SHG: Managing the Non-Employee Workforce

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A white paper by SHG's Frederic Buse regarding managing a non-employee workforce.

SHG website: http://www.shggroup.com/

Frederic Buse on SHG: http://www.shggroup.com/FJBprofile.html

Frederic Buse on LinkedIn:
http://www.linkedin.com/pub/frederic-j-buse/7/762/91a

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SHG: Managing the Non-Employee Workforce

  1. 1. Managing the Non-Employee – Free Lance Workforce Schwartz Heslin Group, Inc. Managing Director Frederic J. BuseBeginning in 1985, the New York State Dept. of Labor began issuing occupation-specific guidelines to clarify who should be classified an employee and who is anindependent contractor.From 1985 to 2005, guidelines covering 10 industries were issued but and none since. Chart 1 Existing NYS Dept. of Labor Guidelines Cover the Following 10 Occupations: Form Number Description IA318.11 Agricultural Employment IA318.16 Organized Camps IA318.17 Performing Artists IA318.18 Insurance Sales Industry IA318.19 Newspaper and Shopping Guide Publishers IA318.20 Translating and Interpreting Industry IA318.21 Tour Guide Industry IA318.22 Van Operators In The Moving Industry IA318.23 Magazine Publishing Industry IA318.24 Messenger Courier Industry Source: (See http://www.labor.state.ny.us/formsdocs/ui/formsandpublications.shtm ).By  contrast,  California’s  Employment  Development  Department  has  issued  “Information  Sheets”  covering  22  occupations  or  industry  segments.  (See http://www.edd.ca.gov/Payroll_Taxes/Forms_and_Publications.htm)It is difficult to determine what constitutes employment to establish employer liability forUI taxes and claimant coverage for unemployment insurance purposes. With theexception   of   certain   specific   exclusions   and   inclusions,   the   term   “employee”   is   not  defined and there is no statutory basis for distinguishing between and employee and anindependent contractor.
  2. 2. Page 2In most instances, this issue is raised when a worker applies for unemploymentbenefits. The last employer is contacted by the Dept. of Labor and asked for thecircumstances of job loss. If the employer indicates that the worker was an independentcontractor and not an employee, information regarding the facts and circumstances ofthe  claimant’s  work  status  will  be  requested  by  the  Liability  &  Determination  Section  of  the   Dept.   of  Labor  (“L&D”)   -- typically from both the claimant and the employer. Aftercompleting its fact finding, L&D will issue a determination letter. If they find that theclaimant was an employee, the Labor Dept. will notify the office which processed theclaim that the claimant is eligible for UI benefits. L&D also will send a determinationletter to the employer citing the factors which led to the decision regarding employment,instructing the employer to file amended UI tax returns to include the taxable wages ofthe claimant and all other similarly situated individuals. The employer has 30 days toappeal the decision to an Administrative Law Judge. The next level of appeal is the UIAppeal Board.If the employer fails to respond with revised tax returns and does not appeal thedecision, he should expect a visit from a Dept. of Labor auditor. The auditor will reviewpayroll information concerning the applicant for unemployment insurance and all otherworkers with similar work responsibilities. Approximately 10,000 such audits arecompleted annually. As a result of such an audit, requests/demands for additional UItax payments plus penalties of $50,000 or more are not unusual.The NYS Dept. of Labor adjudicates many more employee vs. independent contractorcases than any other state agency. It is increasingly clear that it has targetedconsiderable audit resources to indentify employers who misclassify employees asindependent contractors. At the request of the Labor Commissioner, the Governor onSeptember 9. 2007 issued Executive Order No. 17, establishing a Joint EnforcementTask Force on Employee Misclassification.(See http://www.ny.gov/governor/press/0907071.html).The Task Force was directed to strengthen enforcement, avoid duplication by sharingrelevant information among various state agencies, and coordinate both investigationand enforcement actions.The NYS Dept. of Labor has two sections which review decisions of the AdministrativeLaw Judge, the UI Appeal Board and ultimately the Third Department Appellate Divisionof the Supreme Court (the appellate court to which all disagreements with the rulings ofUI Appeal Board must be brought.) Both maintain indexes of precedent cases to assistthe local offices in their determinations. the  Adjudication  Services  Office  (“ASO”)  focuses  on  decisions  related  to  a   claimant’s  eligibility  for  UI  benefits. the Liability & Determination Section concentrates on employer issues.
