HPSS Construction Law Update

July, 2022

HPSS Construction Law News

GET FIRST-HAND LEGAL INSIGHT ON THE CONSTRUCTION INDUSTRY

Independent Contractor or Employee?

Under the Fair Labor Standards Act (“FLSA”), the classification of a worker as an independent contractor or an employee determines, among other things, whether the worker is entitled to minimum wage or overtime. The Wage and Hour Division of the Department of Labor (“DOL”) has the responsibility of enforcing the FLSA and it believes that misclassification of workers is a serious problem for workers and the U.S. economy, including workers in the construction industry. However, whether a worker is classified as independent contractor or an employee has been subject to a test that many view as having been inconsistently applied.

The standard for determining whether a worker is an independent contractor or employee is known as the “economic realities” test. The test has traditionally been a six-factor balancing test that considers and weighs each of the following factors:

1) How much control does the employer have over the employee’s work?

2) Does the worker have an opportunity to earn more or less money based on how they manage the work?

3) Does the work own or invest in the equipment required to perform the work?

4) Does the work performed required a special skill?

5) Is this a long-term or permanent working relationship, or a short-term, temporary relationship?

6) How integral, or central, is the task performed by the worker to the business?

On January 7, 2021, the Trump Administration, seeking to add clarity to the analysis, published a final rule, “Independent Contractor Status under the Fair Labor Standards Act”, which established a revised five-factor “Economic-Reality Test” the DOL would implement to determine whether a worker is an independent contractor or employee. The Trump Administration’s revised “Economic-Reality Test” had two “core factors” to be primarily considered:

1) the nature and degree of the worker’s control over the work, and

2) the worker’s opportunity for profit and loss.

The three secondary factors that could be considered thereafter are:

3) the amount of skill required for the work,

4) the degree of permanence of the working relationship between the worker and the potential employer, and

5) whether the work is part of an integrated unit of production (or the individual works under circumstances analogous to a production line).

This final rule was to go into effect on March 8, 2021, but the Biden Administration delayed its implementation and, thereafter, on May 6, 2021, withdrew the rule. The Biden Administration’s withdrawal of the rule returned the analysis to the traditional six-factor balancing test. However, on March 14, 2022, the Trump Administration’s final rule was reinstated by the Judge Marcia Crone of the U.S. District Court for the Eastern District of Texas.

Judge Crone found that the Biden Administration had failed to delay and withdraw the Trump Administration’s final rule in accordance with the Administrative Procedures Act. Judge Crone further stated that the Trump Administration was attempting to clarify the definition of “independent contractor” under the Fair Labor Standards Act because federal courts had applied the traditional economic-realities test inconsistently. Accordingly, the Department of Labor was required to revert to the revised five-factor “Economic-Reality Test” implemented by the Trump Administration.

Yet, Judge Crone’s ruling does not appear to be the last word on the “economic-realities test.” The DOL has recently indicated that it plans to engage in rulemaking on determining employee or independent contractor status under the FLSA. In fact, the DOL held employer and worker public forums in June to hear the perspectives of those who would be affected. Whether the Biden Administration reverts the traditional six-factor test, retains the revised five-factor test, or creates or adopts a new test, such as California’s three-factor test, is to be seen.

Have You Submitted Your OSHA Form 300A?

OSHA recently announced the launch of its ITA (Injury Tracking Application) Non-Responder Enforcement Computer Program. The program is intended to identify employers that failed to submit injury and illness data when required. Establishments with 250 or more employees and establishments in the construction industry with 20 to 249 employees are required to annually submit electronically their Form 300A.

Each week, the Director of Technical Support and Emergency Management, Office of Statistical Analysis (OSA) or will run an OIS scan summary report of inspections open during the previous week and not yet closed. OSHA does make available, though its website, the identification of establishments that have been subject to an OSHA inspection each week. The OSA then matches the open inspections list against a list of establishments that may have failed to submit their Form 300A. A list of potential non-responders is created and broken down by Area Office. The OSA sends the weekly Area Office Potential Matches Report to the Regional Coordinators for distribution. The Area Office then reviews their weekly list to verify the following:

The inspection status. If the inspection is closed, the Area Office will take no further action for that establishment.
The establishment meets the ITA reporting requirements. The Area Office reviewer will check the inspection data to verify that the establishment meets 29 CFR 1904.41’s size and industry criteria. If the establishment does not meet these requirements, the Area Office will take no further action for that establishment.
The match is valid. The match of establishments on the OIS Scan Summary Report to establishments on the list of those that may have failed to submit their CY 2021 Form 300A data is based on nine data elements. The Area Office Potential Matches Report includes these nine data elements from the two datasets side by side. The Area Offices will review each match to determine if the match is invalid, (i.e., the establishment on the open inspection list is clearly the same establishment as the establishment on the potential non-responder list). If the reviewer determines that the match is not valid, the Area Office will take no further action for that establishment.

For establishment/inspections that are valid matches, the compliance officer will inform the employer of the reporting obligations and a citation will be issued for failure to submit the Form 300A.

OSHA has six months from the date submission of the data was due to issue a citation. This year, submissions were due by March 2. The six-month date issue a citation for noncompliance this year is September 2, 2022. If you have not electronically submitted your Form 300A and you are an establishment with 250 or more employees, or you are an establishment in the construction industry employing between 20 and 249 employees, it is not too late. Your Form 300A can be submitted to OSHA through this link.

