Perspectives

In the construction industry, where flexibility and specialized skills are heavily sought after, the classification of workers as independent contractors has long been a common practice. Independent contractors bring a range of talents and expertise to construction projects, offering unique advantages for both employers and workers.

However, recent developments in labor regulations have brought about significant changes in how independent contractors are classified, particularly in the construction sector. It is crucial for all stakeholders involved to stay informed and adapt to these new requirements to ensure compliance with the law.

The reclassification of independent contractors have significant implications for construction projects. From compliance with wage and hour laws to eligibility for certain benefits, the changes affect how construction businesses operate and engage with their workforce.

The New (Old) Regulations

Beginning March 11, a new Department of Labor rule will change how employers determine if a worker is an independent contractor of employee. The federal rule, first proposed in October 2022 and published in the Federal Register January 10, will reverse a rule made late in former President, Donald Trump’s term.

The 2021 shift by the former President’s administration altered worker classifications to focus on two factors: the nature and degree of control over work, and opportunity for profits or loss. Under the new framework-a return to the standard before the 2021 alteration-six nonexhaustive factors will determine a worker’s employment status.

The Six Major Factors When Determining Employment Status:

• Worker’s opportunity for profit or loss
• Investments made by the worker and the employer
• Degree of permanence of the work relationship
• Nature and degree of control over performance of the work
• Extent to which the work performed is an integral part of the employer’s business
• Use of the worker’s skill and initiative

There are Mixed Reviews

Construction employer groups balked at the change-calling the final rule’s standard “ambiguous and difficult to interpret”. (Associated Builders and Contractors).

Labor groups, on the other hand, applauded the update.

“Simply put, this rule will ensure the basic rights of all workers, consistent with the Fair Labor Standards Act.” (United Association of Union Plumbers and Pipefitters.)

Acting Secretary of Labor Julie Su said the final rule would ensure a level playing field for workers, particularly vulnerable workers who are misclassified and lose out on minimum wage, overtime pay, and other protections under the FLSA. Worker misclassification is prevalent in the construction industry: an estimated 1.1 million to 2.1 million workers are misclassified or paid off the books. (Century Foundation)

Final Thoughts

Employers, and especially employers who utilize the work of specialty and independent contractors, should conduct thorough audits of the employees and their current classification. Failing to comply with federal and state labor laws often leads to costly consequences such as legal penalties, back pay claims, and damages. Additionally, proper employee classification contributes to a fair and equitable workplace, building trust between employers and their workforce.

Employers would benefit from consulting with a lawyer will versed in employment law to assist in their audit of worker classifications. The attorneys at Wagner, Falconer & Judd stay up-to-date on the various laws that impact the classification of employees by state. Learn more about our services and get started today-that way you’ll be ready for the next employment law updates!

It is no secret that the construction industry has been facing significant issues completing its project backlog that have caused stress on business.  Since construction is one of the largest sectors of the U.S. economy, most can appreciate these concerns, as they in turn impact many other sectors of business.  The two main problems most of the industry is navigating are: supply chain issues and shortage of workers.  First, current supply chain issues are pushing delivery dates to double or triple their typical timelines, which make planning projects difficult and deadlines tough to uphold.  Further, even when materials or equipment are available, US Inflation at a current rate of 8.52% is driving costs to unprecedented highs.  Second, the effects of the pandemic have left a significant shortage of skilled workers in the US labor market.  It is difficult to retain quality employees and challenging to hire new or replacement workers.  This labor shortage puts pressure on any project to complete the work on time and within budget.  In some instances, construction firms have taken a laxer approach to compliance, often with dire consequences.

However, these pressures on construction firms should not cause HR departments to “throw out the baby with the bathwater.”  In May, during hearings, the EEOC cited the construction industry’s culture of racism and sexism and commented that, with much of the $1.2 trillion Infrastructure Investment and Jobs Act being earmarked for construction firms, the Act should not fund an environment of hate.  It is safe to say that construction firms are squarely in the EEOC’s enforcement crosshairs, which is never a good place to be.

Consider a case that a Washington HVAC contractor recently settled with the EEOC.  The case involved allegations against the HVAC contractor’s owner who was accused of sexually harassing female employees, including telling women they did not belong in the building trades, engaging in nonconsensual touching, leaving condoms and lubricant out in public areas of the building, and asking women to wear more revealing clothing.  Ultimately, the contractor reached a settlement with the EEOC agreeing to be subject to federal oversight for five years and pay out a total of $361,000 to seven women who were subjected to the owner’s harassing conduct

Against this backdrop, it has never been more important for construction firms to recommit to compliance: starting with its anti-discrimination and anti-harassment policies.

Review: HR representatives should review existing policies and ensure they are up to date.  If any changes are needed, or an audit reveals some employees have not received the policy, HR should undertake to ensure all employees receive and acknowledge receipt of the policies.

Train: All employees and managers should receive anti-discrimination and anti-harassment training, ideally on an annual basis.  Companies should ensure that they comply with any specific state or local laws requiring employee and manager training.

Enforce: Compliant policies are no good if they are not properly enforced.  HR must take all allegations of discrimination and harassment seriously, regardless of the position of power the alleged perpetrator may occupy.  Companies should conduct thorough investigations.  Employees should be subject to appropriate remedial action, including termination of employment if the circumstances warrant.

Simplify your compliance needs by partnering with Wagner, Falconer & Judd. Let our experienced employment law attorneys assist you with everything from employee handbooks, onboarding and training to termination. Contact us today to learn more about our services.