  3. 3. Page 3Summaries of previous decisions by the UI Appeal Board and the Courts relating toclaimants are available online. The summaries are indexed by topic and include precisedescriptions of the actual decisions. Chart 2 Online Claimant Eligibility Topics Covered by ASO Index # Topic 700 Availability and Capability 800 Registration, Reporting and Certification 900 Determination of Benefits 1000 Hearings and Appeals 1100 Misconduct 1200 Refusal of Employment 1300 Industrial Controversy 1400 Total or Partial Unemployment 1500 Misrepresentation and Redeterminations 1600 Voluntary Separation 2000 Section 599 (shared work program) Source: http://www.labor.state.ny.us/ui/aso/interpservice.shtmSummaries of previous decisions by the UI Appeal Board and the Courts relating toemployers are not online and are only available in paper form in Albany. The detailedsummaries are indexed by occupation and listed by statutory inclusions and statutoryexclusions which are further broken down by all employers, non-profits and governmentemployers.
  4. 4. Page 4Examples of the summaries (the entire list is much longer) related to occupationsspecifically covered by statute include: Index # Occupation 3150 Statutory inclusions 3150A Agent-driver or commission driver 3150B Professional musician 3150C Traveling salesman 3150D Professional model 3200 Statutory exclusions (all employers) 3200A Spouse or minor child 3200B Employment subject to federal railroad U.I. Act 3200C Student  and  student’s  spouse 3200D Licensed real estate brokers 3250 Statutory exclusions (non-profits & government) 3250A Golf caddy 3250C Baby sitter 3300 Statutory exclusions (non-profit employers) 3300A Minister 3300D Rehab services or work at rehab facility 3350 Statutory exclusions (governmental employers) 3350A Elected officials 3350B Member of legislature or judiciary 3350C State National Guard 3350G Inmates of penal institutions
  5. 5. Page 5 Examples of the summaries of decisions related to occupations not covered specifically by statute include: Index # Occupation 3800 .005 Accountant/tax preparer 3800 .001 Artist 3800 .025 Attorney/Paralegal 3800 .005 Professional model 3800 .035 Bookkeeper 3800 .045 Cleaner/Maintenance Worker/Janitor 3800 .05 Coach 3800 .06 Construction worker 3800 .065 Consultant 3800 .07 Delivery person 3800 .080A Limousine driver 3800 .085 Editor/Proofreader 3800 .09 Engineer/Draftsman 3800 .120B Nurse 3800 .120D Physician 3800 .013 Interviewer/Research Interviewer 3800 .075 Officer/Director/Board Member 3800 .215G Securities Salespersons 3800 .22 Secretary/Stenographer/Typist 3800 .2255 Teacher/Tutor 3800 .23 Telephone solicitor/Telemarketer 3800 .24 Waiter/Waitress/Service Personnel 3800 .245 Writer/EditorThere are a large number of summarized employer cases indexed by L&D. Forexample, precedent cases involving medical occupations (#3800.120A to #3800.120G)number more than 80.If you receive a determination letter from the Liability and Determination Section, youshould request a meeting with them. Prior to the meeting, you are well advised to obtainthe case summaries covering the occupation(s) in dispute. You should also reviewother occupations in the same industry. After reviewing the summaries, you canrequest copies of the specific UI Appeal Board and NYS Supreme Court decisionsidentified in each summary relevant to your issues.
  6. 6. Page 6If, after exchanging correspondence or meeting with L&D, you are not satisfied with theDept. of Labor conclusion, on behalf of your client you can request an informal hearingwith L&D. If you still dispute the L&D conclusions, you can request a formal hearingbefore an Administrative Law Judge.The formal hearing request must be received on a timely basis. These hearing areusually  conducted  in  Albany  by  ALJ’s  with  experience  in  employer  liability  issues.    Remember, you must establish a complete record at an ALJ hearing. Typically, no newinformation will be accepted at the next level if you decide to appeal an ALJ decision tothe UI Appeal Board. Similarly, the Third Department of the NYS Supreme Court,Appellate Division relies on the record established before the ALJ. The standardfollowed by  the  court  is  whether  or  not  there  is  “substantial  evidence”  to  support  the  Appeal  Board’s  decision.One final note – not-for-profit organizations classified 501 C (3) by the Internal RevenueService  may  request  to  become  “reimbursable”  employers  and  avoid both U.I. taxes andmost U. I. audits in exchange for agreeing to reimburse any UI benefits paid to formerworkers.SHG can assist employers faced with independent contract questionsto minimize the impact on their UI taxes and penalties.Contact: Managing Director Fred Buse -- fbuse@shggroup.com

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