AGC's Human Resource and Labor News - June 14, 2018 / Issue No. 06-18 (Print All Articles)

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Court Finds OFCCP Construction Audit Program Violates Contractor’s Fourth Amendment Rights

A federal district court has ruled that the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) violated the Fourth Amendment’s prohibition of unreasonable searches and seizures in an attempted audit of construction contractor Baker DC.

A federal district court has ruled that the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) violated the Fourth Amendment’s prohibition of unreasonable searches and seizures in an attempted audit of construction contractor Baker DC.

This is an important decision for the construction industry and OFCCP because it finds fault with a discretionary OFCCP construction industry audit protocol that the agency developed during the Obama Administration and was applying nationwide.  Further, it:

  1. Confirms that OFCCP must get a warrant or its federal civil agency equivalent (i.e., evidence of a violation of an OFCCP rule or OFCCP-enforced statute, which was not alleged in this case) or have a “neutral administrative plan” to select contractors for audit before starting a construction audit (given OFCCP’s current and historic audit procedure to start construction audits with an on-site investigation); and
  1. Holds that OFCCP’s nationwide audit practice of taking contractors and subcontractors out of audit order upon receiving “credible” oral and/or written complaints of alleged unlawful discrimination violates the Fourth Amendment’s prohibition on unreasonable searches and seizures because it renders selection for audit decision no longer “neutral.”  

Again, without a warrant or evidence of a violation of one of the three statutes that OFCCP enforces, OFCCP must have a “neutral” administrative plan to select a construction contractor for audit.  This is particularly important given the Office of Management and Budget’s restriction on OFCCP forbidding the agency from asking construction contractors questions and from seeking documents or information before commencing on-site investigations of construction contractors.  (There is no “Desk Audit” preceding OFCCP’s on-site investigation of construction contractors.)  So, OFCCP may not gather information or documents from construction contractors before an on-site investigation and may not undertake an on-site investigation without a warrant or its equivalent.

This case also signals an important limit on OFCCP’s Expedited Hearing Procedures (EXP), which limit discovery (i.e., depositions and written interrogatories) when OFCCP designates the case for EXP.  Depositions are vital, however, to discover evidence that OFCCP’s implementation of its asserted “administrative neutral plan” was actually not neutral at all.

AGC has watched this case closely. The industry will now be watching to see what new audit protocols emerge from OFCCP for construction contractors.  In fact, top leadership at OFCCP has already invited AGC to discuss the development of such protocols, and preparations are underway.

Editor’s Note:  This article is based on an article previously published by Direct Employers and reprinted with permission.  Author John C. Fox, president and partner at Fox, Wang & Morgan P.C., represented Baker DC in the litigation.


Construction Staff Wages Projected to Rise by 3.4% This Year

Submissions due Wednesday, June 20th

According to the latest Contractor Compensation Quarterly (CCQ) published by PAS, Inc., construction staff wages rose by 3.7% in 2017 and contractors are projecting wages to increase an average of 3.4% in 2018. The prediction is based on data gathered from 295 companies who participated in the 36th edition of PAS’s Construction/CM Staff Salary Survey. Though the projected 2018 increase is 3.5% for professionals & middle managers, it is pointed out that historically predictions are usually about .5% low, so year-end 2018 is expected to exceed 2017’s 3.7% increase. 

According to the latest Contractor Compensation Quarterly (CCQ) published by PAS, Inc., construction staff wages rose by 3.7% in 2017 and contractors are projecting wages to increase an average of 3.4% in 2018. The prediction is based on data gathered from 295 companies who participated in the 36th edition of PAS’s Construction/CM Staff Salary Survey. Though the projected 2018 increase is 3.5% for professionals & middle managers, it is pointed out that historically predictions are usually about .5% low, so year-end 2018 is expected to exceed 2017’s 3.7% increase.


©PAS, Inc. and reprinted with permission


Readers are warned that it is challenging to analyze trends and interpret the resulting implications, noting that predictions last year were a little off. To give a broader picture, PAS dives deeper into the numbers gathered on base and variable pay as they each address a different need and together are important to any compensation program and the goals of companies. Companies are advised on the equal importance of each type of pay and not to put one over the other.

PAS offers AGC members a special discount on PAS products.  For more information, contact PAS at (800) 553-4655 or visit www.pas1.com.

Jeff Robinson, president of PAS, Inc., is a regular sponsor and presenter at AGC's Construction HR and Training Professionals Conference.


ICE Workplace Inspections on the Rise; Is Your Company Prepared?

Register Now for Form I-9 and E-Verify Two-Part WebEd Series

U.S. Immigration and Customs Enforcement (ICE) has ramped up workplace inspections, increasing audits and arrests as part of an effort to find illegal workers and deter businesses from hiring them. According to recently released data, ongoing worksite cases have already doubled in fiscal year 2018 in comparison to last year. In light of these developments, don’t miss out on this valuable AGC WebEd series and learn how to stay a step ahead of a potential audit.

Register Now for Form I-9 and E-Verify Two-Part WebEd Series 

U.S. Immigration and Customs Enforcement (ICE) has ramped up workplace inspections, increasing audits and arrests as part of an effort to find illegal workers and deter businesses from hiring them.  According to recently released data, ongoing worksite cases have already doubled in fiscal year 2018 in comparison to last year.  In light of these developments, don’t miss out on this valuable AGC WebEd series and learn how to stay a step ahead of a potential audit.

From Oct. 1, 2017, through May 4, the agency’s Homeland Security Investigations (HSI) opened 3,510 worksite investigations; initiated 2,282 I-9 audits; and made 594 criminal and 610 administrative worksite-related arrests, respectively. In comparison, for fiscal year 2017 – running October 2016 to September 2017 – HSI opened 1,716 worksite investigations; initiated 1,360 I-9 audits; and made 139 criminal arrests and 172 administrative arrests related to worksite enforcement. Derek Benner, the Acting Executive Associate Director for ICE’s Homeland Security Investigation division, has indicated ICE would like to open 15,000 audits per year if possible.

As for penalties, ICE calculates them by dividing the number of violations by the total number of employees to reach a “violation percentage”. The penalties, which range from $220 to $2,191 per violation, go up depending on whether it’s a first, second, or third offense. A recent agency fact sheet makes it appear that violation percentages are calculated separately depending on whether you’re talking about an I-9 violation--such as failing to properly complete a section of the form--or to knowingly hiring and/or continuing to employ an unauthorized immigrant. But in practice, it is being reported that ICE is combining the two types of offenses to reach a higher percentage and impose a higher fine.

For more information, contact Claiborne Guy at claiborne.guy@agc.org or 703-837-5382.


Registration Opens for 2018 Construction HR and Training Professionals Conference

Registration is now open for the 2018 Construction HR and Training Professionals Conference and pre-conference Federal HR Workshop to be held October 10-12, 2018, in Fort Worth, TX.

Registration is now open for the 2018 Construction HR and Training Professionals Conference and pre-conference Federal HR Workshop to be held October 10-12, 2018, in Fort Worth, TX.

AGC's “HR/TED Conference” provides two days of education and networking for HR, training, and workforce development professionals in the construction industry. Educational sessions for training professionals cover the most cutting-edge techniques in training and development currently in use and envisioned for the future in the industry. The HR sessions help HR professionals in the industry remain up-to-date and compliant with employment laws and best practices. Some sessions interest both HR and training professionals alike.

Attendees can expect to walk away from this year's conference with practical skills and knowledge that they can begin to implement immediately. Plus, they can take away insights from colleagues who face the same challenges they face every day. Some sessions will interest both HR and training professionals alike. Sessions include:

  • Labor & Employment Law Update
  • Minimizing Risk and Preventing Harassment
  • Creating a Sustainable Craft Workforce Using Craft Training Programs, and
  • “Active Shooter” Response Preparation

Back by popular demand is the pre-conference Federal Construction HR Workshop.  Designed to help staff responsible for compliance on federal and federally assisted projects, the workshop provides practical information and best-practice advice from experts and peers experienced in the area.

