Contractual Shift: Navigating the New Landscape of Employment Contracts

The Labor Department recently announced that the agency will focus on several employment-related contract provisions that may deter workers from exercising their federal rights. The October 15th Special Enforcement Report highlights these clauses, signaling a strict stance against employers while outlining plans for innovative enforcement strategies, such as filing amicus briefs and groundbreaking lawsuits:

• Waiving Wage and Hour Rights
  The report notes that employers have attempted to include clauses that limit workers’ time to bring wage and hour claims or reduce employer penalties. Such clauses violate federal law, as wage and hour protections under the Fair Labor Standards Act (FLSA) are non-negotiable, designed to ensure fair compensation and prevent exploitation.

• Misclassifying Workers as Independent Contractors
  Employers may classify workers as independent contractors to avoid providing important benefits and protections, such as safety standards, overtime, and minimum wage. However, legal classification depends on the actual working relationship, not just a contractual label. The report states that the DOL frequently challenges such misclassifications and will take action on behalf of affected workers.

• Shifting Liability to Workers
  Some employment contracts have included indemnification clauses that force workers to cover the company’s attorney’s fees and legal costs, even when the worker wins a claim. The report clarified that this practice is illegal under federal law, as it discourages workers from taking action by making them fear financial retaliation.

• Stay-or-Pay Provisions
  “Stay or pay” clauses demand workers reimburse the employer for costs like training or relocation if they leave before a specified period. The DOL warns that these penalties can trap workers in jobs, especially those who cannot afford to pay the costs. Labor laws require wages to be paid “free and clear,” meaning provisions that penalize workers and reduce wages below legal standards are illegal under federal law.

• Confidentiality, Non-Disclosure, and Non-Disparagement
  Certain employment contracts may include broad restrictions that prevent workers from discussing conditions or reporting violations outside the organization. The DOL report reiterates that these restrictions silence employees and undermine federal workplace laws. The DOL cautioned employers that they are not permitted to block communication with enforcement agencies through confidentiality, non-disclosure, or non-disparagement clauses.

• Requiring Internal Reporting of Safety Concerns
  Oftentimes employers have required workers to first report safety issues internally, before approaching agencies like OSHA. The DOL says this may often discourage reporting, due to fear of retaliation or inaction. Federal law protects workers’ right to report safety concerns directly to government agencies, ensuring faster, impartial responses.

Employment laws can be tricky to navigate.  The Department of Labor announced it will be targeting “fine print” provisions in employer documents. Employers are encouraged to review their policies, forms and agreements to evaluate compliance and potential risk.

The attorneys at Johnson, Newlon & DeCort, P.A. are proficient in matters of labor and employment law compliance, offering valuable counsel to businesses and individuals alike. Contact us today to learn how we can assist you in achieving your legal objectives, from regulatory compliance and best practices to efficient and effective dispute resolution.