Hunton Employment & Labor Perspectives

Earlier this month, Democrats in the House of Representatives introduced the “Wage Theft Prevention and Wage Recovery Act” (“Act”). This proposed legislation seeks to amend the Federal Labor Standards Act (“FLSA”) in several key ways.

First, the Act would require all employers to provide regular pay stubs and initial salary disclosures.

Second, the Act would change wage recovery by requiring payment at an employee’s agreed-upon wage rate, rather than at the minimum wage or minimum overtime wage rates, which the FLSA has never done and has traditionally been within the purview of state laws. This would explicitly include rates set forth in collective bargaining agreements.

Third, the Act would change final paychecks by requiring full payment of any remaining salary to be provided the earlier of the scheduled payday or 14 days of termination.

Fourth, the Act would require employers to keep employee records for five years, and permit inspection of such records within 21 days of any employee request.

Fifth, the Act would change FLSA collective actions from an “opt-in” model to an “opt-out” model, similar to most current class actions and a significant departure from the way FLSA representative actions have ever functioned.

Sixth, the Act would invalidate and prohibit all arbitration agreements and class action waivers arising under the FLSA, overturning Supreme Court precedent.

Finally, the Act would increase both civil penalties and recoverable damages for nearly all violations.   

Coming on the heels of Congress passing a law prohibiting the enforcement of pre-dispute arbitration agreements in sexual assault and sexual harassment claims a few months ago, the Act appears to be part of a broader trend disfavoring the use of arbitration agreements, in addition to creating various additional federal rights. If successfully enacted, this legislation would upset otherwise well-settled legal doctrines, such as those surrounding the Labor Management Relations Act, and increase both the risk and severity of FLSA collective actions.

Beyond additional threat of litigation, this Act would likely increase the frequency and scope of investigations and enforcement actions by the Department of Labor’s Wage and Hour Division (“Division”). For example, this legislation would require the Division to enforce collective bargaining agreements and other contracts, which it has not done previously. Some have commented that these requirements would strain the already overburdened agency, such that increased actions would not be an immediate outcome. Others, such as bill co-sponsor Bobby Scott (D-Va.), have noted that the Chair of the House Appropriations Committee, Rosa DeLouro (D-Conn), is an avid bill sponsor, and would be well-placed to ensure that the Division has the resources required to begin targeting employers for enforcement.

While no immediate steps are required, as it remains to be seen whether the bill will pass the House and move to the Senate, this proposed legislation is a helpful reminder that it is far easier to build a plane on the ground than it is to try to build it in the air. Employers will want to ensure compliance with applicable state law on employee records, pay practices, and pay disclosures, as well as monitor compliance with collective bargaining agreements and other employee contracts, well in advance of this bill’s theoretical passage.