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Martha Zackin

HR Manager’s Remarks Regarding Nature of Hiring Process May Help Employee Establish Discrimination Case

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Written by Alexandra D. Thayer (posted by Martha Zackin)

On November 12, the Payroll Fraud Prevention Act of 2013 (S. 1687) was introduced in the United States Senate.   The bill, which would amend the Fair Labor Standards Act, seeks to impose new rules and penalties relating to misclassification of employees as independent contractors.  The changes would apply to all entities covered by the FLSA, including those that do not use independent contractors or other “non-employees.”

Although the Payroll Fraud Prevention Act would not prohibit the use of properly classified independent contractors, the bill would make it unlawful to “wrongly classify an employee . . . as a non-employee,” even if the misclassification is unintentional and made in a good faith attempt to comply with the law.  If passed as currently written, the bill would:

  • Impose treble damages for misclassification when the misclassification is combined with a violation of the minimum wage or overtime pay requirements of the FLSA;
  • Require every entity covered by the FLSA issue a classification notice to all workers, informing them of their status as an “employee” or “non-employee,” and directing them to the Department of Labor for guidance.   Failure to provide the required notice would result in penalties of up to $1,100 for each individual who did not receive notice.  This penalty would increase to up to $5,000 per individual for a second offense or a willful violation;
  • Authorize the Secretary of Labor to report misclassification information to the IRS, impose additional penalties upon employers that misclassify employees for unemployment compensation purposes, and conduct targeted audits within certain industries.

The issue of misclassification continues to be front and center for many lawmakers and regulators at both the state and federal levels.  Bills similar to the Payroll Fraud Prevention Act of 2013 have been repeatedly introduced in Congress since 2010, and numerous states have recently passed or introduced legislation specifically addressing misclassification.  The IRS and DOL are also actively pursuing employers in industries in which misclassification is viewed as prevalent.

Although in the current atmosphere of partisan gridlock on Capitol Hill the proposed bill is likely to face significant push-back, the issue of “misclassification” has been in the forefront for lawmakers and regulators in recent years and is unlikely to go away soon.  The broad scope of S. 1687 means employers will be well served to stay on top of this legislation should it move forward through Congress.

Martha Zackin

HR Manager’s Remarks Regarding Nature of Hiring Process May Help Employee Establish Discrimination Case

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Article by Monica Rose Cafaro (Posted by Martha Zackin)

A recent decision by a federal appeals court underscores the need for HR mangers and other hiring personnel to watch what they say about job openings and the company’s hiring practices.

In Kidd v. Mando American Corporation, a white female employee who worked in the accounting department of a Korean-owned company was not considered for a promotion, despite her qualifications.  Instead, a Korean male was hired.  When the employee who was not hired – Leanne Kidd – complained to an HR Manager, Ms. Kidd alleges she was told that the Company’s predominately Korean management “refused to even consider an American candidate.”   Ms. Kidd also alleges that another HR employee told her that “no matter what . . . there would never be any American management in the company, it would always be Korean management . . . .”  Ms. Kidd relied on the HR employees’ comments to support her claim that that the employer engaged in discriminatory hiring practices by hiring the Korean male candidate over her and other qualified American candidates.

Finding that the company articulated a legitimate non -discriminatory reason for the adverse employment action, the lower court dismissed Ms. Kidd’s complaint.   In so holding, the lower court refused to consider the HR employees’ comments, finding that they were not admissible as evidence to show that the company’s articulated reason for denying Ms. Kidd a promotion was a pretext for unlawful discrimination.

The Eleventh Circuit overturned the lower court’s decision after analyzing various legal standards relating to hearsay.  That legal analysis is not relevant to the point of this blog entry- rather, the key point here is that HR employees, as well as other employees involved in hiring decisions, should avoid commenting on a company’s hiring practices or disclosing certain desired characteristics of an “ideal candidate.”  Periodic training, to educate and to reinforce good hiring practices and “common sense” principles, may help to remind hiring personnel and management employees of their obligations under the law.