The US Department of Labor (“DOL”) and its Office of the Solicitor just announced the issuance of a Special Enforcement Report detailing actions it is taking to combat what it calls “coercive ‘fine print’ provisions” in employment agreements. DOL asserts that many fine print provisions inhibit workers from exercising their rights, preclude them from reporting wrongdoing, or tie them to their job for fear of reprisals or financial repercussions.

The Solicitor placed front and center a recent enforcement action it took against a transportation company that had threatened to countersue number of its truck drivers who had joined a lawsuit seeking overtime pay and other compensation under the federal Fair Labor Standards Act (“FLSA”) as well as California law. The threats were based on language in the drivers’ employment agreements that provided that the drivers would be required to indemnify the company for all of its losses and legal fees from the action.

DOL got wind of this and filed suit against the employer alleging that the contract’s indemnity terms and the company’s threat to shift the costs of the employees’ claims was unlawful. The Court entered a consent judgment that included a permanent injunction banning the company from using (or attempting to use) the clause to threaten to collect the costs it was incurring.

DOL is not only targeting indemnity provisions such as this. It is pursuing enforcement actions to address “other troubling ‘fine print’ provisions that can chill workers in exercising their rights, and that may violate the law. . . .” The kinds of provisions DOL is concerned about include provisions that require employees to:

• “agree they are independent contractors”

• pay their employer’s legal fees if they pursue, but lose, claims against their company for, among other things, employment law violations;

• repay the cost of things like training if the employee does not stay with the company for a set amount of time;

• report safety issues to the company before contacting government agencie;

• sign certain “[c]onfidentialty, non-disclosure, and non-disparagement provisions”; and/or

• waive a variety of other legal rights.

In our experience, employers walk a thin line when they include provisions such those identified by DOL. For example, employees simply cannot bargain away their rights under the FLSA—not even under a Collective Bargaining Agreement. And the law is fairly clear that DOL’s authority to pursue rights on behalf of workers usually cannot be hampered by employee agreements that purport to waive rights, such as those under the FLSA.

In the private sector, the law is less clear about the circumstances in which employees can be required to sign confidentiality agreements, NDAs, or nondisparagement agreements. The law tends to disfavor agreements that prohibit employees from, shall I say, calling the cops—other kinds of agreements that protect proprietary information, however, may be enforceable. Similarly, there are conflicting cases regarding the degree to which employers may rightfully recoup the cost of training or educational benefits if the employee does not stay with the organization for some period of time. Courts tend to allow companies to recover these costs if they costs benefited the employee more than the employer. However, there is case law that holds such costs may not be recouped if the amount withheld would deprive pay to such an extent that the employer fails to meet its minimum wage and overtime obligations.

However, some of these things play out differently for federal contractors. For example, there is a Department of Defense (“DoD”) contract clause that prohibits the use of mandatory arbitration agreements with their employees. See DFARS 252.222-7006 Restrictions on the Use of Mandatory Arbitration Agreements (Jan. 2023). Further, contractors are not permitted to require their employees to sign internal confidentiality agreements that would prohibit employees from reporting concerns over safety, fraud and abuse, or certain other misconduct to federal officials. See FAR 52.203-19 Prohibition on Requiring Certain Internal Confidentiality Agreements or Statements (Jan. 2017).

Service contractors must comply with regulations concerning fringe benefits under the Service Contract Act (“SCA”) such that employees receive bona fide fringe benefits equal to or greater than the value required under applicable wage determinations. Employers may only claim credit for particular kinds of fringe benefits if it actually pays for the benefit or has an irrevocable obligation to furnish the benefit. Employee tuition assistance or training costs can fall in the fringe benefit category if the education or training is for the employee’s personal benefit. Employers, however, may only claim credit for the benefit if the payment of the tuition or training cost cannot be taken back. Thus, provisions that require the employee to pay the cost back to the employer if they don’t get a good grade or if they resign or are fired before the passage of some amount of time usually preclude the contractor from claiming credit. That’s why we recommend employers furnish such benefits after the fact if they don’t want to run the risk of going out of pocket.

DOL’s enforcement report illustrates how it’s pursuing one of many of its pro-worker policies. Will DOL’s aggressive enforcement activities on behalf of workers continue for the foreseeable future? If there’s a change in party at the White House, we undoubtedly will experience yet another swing of the pendulum at DOL. If Democrats remain in charge, then we likely will see little change. We’re here to assist employers, especially federal contractors, to comply with the law—whatever path we find ourselves on for the next four years.