1. Complacency Is Risky: Poor Record-Retention Practices May Lead to Fines

As more and more data is created and stored electronically, courts and government agencies are increasingly taking a dim view of employers that do not proactively manage and properly retain personnel and employment-related data. In May 2010, a large financial services company was fined $15 million by the SEC for failing to properly retain email communications. The federal courts have consistently reiterated the importance of preserving "electronically stored information" ("ESI"). Companies that are complacent in establishing and enforcing ESI retention policies run a significant risk of monetary and other sanctions if they are unable to produce necessary data and records in either litigation or an agency proceeding.

Keep in mind that retaining too much information for too long is also risky. In order to comply with the legal standards for ESI retention, companies should: (i) develop a written ESI and document retention policy that categorizes the types of personnel records that are required, by applicable law, to be kept and the length of the retention period; (ii) train employees on the implementation of the policy; and (iii) establish an internal audit procedure to ensure compliance.

2. Nursing Mothers Get a Break Under the Amendments to the Fair Labor Standards Act ("FLSA")

The U.S. Department of Labor ("DOL") recently released a helpful Fact Sheet explaining a recent amendment to the FLSA that requires employers to provide breaks for nursing mothers. The new law requires that employers provide "reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to express the milk." Employers must provide the breaks "as frequently as needed," and must give the employee a private place, other than a bathroom, to take the breaks. The breaks need to be of "reasonable" length. The employer does not have to pay the employee for the break time, unless the employer already provides compensated breaks, and the employee uses one of those breaks to express breast milk. The law applies only to non-exempt employees. In addition, employers with fewer than 50 employees are not subject to the break-time requirement if compliance with the provision would impose an "undue hardship." Whether compliance would be an undue hardship is determined by looking at the difficulty or expense of compliance for a specific employer in comparison to the size, financial resources, nature, and structure of the employer's business. Covered employers should take steps to anticipate employee requests and to comply with the new law.

3. Department of Homeland Security ("DHS") Issues Final Rule on Form I-9 Electronic Storage

Effective August 23, 2010, employers may complete, sign, scan, and electronically store Forms I-9, provided that: (i) a Form I-9 is completed within three business days of the hire date; (ii) the electronic storage system complies with DHS' regulatory requirements; and (iii) employers maintain records of when the Form I-9 is created, completed, updated, or modified, altered, or corrected. Employers need not provide employees with confirmation of completion of the Form I-9, unless the employee requests written confirmation. Employers that are, or are considering, converting their paper I-9 system to an electronic version must ensure that their system or their vendor's electronic Form I-9 support satisfies all regulatory requirements. Otherwise, employers may end up discarding paper Forms I-9 in reliance on a system that the DHS will not accept – and that could lead to substantial fines.

4. Worker Misclassification Bill Receives White House Support

The Obama administration is focusing its attention on the misclassification of workers as independent contractors through the DOL, Internal Revenue Service ("IRS"), and U.S. Congress. Recently, the Fair Playing Field Act of 2010 was introduced in the House and Senate. This bill would close the loophole in the tax law that gives latitude to employers to classify workers as independent contractors and would require companies to provide a written statement to independent contractors that: (i) informs them of their tax obligations; (ii) notifies them of the employment laws that do not cover independent contractors; and (iii) informs them of their right to obtain a status determination from the IRS.

Potential liability for worker misclassification can be staggering when one takes into account unpaid federal, state, and local income tax withholdings, social security and Medicare contributions, unpaid overtime and expenses, workers' compensation and unemployment insurance premiums, and coverage under employee benefits plans. As the scrutiny of worker misclassification increases, it is critical that employers take steps to ensure that workers are properly classified.

5. Beware of "Bounty Hunters": The New "Whistleblower" Rules

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") contains an array of "bounty hunter" provisions and whistleblower protections that affect companies associated with securities, commodities and futures, and consumer financial products. Dodd-Frank also adds significant changes that will allow whistleblowers to fare better under the False Claims Act and the Sarbanes-Oxley Act ("SOX"). The whistleblower incentives may have a negative effect on corporate compliance, since they may encourage employees to go outside the organization instead of reporting the problem internally. It will be increasingly important for companies covered by Dodd-Frank and SOX to implement and maintain internal whistleblower policies and/or "hotlines" to handle employee complaints. In addition, employers must be diligent and train supervisors not to retaliate against employees who make whistleblower complaints.