Employment Law Bits

Multi-year public construction contracts require annual updates for prevailing wage

Recent amendments to Massachusetts’ prevailing wage law, M.G.L. ch. 149, § 27, require construction contractors working under government contracts to update the prevailing wage paid to laborers on a yearly basis. Awarding authorities must request updated wage schedules from the Massachusetts Division of Occupational Safety at least two weeks prior to the anniversary of any construction contract.

Contractors must then pay these updated wages to their covered laborers or risk being in violation of the prevailing wage law. Criminal or civil penalties under M.G.L. ch. 149, § 27C may result if a contractor fails to pay covered workers the appropriate rate. First time violators of this law may be subject to $50,000 in fines, up to one year imprisonment, or by a combination of fines and imprisonment. Additionally, violators can be prohibited from contracting, directly or indirectly, on public works projects for up to five years.

While multi-year contracts are the primary focus of these changes, any contractor working on a project that lasts longer than one year must comply—even if the contract was initially estimated and bid to last less than one year. These changes to the prevailing wage law only apply to construction contracts bid on after August 8, 2008.

Companies performing services in Massachusetts should be aware of the Massachusetts Independent Contractor Misclassification Law.

Employers should be very careful when classifying a worker as an “independent contractor” in Massachusetts. Under Massachusetts law, an employer who misclassifies an employee as an independent contractor may be subject to a wide variety of criminal and civil penalties, including fines of ten to fifteen thousand dollars and up to two years in jail.

This law is actively enforced by the Attorney General’s Office and is applied to both Massachusetts companies and out-of-state companies doing business in Massachusetts. In November, 2008, the AG’s office issued $10,000 civil penalty to Pinto’s Drywall Construction, LLC, a Virginia company, for misclassifying employees on a Massachusetts job site as independent contractors. In December, 2008, a Bourne construction company paid $2,000 in fines for misclassifying an employee, in addition to fines for failure to pay prevailing wage.

An employer is in violation of the independent contractor law if: (a) the worker does not meet the three prong independent contractor test; and (b) as a result of receiving services from that worker, the employer has violated Massachusetts labor law, including wage and hour, overtime, minimum wage, worker’s compensation, payroll or tax laws. To be appropriately labeled an independent contractor, the worker must:

1. Be free from direction and control of the employer in performing the service;
2. Perform a service outside the usual course of business of the employer; and
3. Be customarily engaged in an independent trade or profession of the same nature as the service being performed for the employer. (For more information see: Are you misclassified as an independent contractor when you should be an employee?)

In May 2008, the AG’s office issued an advisory regarding the enforcement of the independent contractor law.  In that advisory the Attorney General listed the following as red flags of misclassification, which may trigger further investigation by the AG:

• Individuals providing services for an employer that are not reflected on the employer’s business records;
• Individuals providing services who are paid “off the books”, “under the table”, in cash or provided no documents reflecting payment;
• Insufficient or no workers’ compensation coverage exists;
• Individuals providing services are not provided 1099s or W-2s by any entity;
• The contracting entity provides equipment, tools and supplies to individuals or requires the purchase of such materials directly from the contracting entity; and
• Alleged independent contractors do not pay income taxes or employer contributions to the Division of Unemployment Assistance.

Employers must ensure compliance with applicable laws prior to taking action regarding an applicant’s consumer report

An employer that decides to take an adverse employment action after reviewing an applicant’s or employee’s consumer report must be aware of the laws that regulate the procedure for making such decisions in order to avoid potential liability.

Federal Bankruptcy Act

Given the current economic trend, employers may be faced with increasing numbers of applicants and employees that have filed, or are in the process of filing for bankruptcy. It is, therefore, critically important to understand that an employer cannot reject an applicant solely because he or she has filed for bankruptcy. Nor can the employer rely on any bad debts that the applicant had prior to filing for bankruptcy, if such debts were discharged or dischargeable during the bankruptcy action.

Adverse Employment Action (i.e. deciding not to hire the applicant)

If the employer subsequently decides to take adverse action against the employee or applicant based on the information in the report, it must comply with the federal Fair Credit Reporting Act (FCRA) by providing the employee or applicant with a copy of the consumer report and a Summary of Consumer Rights form prior to taking the adverse action. The agency that furnished the individual’s report will provide the employer with the Summary of Consumer Rights.

Once the employer does make an adverse action, it must provide the individual applicant or employee with notice, (orally, in writing, or electronically,) that it has decided to take this action. This notice must include (1) the name, address, and telephone number of the agency that provided the report; (2) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide specific reasons why the adverse action was taken; and (3) a notice of the of the individual’s rights to dispute the accuracy or completeness of any information the agency furnished, and the individual’s right to an additional free consumer report from the agency upon request within 60 days.

It is important to note that whenever the information in a consumer report is a factor in the decision to take any adverse action – even if it is not the major consideration – an employer must always follow the procedures mandated by FCRA. If you have any questions about using consumer reports in your hiring practices, you are urged to contact an employment professional or attorney.

Employee & applicant credit reports – how to obtain them legally

Procedure for Obtaining an Employee’s Credit Report

Once an employer has decided that it has a sound business need for applicant and employee consumer reports, it must ensure that it complies with the statutory procedures for obtaining them. FCRA mandates that an employer requesting an employee's or an applicant's credit report must first make a written disclosure to the employee or applicant that a credit report may be obtained for employment purposes. Additionally, the employer must obtain the employee or applicant's written authorization.

Obtaining an Investigative Consumer Report

For certain positions, it is not unusual for an employer to order investigative consumer reports. These are reports that, in addition to credit information, contain information on the individual's character and reputation obtained through personal interviews.

In Massachusetts, employers that seek investigative reports must first disclose to the employee or prospective employee, in writing, its intention to request such a report. The employer must also inform the employee of the precise nature and scope of the investigation requested. Moreover, the employer must disclose the employee's or applicant's right to have a copy of the report provided on request. Finally, the employer must first obtain the employee's or applicant's written permission before actually requesting the report.

It is important to note that the Massachusetts law is more stringent than the FCRA requirements. However, because it is more protective of consumer rights, it is controlling upon Massachusetts employers.

Health and medical records with the Obama stimulus plan

In 2004, President George W. Bush established the goal of creating electronic health records for most Americans within ten years. Today, funding provided in the Obama Stimulus plan could make it happen. Specifically, as much as $21 billion dollars has been earmarked in the bill.

As part of the stimulus plan, $21 billion dollars will be used to accelerate the use of electronic health records. As planned, all of our health records would be linked together for easy access by all the patient’s health care providers. The new system will likely improve the quality of care and reduce the costs of cumbersome paper records by allowing every person’s doctor to have access to the patient’s complete health care file.

However, having electronic medical records at your fingertips, which can easily be transferred to a hospital or other provider, it is not without critics. There is a major potential for abuse because critics fear that in spite of privacy laws in force to protect the public, employers might inappropriately obtain the medical records of a job applicant and determine that the applicant is too expensive to insure. Moreover, critics also provide that too many administrative burdens would impede the use of electronic records and interfere with the coordination of care.

Prior to the recent stimulus plan, complying with the 2014 goal has been looking like a significant challenge. The percentage of United States doctor offices currently adopting electronic records systems is estimated to be in the single digits. The biggest hurdle has been providing funds to help health care providers buy and implement these IT systems, which are costly and difficult to install. The money earmarked for electronic medical records in the stimulus plan should facilitate President Bush’s 2004 goal. Let’s hope that Congress can balance the above critics’ concerns for the sake of consumers of health care services.

By: Todd C. Ratner, Esq.