Summer in the Ocean State brings with it familiar novelties: the beach, clam cakes, and the end of the General Assembly’s legislative session. In this Insight, we summarize three employment-related bills that Rhode Island Governor Daniel McKee signed into law late last month, note bills that garnered attention but ultimately did not pass, and explain what employers should do now to remain in compliance.
Ban on Certain Non-Disclosure and Non-Disparagement Provisions
S 342 (Relating to Fair Employment Practices), which took effect on June 22, 2023, bans non-disclosure and non-disparagement agreements that require employees, as a condition of employment, to keep confidential alleged violations of civil rights or alleged unlawful conduct. employees to keep confidential alleged civil rights violations or criminal conduct as a condition of employment. The law does not prohibit employers’ rights to require non-disclosure and non-disparagement agreements as part of a separation or settlement agreement. (Other laws, however, might affect these types of provisions, including Exchange Act Rule 21F-17 and the National Labor Relations Act.)
Heightened Penalties for Wage-and-Hour Violations
Effective January 1, 2024, S 1079 (Relating to Payment of Wages) will increase the penalties for withholding or failing to pay wages on time and for independent contractor misclassification, particularly in the construction industry.
Beginning with “wage theft,” S 1079 makes it a felony, punishable by up to three years imprisonment and/or a fine of up to $5,000, for any employer to knowingly and willfully withhold more than $1,500 in wages due to an employee.
With respect to for misclassification, the law requires the Department of Labor and Training (“DLT”) to investigate claims of misclassification using the Fair Labor Standards Act’s multi-factor “economic reality” test. If the DLT determines that an employer misclassified an employee as an independent contractor, it must refer the matter to the state’s Office of the Attorney General with a recommendation as to whether to prosecute the matter criminally. In addition, the DLT may issue a civil penalty between $1,500 and $3,000 for a first offense, and between $1,500 and $5,000 for subsequent violations.
Finally, S 1079 imposes heightened criminal penalties for knowing and willful misclassifications by employers in the construction industry. Specifically, a first offense is a misdemeanor punishable by up to one year of imprisonment and/or a fine of up to $1,000. Subsequent offenses may be felonies and punishable by imprisonment for up to three years and/or a fine of up to $5,000.
Annual Independent Contractor Filing
The General Assembly’s focus on independent contractor misclassification did not end with S 1079. Effective January 1, 2024, S 427B (Relating to Workers’ Compensation General Provisions) will require independent contractors to file an annual notice of designation with the DLT stating that they are independent contractors and exempt from workers’ compensation coverage. Previously the law required independent contractors to file a one-time notice of designation that remained in effect until withdrawn.
A handful of highly publicized bills, all of which would have expanded existing employment protections, imposed significant potential liability, and undoubtedly led to increased litigation, were ultimately unsuccessful. Specifically, the General Assembly did not pass the five bills below:
- S 145/H5990, which would have increased the amount of parental or family leave available to an employee from 13 to 24 weeks (Senate version) or 26 weeks (House version) in any two calendar years;
- S821A, which proposed to impose liability on employers and coworkers for bullying and psychological abuse in the workplace;
- H5370, which would have voided noncompete agreements that restrain employees from working in any lawful profession, trade or business;
- H5708, which sought to require employers with 30 or more employees to list salary ranges in job postings; and
- H5923A, which would have allowed individuals to possess less than 1 ounce of psilocybin and to grow psilocybin at their residence for personal use, potentially impacting employers’ drug testing and disability accommodations policies.
For now, employers need not worry about these bills, but it is possible that legislators may reintroduce one or more of them in subsequent legislative sessions (which is a common occurrence in Rhode Island). We will monitor and report on any substantive developments on these and other employment laws in Rhode Island.
In light of the enactment of Rhode Island’s three newest employment laws, Rhode Island employers may want to consider taking steps now to comply with them to mitigate potential risks:
Non-Disclosure and Non-Disparagement Compliance
- Review and revise (if necessary) employment, non-disclosure, and non-disparagement agreements and policies to ensure that they are not overbroad;
- Consult with counsel before seeking to enforce a preexisting non-disparagement or non-disclosure agreement.
“Wage Theft” Issues
- Review payroll practices to ensure that employees are paid their regular and final wages within the timeframes required under Rhode Island law;
- Review existing wage deduction policies and practices to ensure compliance.
Independent Contractor Misclassification
- Conduct a privileged audit of independent contractor relationships (and periodically re-audit those relationships);
- Establish procedures for collecting and preserving documents and information that establish the propriety of independent contractor classifications.
For more information about this Insight, please contact:
- Member of the Firm