Reminder – Increased and Expanded Inspections with OSHA’s Heat Illness National Emphasis Program

With summer now in full swing, construction industry employers can expect increased and expanded OSHA inspections at their worksites. In April, OSHA announced the creation of the Heat Illness National Emphasis Program (“NEP”) intended to prevent heat related illnesses in specific high-risk industries expected to have the highest exposures to heat related hazards.

As part of the NEP, OSHA is targeting 70 “high risk industries” with increased inspections and enforcement activity. On “heat priority days” – defined as days when the heat index is 80 degrees Fahrenheit or higher with humidity at or above 40 percent – OSHA will conduct increased inspections of these high-risk industries, which include residential and non-residential building construction. In addition to increased inspections on heat priority days, high risk industries can expect an inspection if a hazardous heat condition is recorded in the employer’s OSHA 300 log or 301 incident report or when an employee raises a heat-related issue to an OSHA compliance officer. In addition, OSHA compliance officers are directed to open or refer a heat related inspection when they observe heat hazards during investigations for other purposes. Finally, OSHA is also coordinating with the Department of Labor’s Wage and Hour Division to encourage heat hazard inspection referrals when heat hazards are observed when conducting a wage investigation.

During these increased and expanded inspections, OSHA will evaluate the employer’s heat illness and injury prevention program for the following:

· Whether the heat illness and injury prevention program is written.

· Whether the employee monitors temperature at the worksite.

· Whether there is easy access to water.

· Whether the employer provides water breaks or other scheduled rest

breaks.

· Whether there is access to shade.

· Whether the employer uses the buddy system to have employees monitor

one another for symptoms of heat illness.

For construction employers that have not already done so, now is the time to conduct a job hazard analysis to determine the potential exposures to heat illness, develop a heat illness and injury prevention plan, and then implement and train employees on all of the plan’s components. More information on developing and implementing a heat illness and injury prevention plan can be found directly on OSHA’s website, which you can access here.

Because there is currently no specific federal OSHA standard governing heat-related hazards (OSHA published an Advance Notice of Proposed Rulemaking for Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings in October 2021 but no federal heat standard is currently on the books), OSHA relies upon the general duty clause of the Occupational Safety and Health Act when citing contractors for heat-related hazards. The general duty clause requires employers to provide their employees with a place of employment that “is free from recognized hazards that are causing or likely to cause death or serious harm to employees. To prove a violation of the general duty clause, OSHA must establish (1) a condition or activity in the workplace presented a hazard; (2) the employer or its industry recognized the hazard; (3) the hazard was causing or likely to cause death or serious physical harm; and (4) a feasible and effective means existed to eliminate or materially reduce the hazard. As with all OSHA violations, OSHA was also required to prove that the employer “knew, or with the exercise of reasonable diligence could have known, of the violative conditions.”

Recent litigation before the Occupational Safety and Health Review Commission has seen some of heat citations under the general duty clause vacated. However to prevent citations in the first place, construction employers need to be aware of OSHA’s increased and expended heat inspections and be prepared to show compliance officers a working and implemented heat illness and injury prevention plan.

If you have any questions regarding Federal OSHA’s Heat Illness National Emphasis Program, please call or email either Philip Siegel or Ben Lowenthal. Philip’s email is pjs@hpsslaw.com and can be reached directly at (404) 469-9197. Ben’s email is bsl@hpsslaw.com and can be reached directly at (404) 469-9177.

Trending: Enforcement of Non-Competes Becoming More Difficult

A nationwide trend against the enforceability of non-competes and other restrictive covenants is continuing. Over the past 10-15 years, a number of states have enacted laws prohibiting the enforcement of non-competes against “low-wage” earners. At least 10 states currently have such restrictions in place. Colorado recently passed new more restrictive legislation which goes into effect in August, and Iowa and West Virginia have legislation pending which would follow suit. The trend in these states has been joined by proposed federal legislation and Presidential pronouncements limiting or banning the enforcement of these covenants.

Are these trends an indication that non-competes are on the endangered list? Not entirely. However, these recent laws do indicate that many states are cracking down, at least with respect to enforceability against “low-wage” earners. Of course, the definition of “low-wage” varies widely from state to state, so that under the new Colorado law, non-competes are not enforceable against employees earning less than a state-declared index (currently $101,250 on an annual basis), but in Illinois, the threshold is set at $75,000, and the Iowa legislation is tied to an annual wage paid at the rate of $14.50 per hour.

We have regularly advised in the past that enforcement of non-competes and similar restrictive covenants (non-solicitation or non-disclosure agreements) varies significantly from state to state, and this recent trend only reinforces that advice. The Colorado statute requires advance written notice to the employees of the restrictions in such an agreement and imposes potential civil and criminal penalties for violations. Illinois and Colorado are among the many states that have different rules for non-competes and non-solicitation agreements. Other factors affecting enforceability that vary from state to state include descriptions of reasonable time and territory and the nature of the services performed by the employee. Employers should evaluate their restrictive covenants under the law of their particular states and consider modifying the agreements or taking other steps as may be required by recent laws.

With careful review and proper planning, employers can still protect their valuable trade secrets and other business property but keeping an eye on these trends and taking action to ensure compliance can be critical. If you have questions about the use and enforceability of non-competes and other restrictive covenants in your states, please contact Philip Siegel or Scott Calhoun. You can e-mail them both by clicking here.