Rhode Island: Recent Legislative Updates

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Quick Look

  • Employers will face criminal liability when knowingly and willfully failing to pay wages of $1,500 or more on an employee’s regular pay day, at the time of termination, or to a deceased employee.
  • Rhode Island will apply the FLSA test to determine independent contractor status. Employers who knowingly and willfully misclassify an employee as an independent contractor under this test may face criminal prosecution and increased civil penalties.
  • Beginning January 1, 2024, independent contractors must file Form DWC-11 on an annual basis.
  • It is an unlawful employment practice for employers to require employees to sign non-disclosure agreements or non-disparagement agreements that seek to conceal or keep confidential alleged violations of civil rights.
  • June 19th is known as “Juneteenth National Freedom Day,” and has been designated as a recognized state holiday.

Discussion

On June 16, 2023, the Rhode Island General Assembly concluded its 2023 legislative session, resulting in several new employment-related laws that expand employee protections. The changes are summarized below.

Increased Criminal and Civil Penalties for Wage Violations and Employee Misclassification. Under SB 1079, and beginning January 1, 2024, any employer who knowingly and willfully fails to pay wages of $1,500 or more on an employee’s regular pay day or at the time of termination will face criminal liability. Similar liability will be imposed on an employer who fails to pay wages of $1,500 or more owed to a deceased employee. Upon a plea or conviction under the new law, employers will face potential imprisonment for a term of up to three (3) years, a fine of up to $5,000, or both.

Additionally, beginning on January 1, 2024, employers should apply the Fair Labor Standards Act (FLSA) test to determine independent contractor versus employee status. The Rhode Island Department of Labor and Training (DLT) will review employee misclassification complaints using the FLSA test, and if the DLT finds that an employer has knowingly and willfully misclassified an employee as an independent contractor, the DLT will be directed to refer the matter to the Office of the Attorney General for potential criminal prosecution. Employers who knowingly and willfully misclassify employees under the new FLSA test will be liable for civil penalties ranging from $1,500 to $3,000 for a first offense and up to $5,000 for each misclassified employee for any second and subsequent offense.

The new legislation presents a focus on the Rhode Island construction industry, specifying that any “construction industry” employer that knowingly and willfully misclassifies an employee as an independent contractor will be guilty of a misdemeanor if the value of the employee’s services is less than $1,500, or a felony if the value of their services is more than $1,500. If the employer did not make its classification decision knowingly and willfully, the employer will be liable for a civil penalty of $1,500 to $3,000 per misclassified employee.

Independent Contractor Annual Registration. Under current law, independent contractors in Rhode Island are required to file a form with the DLT (i.e., Form DWC-11), reaffirming that the independent contractor is not an employee of the hiring entity and is not entitled to workers’ compensation benefits from the hiring entity. Under HB 5710, independent contractors will be required to file the Form DWC-11 electronically on an annual basis. The new annual registration requirements will take effect on January 1, 2024.

Restrictions on Non-Disclosure and Non-Disparagement Agreements. Effective June 21, 2023, SB 342 states that employers cannot require an employee, as a condition of their employment, to execute a non-disclosure agreement seeking to conceal alleged violations of civil rights. Additionally, it is an unlawful employment practice to proffer to an employee a non-disparagement agreement concerning alleged violations of civil rights or any agreement that requires alleged violations of civil rights to remain confidential. Any contract provision in violation of the new law will be void and unenforceable.

Juneteenth as a State Holiday. Governor McKee signed HB 5380, designating June 19th as “Juneteenth National Freedom Day,” requiring employers to pay employees classified as non-exempt at the holiday premium rate for all hours worked on this new state holiday. Employers cannot impose disciplinary action if a non-exempt employee refuses to work on the recognized Juneteenth holiday.

Action Items

  1. Review wage payment procedures to ensure compliance with requirements.
  2. Have independent contractor status reviewed by legal counsel.
  3. Review applicable nondisclosure and non-disparagement agreements with legal counsel.
  4. Review and update policies to account for recognition of June 19th as a state holiday.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase