Strangulation by Regulation

by Peter Kirsanow

Many employers are expressing concerns about the increasingly aggressive regulatory posture of federal agencies charged with enforcing labor and employment laws. The Department of Labor sometimes seems to presume that employers are guilty of violating employment laws until proven innocent.

A few days ago I mentioned the proposed OSHA Super-Rule, “I2P2,” that some employers estimate would cost them $3,000 per employee per year. Not to be outdone, the Wage & Hour Division of the Department of Labor is working on its own super-rule related to misclassification of non-exempt employees.

The Wage & Hour Division’s regulation would require employers to conduct a written analysis of each employee’s status to certify whether such employee is properly designated as “exempt” from the overtime requirements of the Fair Labor Standards Act. A copy of the written analysis must then be given to the subject employee(s) and kept on file in case of an inspection by the Wage & Hour Division.

Yes, employers chafe at yet another recordkeeping mandate, but that’s far from their primary concern. Misclassification/overtime lawsuits are among the most financially ruinous causes of action an employer can face. A seemingly minor classification or compensable time error can result in enormous back-pay liability. Employers rightfully fear that the Wage & Hour regulation would prompt a flood of lawsuits, with the written analysis providing plaintiffs’ counsel a handy roadmap for litigation.

Without providing a safe harbor for employers who conduct the required analysis in good faith, the regulation appears more punitive than remedial. The federal government should insure that employees’ wages are paid in accordance with the law. At the same time, the government shouldn’t lose sight of the fact that a wage presumes a job.

— Peter Kirsanow is a former member of the National Labor Relations Board.