Given the growing number of contingent workers, HR and recruiting must be prepared to inch out the competition to secure a different type of tech workforce in the evolving "gig economy."
6. #RDaily@RecruitingDaily @RecruitingBlogs
DISCLAIMER
This webinar and any links provided are for general informational purposes
only and should not be construed as legal advice. Receipt of these materials
does not create an attorney-client relationship nor is it a solicitation or
advertisement to provide legal services. The views expressed in this article
may be outdated or repealed by current law. Do not act upon this information
without seeking professional counsel in the appropriate jurisdiction.
9. #RDaily@RecruitingDaily @RecruitingBlogs
The “Growing” Gig Economy
Years of government crackdown on
misclassification of contractors led to
companies reevaluating the use of
“1099’s”
The result?
Many companies require
incorporation or employment
10. #RDaily@RecruitingDaily @RecruitingBlogs
The gig economy and sharing
economy are being sued to death!
Uber and Lyft Drivers, as well as other workers that would seem to have
complete independence have been classified as employees by some
courts.
Crackdowns based on the ACA are already in motion and the final phase
limited exemptions to companies with <50 employees.
A final blow by the DOL resulted in the conclusion by industry experts that
moving forward, the government is going to audit based generally on the
concept that EVERY WORKER is SOMEONE’S EMPLOYEE.
11. #RDaily@RecruitingDaily @RecruitingBlogs
Regulatory Compliance Responsibilities
Have Changed
Companies that utilize a contingent workforce can no longer shift
responsibilities to staffing firms or PEOs without consequence.
New laws (in particular the ACA) actually mandate that the
company for whom work is performed must ensure compliance
for contingent workers as if they were direct employees.
12. #RDaily@RecruitingDaily @RecruitingBlogs
Compliance Strategies
To ensure blanket compliance, companies must analyze whether their non-employee workers are
properly classified under:
A new 11-part NLRB test
The IRS Right to Control Test (federal taxes)
The traditional common law Right to Control Test (ERISA and federal discrimination laws)
The modified U.S. Treasury version of the traditional common law Right to Control Test
(Affordable Care Act)
The federal court Economic Realities Test (FLSA or Department of Labor in General)
AND….
Individual state law tests used for state wage and hour laws, workers compensation and
unemployment
13. #RDaily@RecruitingDaily @RecruitingBlogs
National Labor Relations Board
11 Part Test (New in 2014)
In a 2014 FedEx Case, the NLRB held that no bright line exists between "employee" and
"independent contractor," rather every case needed to consider a wide array of factors, all of which
go to the basic question of whether the worker is "rendering service as part of an independent
business.“
What defies and “independent business”?
(1) significant entrepreneurial opportunity,
(2) a realistic ability to work for other companies;
(3) a proprietary or ownership interest in the work being done; and
(4) control over important business decisions, such as scheduling work, hiring, selection and
assigning employees, purchase and use of equipment and commitment of capital.
14. #RDaily@RecruitingDaily @RecruitingBlogs
National Labor Relations Board
11 Part Test (New in 2014)
1. Extent of control by employer;
2. Whether the individual is involved in a distinct occupation or business;
3. Whether the work is usually done with or without supervision;
4. Specialized skills;
5. Who provides the supplies and tools;
6. Length of employment;
7. Method of payment;
8. Whether the work is part of the employer’s regular business;
9. The parties’ beliefs about the nature of the relationship;
10. Whether the employer is in the business that the worker performs; and
11. Whether the worker is rendering service as part of an independent business.
NLRB
11-
PART
TEST
15. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test
Old Concept, New Guidelines
Recent Policy Shift under new Department of Labor Guidelines has
basically led to the death of independent contractors as we know
them. The 6 factors in the Economic Realities Test remain the same,
but the weight given to each has changed drastically. Previously,
“Control” was the paramount factor. All factors were given
significantly less weight.
As of last year’s guidance, all 6 factors are to be considered equally
when determining worker classification.
The conclusion is that even where there is ZERO control over the
worker, the DOL may still consider them misclassified, making the
client company liable for all regulations governed by the DOL.
What is the nature and
degree of the
employer’s control?
Is the work an integral
part of the employer’s
business?
Does the worker’s
managerial skill affect
the worker’s
opportunity for profit
or loss?
How does the worker’s
relative investment
compare to the
employer’s
investment?
Does the work
performed require
special skill and
initiative?
Is the relationship
between the worker
and the employer
permanent or
indefinite?
16. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: Is the Work an Integral Part of the Employer’s Business?
For a construction company that frames residential homes, carpenters are integral to
the employer’s business because the company is in business to frame homes, and
carpentry is an integral part of providing that service.
In contrast, the same construction company may contract with a software developer to
create software that, among other things, assists the company in tracking its bids,
scheduling projects and crews, and tracking material orders. The software developer is
performing work that is not integral to the construction company’s business, which is
indicative of an independent contractor.
17. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?
A worker provides cleaning services for corporate clients. The worker performs assignments only
as determined by a cleaning company; he does not independently schedule assignments, solicit
additional work from other clients, advertise his services, or endeavor to reduce costs. The worker
regularly agrees to work additional hours at any time in order to earn more. In this scenario, the
worker does not exercise managerial skill that affects his profit or loss. Rather, his earnings may
fluctuate based on the work available and his willingness to work more. This lack of managerial skill
is indicative of an employment relationship between the worker and the cleaning company.
In contrast, a worker provides cleaning services for corporate clients, produces advertising,
negotiates contracts, decides which jobs to perform and when to perform them, decides to hire
helpers to assist with the work, and recruits new clients. This worker exercises managerial skill that
affects his opportunity for profit and loss, which is indicative of an independent contractor.
18. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: How Does the Worker’s Relative Investment Compare to the Employer’s Investment?
A worker providing cleaning services for a cleaning company is issued a Form 1099-MISC each year and signs a contract
stating that she is an independent contractor. The company provides insurance, a vehicle to use, and all equipment and
supplies for the worker. The company invests in advertising and finding clients. The worker occasionally brings her own
preferred cleaning supplies to certain jobs. In this scenario, the relative investment of the worker as compared to the
employer’s investment is indicative of an employment relationship between the worker and the cleaning company. The
worker’s investment in cleaning supplies does little to further a business beyond that particular job.
A worker providing cleaning services receives referrals and sometimes works for a local cleaning company. The worker
invests in a vehicle that is not suitable for personal use and uses it to travel to various worksites. The worker rents her own
space to store the vehicle and materials. The worker also advertises and markets her services and hires a helper for larger
jobs. She regularly (as opposed to on a job-by-job basis) purchases material and equipment to provide cleaning services
and brings her own equipment (vacuum, mop, broom, etc.) and cleaning supplies to each worksite. Her level of investments
is similar to the investments of the local cleaning company for whom she sometimes works. These types of investments may
be indicative of an independent contractor.
19. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: Does the Work Performed Require Special Skill and Initiative?
A highly skilled carpenter provides carpentry services for a construction firm; however, such skills are not
exercised in an independent manner. For example, the carpenter does not make any independent
judgments at the job site beyond the work that he is doing for that job; he does not determine the
sequence of work, order additional materials, or think about bidding the next job, but rather is told what
work to perform where. In this scenario, the carpenter, although highly skilled technically, is not
demonstrating the skill and initiative of an independent contractor (such as managerial and business
skills). He is simply providing his skilled labor.
In contrast, a highly skilled carpenter who provides a specialized service for a variety of area construction
companies, for example, custom, handcrafted cabinets that are made-to-order, may be demonstrating the
skill and initiative of an independent contractor if the carpenter markets his services, determines when to
order materials and the quantity of materials to order, and determines which orders to fill.
20. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: Does the Work Performed Require Special Skill and Initiative?
A highly skilled carpenter provides carpentry services for a construction firm; however, such skills are not
exercised in an independent manner. For example, the carpenter does not make any independent
judgments at the job site beyond the work that he is doing for that job; he does not determine the
sequence of work, order additional materials, or think about bidding the next job, but rather is told what
work to perform where. In this scenario, the carpenter, although highly skilled technically, is not
demonstrating the skill and initiative of an independent contractor (such as managerial and business
skills). He is simply providing his skilled labor.
In contrast, a highly skilled carpenter who provides a specialized service for a variety of area construction
companies, for example, custom, handcrafted cabinets that are made-to-order, may be demonstrating the
skill and initiative of an independent contractor if the carpenter markets his services, determines when to
order materials and the quantity of materials to order, and determines which orders to fill.
21. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: Is the Relationship between the Worker and the Employer Permanent or Indefinite?
An editor has worked for an established publishing house for several years. Her edits are completed in
accordance with the publishing house’s specifications, using its software. She only edits books provided by
the publishing house. This scenario indicates a permanence to the relationship between the editor and the
publishing house that is indicative of an employment relationship.
Another editor has worked intermittently with fifteen different publishing houses over the past several
years. She markets her services to numerous publishing houses. She negotiates rates for each editing job
and turns down work for any reason, including because she is too busy with other editing jobs. This lack of
permanence with one publishing house is indicative of an independent contractor relationship.
22. #RDaily@RecruitingDaily @RecruitingBlogs
The Economic Realities Test Examples
Straight From the Department of Labor
Example: What is the Nature and Degree of the Employer’s Control?