Not to be missed this year are the Conference’s four anchor sessions.  During the opening session of the conference, speaker, trainer, and author Pete Smith will kick off the conference with his session “Dare to Matter: Rising to the Level of Significance.”  Rob Salome, Retired Army Colonel and former City Manager of Fort Campbell, KY, will close the first day of the conference with the keynote session. On the final day of the conference, Matt Abele of Caddell Construction will present a case study on strategic resource allocation. And to close out the conference, NCCER will moderate a panel on workforce development. This session will be informative for everyone as the panelists will share practical ideas and solutions to the ongoing workforce crisis.

General and specialty contractor staff, AGC chapter staff, and other professionals involved in workforce and professional development, education, human resources and training are invited to attend. Attendees will also earn HRCI credits.

CLICK HERE TO REGISTER

For more information, contact Claiborne Guy at 703-837-5382 or claiborne.guy@agc.org.


Union Sector Reports Small but Prevalent Craft Worker Shortages, and Expects Growth

“Optimism about future job opportunities and market growth in 2018 and beyond remains high among union contractors, labor representatives and owner-clients – but at the same time, many remain concerned about a growing shortage of union craft workers,” reports The Association of Union Constructors (TAUC) in a recent press release about the publication of the 2018 Union Craft Labor Supply Study. The study was conducted by TAUC and the AGC-supported Construction Labor Research Council.

“Optimism about future job opportunities and market growth in 2018 and beyond remains high among union contractors, labor representatives and owner-clients – but at the same time, many remain concerned about a growing shortage of union craft workers,” reports The Association of Union Constructors (TAUC) in a recent press release about the publication of the 2018 Union Craft Labor Supply Study. The study was conducted by TAUC and the AGC-supported Construction Labor Research Council

According to the study report, over three fourths (78 percent) of survey respondents project growth in the construction and maintenance industry during 2018.  This is the same as last year but up significantly (58 percent) from two years ago.  Respondents project strong and increasing growth particularly in the South Central and Southwest Regions.

While two thirds of study participants reported a shortage of union craft workers during 2017, the vast majority of those participants reported that the shortage was small in size.  Only 17 percent said they had experienced a large shortage.  Many respondents reported a surplus or the right number of workers.  According to the study, shortages are most likely to be found in:   the manufacturing industry; in larger organizations; the Southeast, South Central, Mountain Northern Plains, and the Northwest Regions; and in the carpenter and millwright, roofer and waterproofer, iron worker, and electrician crafts.

The report also includes information about absenteeism rates, a perceived link between labor shortages and safety incidents, and more.


AGC Call for Workforce Development Success Stories

Submissions due Wednesday, June 20th

In conjunction with AGC’s 2018 workforce development campaign, we are currently seeking success stories and best practices in the areas of construction workforce development, industry image enhancement and industry recruiting. Our goal is to gather and share these success stories with member firms and AGC chapter staff in the hopes of increasing knowledge sharing and program collaboration, communicating lessons learned, and sparking innovative workforce solutions.

In conjunction with AGC’s 2018 workforce development campaign, we are currently seeking success stories and best practices in the areas of construction workforce development, industry image enhancement and industry recruiting. Our goal is to gather and share these success stories with member firms and AGC chapter staff in the hopes of increasing knowledge sharing and program collaboration, communicating lessons learned, and sparking innovative workforce solutions.

Submitted success stories will have the opportunity to be featured in AGC’s Workforce Development Plan and a number of other AGC publications, webinars and the AGC website.

Do you have a successful workforce program to share? If so, please submit your programs through ProposalSpace (click here) by COB Wednesday, June 20, 2018. For questions, please contact Carly Trout at carly.trout@agc.org.

Submit your program today and help AGC build the industry’s workforce!


Supreme Court Allows Employers to Require Arbitration of Class Actions

On May 21, 2018, the U.S. Supreme Court upheld the legality of arbitration agreements containing collective- and class-action waivers. The Court held that arbitration agreements providing for individualized proceedings are valid and that neither the Federal Arbitration Act’s (“FAA”) savings clause nor the National Labor Relations Act (“NLRA”) suggests otherwise.

On May 21, 2018, the U.S. Supreme Court upheld the legality of arbitration agreements containing collective- and class-action waivers.  The Court held that arbitration agreements providing for individualized proceedings are valid and that neither the Federal Arbitration Act’s (“FAA”) savings clause nor the National Labor Relations Act (“NLRA”) suggests otherwise.

The decision resolved an issue that had divided the federal circuits, with the Court reversing decisions of the 7th and 9th Circuits holding that the NLRA rendered any sort of collective litigation waiver in an employment arbitration agreement unenforceable.

In its decision, the Court recognized the policy underlying the FAA and its requirement that courts enforce arbitration agreements according to their terms.  Although the FAA contains a “savings clause” which invalidates arbitration agreements insofar as they conflict with other laws, the Court held that employees’ right to engage in “concerted activities” as guaranteed by the NLRA presents no such conflict.  The Court noted that as a matter of statutory interpretation, statutes are to be read in harmony with one another, and conflicts arise only when they are explicit. A statute will not be displaced by another, absent a showing of a clearly expressed congressional intention to do so.

The Court declined to find such a conflict here. Although the NLRA protects “concerted activities,” the Court held that this protection is meant to encompass activities of a sort that “employees do for themselves in the course of exercising their right to free association in the workplace.”  It does not, as the employees argued, protect employees’ right to “the highly regulated, courtroom-bound ‘activities’ of class and joint litigation.”  The Court also noted that, while the NLRA provides a regulatory scheme for activities related to organization and collective bargaining, the statue is notably silent as to class or collective actions.

The Court bolstered its conclusion by relying on the Court’s treatment of other federal laws in relation to the FAA.  In particular, the Court made reference to precedent holding that the Fair Labor Standards Act (“FLSA”), which specifically allows for collective suits for wages, does not invalidate arbitration agreements containing class-action waivers.  The Court reasoned that, if the FLSA allows class-action waivers for wage and hour disputes, certainly the NLRA – which  regulates a completely different sphere – does not invalidate them.  The Court went on to note that it has routinely declined to find a conflict between the FAA and other federal statutes, and it found no cause to reverse that line of reasoning with respect to the NLRA.

Finally, the Court majority rejected the argument that the National Labor Relations Board’s (“NLRB”) interpretation of the NLRA is entitled to Chevron deference.  Although agency interpretations may be entitled to deference with regard to statutes it administers, such deference does not extend to their interpretations of other federal statutes that it does not administer.  The Court reasoned that allowing the NLRB to limit the FAA under the guise of interpreting the scope of the NLRA would essentially be “bootstrapping” the NLRB into an area which it has no jurisdiction.

The decision is a welcome development for employers hoping to avoid defending against burdensome and costly wage-and-hour class-action suits.  Employers may wish to consult with legal counsel to ensure that their employment arbitration agreements are well-drafted in light of the decision.

Editor’s note:  This article was written by guest authors Thomas Kaufman and Joni L. Noggle of the law firm Sheppard Mullin.


California’s High Court Adopts Tough New Independent Contractor Test

In a landmark decision, the Supreme Court of California in Dynamex Operations West, Inc. v. Superior Court adopted a new test to determine whether a worker performing services for a company is an employee or an independent contractor under California’s wage orders. The new three-factor test, known as the ABC test, will determine whether a company “employs” a worker under the wage orders, which address certain requirements for minimum wage, overtime, and meal and rest periods, among others. The ABC test, which has long existed in other parts of the country in different forms, has not previously been used in California.

In a landmark decision, the Supreme Court of California in Dynamex Operations West, Inc. v. Superior Court adopted a new test to determine whether a worker performing services for a company is an employee or an independent contractor under California’s wage orders. The new three-factor test, known as the ABC test, will determine whether a company “employs” a worker under the wage orders, which address certain requirements for minimum wage, overtime, and meal and rest periods, among others. The ABC test, which has long existed in other parts of the country in different forms, has not previously been used in California.

The decision will have a significant impact on California companies in industries, including construction, where the use of independent contractors is common and long-standing. Specifically, the decision will make it more difficult for companies to use independent contractors to perform services.  It might also signal similar changes in other states.

What Is the ABC Test?

