The U.S. Department of Labor (DOL) issued a Special Enforcement Report outlining its plans to crack down on seven specific contract provisions that it considers “coercive” and detrimental to workers. The Solicitor of Labor (SOL), the DOL’s top legal advisor, emphasized that these provisions undermine workers’ rights under wage and hour laws, and the department is prepared to take legal action to prevent their continued use.
These seven provisions—often hidden in the fine print of employment contracts—are designed to limit workers’ ability to protect themselves and seek fair compensation. The DOL’s report serves as a clear warning to employers that these practices will face increased scrutiny. Here’s a closer look at each provision:
Waivers of Wage and Hour Rights: Some employers require workers to waive their rights to claim unpaid wages or overtime. The DOL insists these waivers are invalid because federal labor laws are designed to protect workers from underpayment and exploitative work conditions.
Misclassification of Workers as Independent Contractors: Misclassifying workers as independent contractors is a long-standing issue for the DOL. The report reiterates that workers cannot simply be labeled as contractors to bypass minimum wage, overtime pay, or safety regulations.
Indemnification Provisions: These provisions require workers to repay employers for legal costs, even if the employer is found at fault. The SOL argues that such provisions discourage workers from asserting their legal rights.
Loser Pays” Clauses: These clauses force workers to pay their employer’s legal fees if they lose a case, making it financially risky for workers to bring legitimate claims. The DOL maintains that such provisions unfairly burden workers and contravene wage and hour laws.
Stay-or-Pay” Clauses: These provisions compel workers to repay expenses such as training or relocation costs if they leave the company before a certain time. The DOL argues that these payments often reduce a worker’s wages below the legal minimum.
Confidentiality and Non-Disparagement Agreements: Broad confidentiality agreements prevent workers from discussing workplace issues or reporting concerns to government agencies. The DOL views these clauses as stifling workers’ rights to raise safety or wage concerns.
Safety Reporting Restrictions: Employers sometimes require workers to report safety concerns internally before contacting federal agencies like OSHA. The DOL opposes these requirements, noting that workers have the right to report directly to the government without fear of retaliation.
While the report does not create new law, it signals the DOL’s commitment to cracking down on these coercive provisions. Employers who rely on such contract clauses could face legal challenges in the near future. The DOL’s enforcement priorities, particularly around issues like worker misclassification, will likely remain a focus regardless of political changes.
Employers using any of these contract provisions should evaluate their risk and consider revising their agreements. While some may adopt a wait-and-see approach, it’s clear that the DOL’s stance could lead to increased legal action. Consulting with legal counsel to navigate these changes is highly recommended.
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