A registered nurse who provides skilled nursing care in nursing homes is listed with Beta Nurse Registry in order
to be matched with clients. The registry interviewed the nurse prior to her joining the registry, and also required the
nurse to undergo a multi-day training presented by Beta. Beta sends the nurse a listing each week with potential
clients and requires the nurse to fill out a form with Beta prior to contacting any clients. Beta also requires that the
nurse adhere to a certain wage range and the nurse cannot provide care during any weekend hours. The nurse
must inform Beta if she is hired by a client and must contact Beta if she will miss scheduled work with any client. In
this scenario, the degree of control exercised by the registry is indicative of an employment relationship
Another registered nurse who provides skilled nursing care in nursing homes is listed with Jones Nurse Registry in
order to be matched with clients. The registry sends the nurse a listing each week with potential clients. The nurse
is free to call as many or as few potential clients as she wishes and to work for as many or as few as she wishes;
the nurse also negotiates her own wage rate and schedule with the client. In this scenario, the degree of control
exercised by the registry is not indicative of an employment relationship.
23. #RDaily@RecruitingDaily @RecruitingBlogs
What should companies do?
What are your goals?
Do you want to have control over your workers?
Do you need to be able to assess their performance and make decisions accordingly?
Will an independent contractor salesperson be effective without using your company’s business
cards and e-mail system?
Do you need to pay for their training or business expenses?
Do you want to stop them from working for competitors?
Do you need to require full-time work?
25. #RDaily@RecruitingDaily @RecruitingBlogs
Top Reasons for Freelancing:
To have flexibility in my schedule (i.e. what days or times I work)
To be my own boss
To work from the location of my choosing
To be able to pursue work I am passionate about or find meaningful
To have a schedule that enables me to pursue my personal passions
To be able to spend more time with friends, family & my personal life
To be in control of my own financial future
To earn extra money
Attract Talent with Factors that Drive
Freelancer Mentality
27. #RDaily@RecruitingDaily @RecruitingBlogs
Key Freelancer Concerns:
Cost of health care
Unpredictable income
Saving for retirement
High taxation rates
Difficulty finding more clients or projects
Non-payment or late payment by clients
But Wait…. How can a Client help alleviate these concerns without
risking being seen as an employer?
Attract Talent by Alleviating Concerns
29. #RDaily@RecruitingDaily @RecruitingBlogs
For any Resource staffed on a Microsoft Project, Supplier must ensure that the Employee’s employer will:
o collect and maintain all payroll and employment files or records, including time sheets, as required by
applicable state and federal wage and hour laws and regulations;
o pay all compensation due, including, withholding of income taxes, and pay and withhold social security and
other payroll taxes, unemployment insurance, workers’ compensation insurance payments and disability
benefits;
o accurately and timely pay any business and occupational taxes;
o accommodate any disabilities as may be required by law;
o train the Employees and establish a career development program for them;
o investigate and resolve all complaints, claims and/or grievances.
o If the employer has 50 or more total Employees (not just those engaged at Microsoft), provide at least 15
days of paid time off (5 may be paid sick leave) to any employee who is staffed on a Microsoft Project, and
has worked for said employer for at least 1500 hours in the prior 12 months in any capacity (not just with
Microsoft).
o Provide ACA compliant health insurance to all U.S.-based Employees who work a total of 30 or more
hours per week (not just >30 hrs for Microsoft)
CASE STUDY:
New Microsoft Staffing Provider Obligations
30. #RDaily@RecruitingDaily @RecruitingBlogs
Microsoft Justification for New Supplier Standards
Ensuring suppliers share our commitment to strong minimum employment standards:
We want to work with suppliers who share our commitment to strong minimum standards for their people who work
on our behalf. That’s why we are requiring our suppliers provide their employees who do our work at least 15 days
of paid time off.
That’s also why we require anyone doing work at a Microsoft supplier on behalf of Microsoft to be an employee of
that supplier, and not an independent contractor. This is designed to ensure eligibility for important workplace
protections such as minimum wage, overtime compensation, unemployment insurance, and workers compensation.
Probable Reality: Microsoft knows that they risk becoming “common law employers” & are embracing “co-
employment” instead.
California and a few other states have laws related to mandatory PTO and sick leave. If a supplier employer doesn’t
provide it when they are required to do so, Microsoft could be liable for it.
Federal law and the ACA are the main culprits for the second part. Regardless, Microsoft knows they have liability
as either a common law employer or a joint employer and they would rather just make individuals performing
services for them have anything to complain about!
CASE STUDY:
New Microsoft Staffing Provider Obligations
32. #RDaily@RecruitingDaily @RecruitingBlogs
DISCLAIMER
This webinar and any links provided are for general informational purposes
only and should not be construed as legal advice. Receipt of these materials
does not create an attorney-client relationship nor is it a solicitation or
advertisement to provide legal services. The views expressed in this article
may be outdated or repealed by current law. Do not act upon this information
without seeking professional counsel in the appropriate jurisdiction.