Under the ABC test adopted by the court, which is based upon Massachusetts’s version of the test, a worker is properly considered an independent contractor only if the company hiring the worker establishes all of the following: (A) the worker is free from the control and direction of the hiring company “in connection with the performance of the work, both under the contract for the performance of the work and in fact”; (B) “the worker performs work that is outside the usual course of the hiring company’s business”; and (C) the worker is “customarily engaged in an independently established trade, occupation, or business of the same nature” as the work performed for the hiring entity. The company’s “failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order,” the court stated.

What Is the Borello Standard? 

In adopting the new standard, the court abandoned the Borello test—a multifactor test based primarily upon a company’s “right to control”  the worker—in certain circumstances. In particular, the court stated that the new ABC test applies to determine whether there is an employment relationship under the wage orders. In a footnote, the court refused to address whether the Borello test was still the applicable standard for various obligations under the California Labor Code, including the obligation to reimburse employees and to provide them with workers’ compensation benefits. The decision does not address or change the applicable laws regarding the tax treatment of workers.

The “Suffer or Permit to Work” Standard

The court also addressed its own decision in Martinez, which involved a controversy over the definition of “employ” and “employer” in a case brought by seasonal workers. The Martinez court had ruled, in 2010, that “the applicable wage order sets forth three alternative definitions of employment for purposes of the wage order: ‘(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.’” While the Dynamex defendant argued that the “suffer or permit to work” standard only applies to the joint-employment issue presented in Martinez, the court concluded that this standard also “properly applies to the question whether a worker should be considered an employee or, instead, an independent contractor.” 

The court ruled in favor of a broad interpretation of the wage order’s definition of “suffer or permit to work” in order to “provide the wage order’s protection to, all workers who would ordinarily be viewed as working in the hiring business.” At the same time, the court ruled that the suffer or permit to work definition should not encompass “individual workers, like independent plumbers or electricians, who have traditionally been viewed as genuine independent contractors who are working only in their own independent business.”

“[I]t is appropriate, and most consistent with the history and purpose of the suffer or permit to work standard in California’s wage orders,” the court concluded, “to interpret that standard as: (1) placing the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be included within the wage order’s coverage; and (2) requiring the hiring entity, in order to meet this burden, to establish each of the three factors embodied in the ABC test.” The court also held that under the suffer or permit to work standard, the class certification order at issue in Dynamex should be upheld.

What Is California’s Test for Independent Contractors After Dynamex?

The decision establishes that the ABC test (which previously was not used by any court or enforcement agency in California, including the Division of Labor Standards Enforcement) now applies to claims brought under the applicable wage orders. Because the various wage orders include provisions related to minimum wage payments, overtime compensation, and meal and rest requirements (among others), the ABC test will apply to those claims in many cases. 

Does the ABC Test Apply Retroactively or Prospectively?

The court did not specifically address whether the test applies retroactively or prospectively. The California Employment Law Council has submitted an amicus request for clarification on that issue, which may cause the court to amend its ruling.

Key Takeaways for Employers

Under the ABC test, either the independent contractor satisfies all three criteria and is properly classified, or the independent contractor does not meet one or more of the criteria and is misclassified. Companies that engage independent contractors to perform services in California (or in another state using the ABC test) should evaluate whether they can satisfy this new test.

While the court sought to provide “greater clarity and consistency” by adopting the ABC test, the Dynamex decision, at least in the short run, will cause considerable uncertainty and upheaval. Although the court complained that the Borello test “invariably requires the consideration and weighing of a significant number of disparate factors on a case-by-case basis,” there are 30 years of California court decisions interpreting and applying that test. In contrast, because the ABC test is new to California, it is unclear exactly how it will be applied. As noted above, there will also be further litigation or rulings to clarify whether the Dynamex decision only applies prospectively, as well as under what circumstances the Borello standard still applies. 

If nothing else, the court’s new test is certain to impact and cause disruption to long-standing relationships between companies and independent contractors in California. While independent contractor misclassification lawsuits were already prevalent in California, the decision is expected to further increase the number of wage claims, lawsuits, and class actions by independent contractors and their attorneys.

Editor’s Note:  This article was written by guest authors Robert R. Roginson (a past chairman of the AGC Labor and Employment Law Council), Alexander M. Chemers, and Hera S. Arsen of the law firm Ogletree Deakins.


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