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2006 Brings Heightened Recordkeeping Requirements

By Harley M. Kastner

The last quarter of 2005 brought about several important developments that will significantly affect employers in the coming years. These three changes specifically address an employer’s duty to collect certain information concerning its employees as well as report them to the Department of Labor (“DOL”) or the Equal Employment Opportunity Commission (“EEOC”).

Obligation to Solicit Race and Gender Data from “Internet Applicants”

On October 7, 2005, the DOL’s Office of Federal Contract Compliance Programs (“OFCCP”) issued a final rule amending its traditional recordkeeping requirements to make employers responsible for collecting additional information from Internet applicants. The new regulation becomes effective February 6, 2006, and applies to any company that holds a federal contract. The final rule adds to OFCCP’s traditional requirements a provision requiring contractors to obtain, where possible, the same gender, race, and ethnicity information for “Internet Applicants”.

To be considered an “Internet applicant,” an individual must meet four criteria:

(1) have submitted an expression of interest in employment with the contractor through the Internet or related technology channel;

(2) the contractor must consider the individual for a particular position;

(3) the expression of interest must indicate that he or she possesses the basic qualifications for the position; and

(4) the individual must not at any point prior to receiving an offer remove himself or herself from further consideration or otherwise indicate that he or she is no longer interested in employment in the position.

The form and method of the submission are broadly interpreted. OFCCP expressly included email, commercial and internal resume databank services such as Monster.com, and employer website submissions as sources of Internet applications.

Although the final rule appears on its surface to establish an additional cumbersome requirement on employers, there is significant potential to exclude applicants from the “Internet applicants” definition. Applicants can essentially remove themselves from ‘consideration’ by including salary or geographic location restrictions in their application. If these limitations are contrary to the requirements of the position, the applicant is not under consideration for that position and can be excluded from the reporting requirements. An employer can also limit the amount of Internet applicants by establishing basic qualifications that must be met for a position. These qualifications must be non-comparative, objective and business related (such as requiring a Masters in Accounting). However, so long as they do not require a contractor to consider the substance of each application, they can be used to reduce the number of Internet applicants. Contractors also can establish a protocol under which they refrain from considering any expression of interest that is not submitted according to that protocol, such as unsolicited resumes without respect to a particular position.

The OFCCP uses the race and gender data to audit individual employers as related to other local and industry workforces to ensure that hiring decisions are made in compliance with their equal employment opportunity and affirmative action obligations. The OFCCP has begun notifying specific contractors of upcoming compliance reviews.

DOL Guidance of Expanding Enforcement of Disclosure Requirements

The DOL made its intentions known to expand the enforcement of the Labor Management Reporting and Disclosure Act (“LMRDA”). The DOL has subsequently released an updated question and answer (“Q&A”) guidance to better explain the new reporting obligations. The LMRDA requires employers to disclose to the DOL all payments or benefits made either directly or indirectly (including marketing expenses, gifts, meals, lodging, travel, golf outings, tickets to sporting events, and access to educational conferences) to labor organizations, union officials, or union employees on Form LM-10.

The Q&A expands the number of employers that are bound by the LMRDA and imposes compliance on vendors, service providers (including investment advisors, banks, broker-dealers, and other financial institutions that do business with union-affiliated pension plans [generally called “Taft-Hartley” plans]), and non-union employers.

The Q&A also narrows the payments that will be exempt from reporting. The DOL believes that only payments made in the regular course of business, that are arms-length commercial transactions, and are made without regard to the recipient’s status as a union official are exempt from reporting.

The Q&A does increase the dollar amount for the de minimis exemption from $25 to $250. A payment does not need to be reported if (1) the total value is less than $250 in any fiscal year and (2) it is unrelated to the recipient’s status as a union official.

The Q&A also outlines that, absent “extraordinary circumstances,” new filers of Form LM-10 will be required to keep records and submit forms for the fiscal year beginning on or after January 1, 2005. Recognizing that many employers have not kept adequate records, where the employer acts diligently and in good faith to reconstruct records and identify reportable records, the DOL has eliminated the requirement that the president and treasurer sign the initial Form LM-10. The relaxed signature and record standard only applies to the 2005 calendar fiscal year. Employers must establish appropriate policies for documentation and reporting beginning January 1, 2006.

Overall the Q&A increases the number of employers that must file a Form LM-10, while also shrinking the available exempt payments. Although the Q&A does enlarge the de minimis exemption, it likely will lead to higher costs associated with tracking expenses. Although the underlying purpose of the LMRDA is to enhance union transparency and keep union officials accountable to their members for their compensation and benefits, the revision and clarification of the Form LM-10 reporting requirements will impose additional costs on more employers.

Revisions to EEO-1 Report

On November 16, 2005, the Equal Employment Opportunity Commission (“EEOC”) approved revisions to the Employer Information Report (EEO-1) which will be used for the reporting cycle beginning with the survey due by September 30, 2007. The September 2006 survey will use the previous format.

The EEO-1 must be filed by (1) employers with federal government contracts of $50,000 or more and 50 or more employees and (2) employers who do not have federal government contracts but have 100 or more employees. Qualified employers must provide the federal government with an accounting of their employees by ethnicity, race and gender, divided into job categories.

The race and ethnicity category of the EEO-1 is being revised to add a new category entitled “Two or more Races” as well as rename and reclassify existing categories to their more politically correct alternatives. Most importantly the revision strongly endorses self-identification of race and ethnic categories by employees themselves as opposed to the current system of visual identification by employers.

The job category of the EEO-1 is also being changed to better track the representation of women and minorities at different levels of management.

ABOUT THE AUTHOR

Harley M. Kastner is engaged in the traditional labor practice, devoted primarily to contract negotiations, arbitration, strategic labor planning, civil rights litigation, union prevention, and supervisory training in both the public and private sectors.

This article originally appeared in the Winter 2006 issue of kwwlaborlaw.communicator, a publication of Kastner Westman & Wilkins, LLC. Reprinted with permission.

riskVue | The webzine for risk management professionals
May 2006