Posts belonging to Category Government & Regulation

Identifying a convergence of factors, including a large and eager supply of immigrant labor and a $54 billion-per-year construction industry, NPR has documented widespread “wage theft” in Texas, with many workers being paid about half of the federal minimum wage or even less.

The NPR story references an extensive University of Texas, Austin report (available here) that examined Texas’ working conditions and found low wages and serious safety risks to be a staple of the state’s construction projects. The safety findings are especially stark. Though often assailed for its excessive regulation (and thereby used as a counterpoint in Texas’ marketing campaigns), California has an exceptionally low workplace fatality rate: 5.2 per deaths per 100,000 workers, well below the national average of 8.8. Texas (going big, as it often does) has the highest death rate in the country at 10.7 per 100,000, more than double that of California.

While NPR and the UT report cited numerous forms of malfeasance, the most popular appears to be misclassifying ordinary workers as “subcontractors,” which allows employers to essentially treat workers like they are independent companies rather than employees. Employers use this tactic to circumvent labor and employment laws (which provide workers with basic entitlements such as overtime, meal breaks and rest breaks), and avoid paying Social Security and payroll taxes. Thus, in addition to robbing vulnerable workers of their hard-earned wages, these fraudulent transactions cost Texas and the federal government billions in revenue every year.

In Noel Canning v. NLRB, No. 12-1115 (D.C. Cir. Jan. 25, 2013), the D.C. Circuit Court ruled that President Obama lacked the authority to make three recess appointments to the five-member National Labor Relations Board (NLRB). The recess appointments were deemed unconstitutional, leaving the NLRB with only one board member — two short of the three required to make a quorum and allow the NLRB to function. At least 30 workplace disputes pending before the NLRB are now in limbo.

Of greater consequence, Noel Canning potentially abrogates every NLRB decision since January of 2012, including: Costco Wholesale Corp., 358 NLRB No. 106 (Sept. 7, 2012) (employer’s “social media policy” prohibiting electronic postings that “damage the Company, defame any individual or damage any person’s reputation” held unlawful); Karl Knauz Motors, Inc., 358 NLRB No. 164 (Sept. 28, 2012) (employer’s rule prohibiting “disrespectful” language or “any other language which injures the image or reputation of” employer held unlawful); and Banner Health System, 358 NLRB No. 93 (July 30, 2012) (asking employee who was subject of an internal investigation to refrain from discussing matter violates the NLRA).  Also in question are D. R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012) and Convergys Corp., 2012 NLRB LEXIS 742 (Oct. 25, 2012), key pro-worker decisions finding class action waivers unconscionable.

Meanwhile, as his NLRB appointments are being assailed, President Obama has made two appointments to the Federal Circuit. Unique among the federal intermediate appellate courts, the Federal Circuit was established in 1982 pursuant to Article III of the Constitution, in order to effectuate the merger of the United States Court of Customs and Patent Appeals and the appellate division of the United States Court of Claims. The Federal Circuit’s jurisdiction covers patents and trademarks, but also takes the appeals of certain administrative agency decisions. Indeed, fully half of the Federal Circuit’s caseload is administrative law.

The president’s two most recent appointments, Raymond Chen and Todd Hughes, are notable in broadening the federal judiciary’s diversity. Hughes would be the first openly gay federal appeals court judge, while Chen would be the first Asian American to serve on the Federal Circuit in over 25 years.

California Governor Jerry Brown has signed into law amendments to Labor Code section 226 — which sets forth the information that must be printed on California workers’ pay stubs — to clarify an ambiguity that allowed some non-compliant employers to elude meaningful enforcement actions.

The amendments chiefly address the language of Labor Code section 226(e), which provides that a plaintiff “suffering injury” may allege wage-statement violations. Some employer defendants have successfully argued that, in a class action, the inquiry into whether class members have suffered injury would be intrinsically individual, thus rendering individual questions predominant over common questions of law or fact. While many courts have rejected this argument, a sufficient number of state and federal courts have denied certification of wage-statement classes based on the idea that individual inquiry is required in order to make the injury determination. Under this analysis, class treatment of all wage-statement actions would effectively be precluded, despite the fact that standardized pay stubs allow for the sort of violation that is ideally suited to class treatment.

In order to remedy this inconsistency, the Legislature drafted a clarifying amendment, Senate Bill 1255, which provides that an employee is deemed to have suffered injury if the employer fails to include “accurate and complete information” on employees’ pay stubs, essentially making it a violation for an employer to omit any of the required data enumerated in Labor Code section 226(a)(1)-(9) (including gross and net wages earned, hours worked, and hourly rates). In addition, a “reasonable person” must be able to “promptly and easily determine” the information corresponding to each requirement. By making the analysis subject to a reasonable-person standard, the prospect of individualized inquiries is negated, analogous to the fraud-on-the market and presumed reliance doctrines applicable to securities and consumer class actions.

The amendments will take effect January 1, 2013

The long, strange journey of former UBS-AG investment banker and qui tam relator Bradley Birkenfeld has reached a resolution, with Birkenfeld being awarded a $104-million payment for his role in providing the IRS with evidence of as many as 4,000 individuals’ tax evasion. The nine-figure award (or “bounty” in qui tam jargon) is believed to be the largest ever of its kind. While relator bounties of up to $100,000 are not uncommon, the $104 million to be paid to Birkenfeld is several orders of magnitude greater than the norm, a function of the substantial value of the information provided by Birkenfeld.

The evidence that Birkenfeld provided to the government resulted in UBS paying upwards of $780 million to settle criminal charges involving secret offshore accounts and being forced to turn over the account information of thousands of alleged tax evaders. Additionally, the publicity surrounding this case is thought to have been a factor in prompting more than 33,000 U.S. taxpayers to voluntarily come forward and admit to having offshore accounts. The IRS has been able to collect more than $5 billion in fees and penalties from these mass confessions.

Birkenfeld’s much-covered saga (most major news outlets have covered the story) is not without a darker controversial side, as he was released from federal prison only last month after serving a two-and-a-half year felony sentence for conspiracy in connection with the same tax evasion as to which he provided evidence.