee Credit Information

Many employers require applicants to sign forms providing authorization for the employer to access an employee's credit report -- particularly in the banking and financial services fields. When negative information is uncovered, such as poor credit or bankruptcy, that information is often used as the basis for denying employment.

However, effective October 1, 2011, a new law will severely constrain the ability of Maryland employers to request or use an applicant's or employee's credit report or credit information to make employment decisions. The Job Applicant Fairness Act applies to all employers (with several exceptions outlined below) and allows an employer to request or use an applicant's credit information only after an offer of employment has been made. Even then, credit information cannot be used: (i) to deny employment; (ii) as the basis for terminating the employee; or (iii) to determine the terms, conditions or privileges of employment, such as the employee's salary level.

Although most employers will be required to comply with this new law, the Job Applicant Fairness Act does not apply to various financial institutions, as well as employers who are required to inquire into an applicant’s or employee’s credit history under federal or state law.

The Act does not provide a private right of action -- i.e. individuals cannot sue for violations. Rather, a complaint must be filed with the Commissioner of Labor and Industry who can assess a civil penalty of up to $500 for an initial violation and up to $2500 for repeat violation.

For more information, see House Bill 87.

Court Issues Judgment of $70,000 To Client In Wage Payment And Collection Law Case

Last year, we began representing an employee of a local business in an unpaid wage case involving rather extraordinary facts -- the employer had issued an astounding total of 57 paychecks to our client which the bank would not honor due to insufficient funds.  We filed suit in the Circuit Court for Montgomery County seeking treble (triple) damages and attorney's fees under Maryland's Wage Payment and Collection law which requires employers to promptly pay their employees wages or face severe penalties.

On March 31, 2011, the Court entered judgment in favor of our client and against the defendant employer for $70,000.  Unfortunately, the individual defendant than proceeded to file a Chapter 7 bankruptcy seeking to avoid her obligation to our client.  For the short term, the defendant's bankruptcy filing stays any effort on our part to collect the judgment entered in favor of our client; however, we anticipate challenging the defendant's ability to discharge her obligation to our client on the grounds of fraud.