Why this Matters• Department of Labor: –adding 250 new investigators –Internet education initiatives –will be requiring compliance audits –prioritizing misclassifications• Mistakes cost big money
Three Issues to Think About• Employee vs. Contractor• Employee vs. Intern• Non-Exempt Employee vs. Exempt Employee
Employee vs. Contractor• The Benefits of Using Independent Contractors • Reduced Cost • Employer taxes –No benefits –Flexibility in staffing
Employee vs. Contractor (cont.)• When Will Workers Be Considered “Employees” – Common Law Test (Right To Control) • Nationwide Mutual Insurance Co., v. Darden Insurance Agent – US Supreme Court factors – consider all aspects of employment relationship – no single factor controls – The IRS 20 Factor Test • It is not about the numbers! • You do not need to meet all 20 tests • All of the relevant facts and circumstances are considered • Ultimately, it is about CONTROL
Employee vs. Contractor (cont.)• When Will Workers Be Considered “Employees” (cont.) – Economic Realities Test • As an economic reality, is the worker dependent on the company – Considered a broader, more liberal test • Often used in FLSA cases • Relevant factors – Level of skill required – Degree of worker’s financial investment in equipment and facilities – Degree of control by Company – Duration of the relationship – Worker’s opportunity for profit and loss
Employee vs. Contractor (cont.)• Effects of Misclassification – Payroll Tax Liability • Safe harbor protections – company had a reasonable basis for not treating workers as employees. – past audit – court case – letter ruling – advice of attorney – FLSA • FLSA does not cover independent contractors • Economic realities test • If misclassified – Overtime – minimum wage
Employee vs. Contractor (cont.)• Effects of Misclassification (cont.) – Employment Discrimination Laws and NLRA • If considered an employee, must count towards jurisdictional minimum number of employees (Title VII requires 15 employees, etc.) • If considered an employee, entitled to protections of the laws – Workers’ Compensation • If independent contractor, then exempt from workers’ compensation, and can sue in court for work related injuries – Employee Benefits • May sue the plan for benefits denied • Risk of plan disqualification • Plan language is key – the definition of who is eligible for benefits • Vizcaino v. Microsoft
Employee vs. Contractor (cont.)• Precautions to Reduce Risk of Liability – Draft Independent Contractor Agreement – Key Terms • The definition of work performed • Payment – flat rate, or per hour charge, with submission of reports • Payment of Expenses • Responsibility for Taxes • Equipment, materials, supplies • No Benefits • Insurance – contractor to carry • Indemnification – contractor to indemnify company for losses if reclassified as employee – In practice, adhere to the agreement’s terms
Employee vs. Intern• DOL is cracking down on companies that fail to properly pay interns.• Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act• Internships in the “for-profit” private sector will most often be viewed as employment, which must be paid.
Employee vs. Intern• Six-Factor Test: – Is the training similar to what would be given in a vocational school or academic educational instruction? – Is the training for the benefit of the trainees or students? – Do the trainees or students work under their close observation of regular employees without displacing them? – Does the employer derive no immediate advantage from the activities of the trainees or students, and on occasion are the employer’s operations actually impeded? – Are the trainees or students not necessarily entitled to a job at the conclusion of the training period? – Do the employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training?
Exemptions: Administrative Employees• Employee-by-employee analysis based on: – Is the employee paid a salary of at least $455 per week? – Is the employee’s primary duty the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers? – Does the employee’s primary duty include the exercise of discretion and independent judgment with respect to matters of significance?• The Case of Mortgage Loan Officers• Traditionally considered “exempt.”• DOL Administrator’s Interpretation No. 2010-1 – “Employees who perform the typical job duties of a mortgage loan officer do not qualify” as exempt administrative employees. – “A careful examination of the law as applied to the mortgage loan officers’ duties demonstrates that their primary duty is making sales and, therefore, mortgage loan officers perform the production work [as opposed to administrative work] of their employers.”
Patient Protection and Affordable CareAct (PPACA) and Healthcare andEducation Reconciliation Act (HCERA) What You Need To Known Now and In the Future
Main Elements• Individual Mandate• Employer Mandate• Health Insurance Market Reform – Creation of exchanges – Insurance mandates – Required coverage elements• Tax Changes
Impact on Businesses• What Your Insurance Must Have – No lifetime amount restrictions – Cover up to 26 – Preexisting condition coverage – No rescissions – Preventative health services without cost sharing (with grandfather clause)• Early retiree reimbursement• Community Living Assistance Services and Support Act• Prohibition on salary discrimination
Employer Coverage Issues• NOW (2010 and 2011) – Tax credits for small businesses – Coverage requirements – Tax changes – HSA changes – CLASS Act – Long-term benefit enrollment• 2013 – Medicare payroll tax increase – Cap on salary-reductions for health FSAs – Change Medicare Part D retiree drug subsidy (RDS)
Employee Coverage Issues (cont.)• 2014 – Small Business Exchanges (SHOPs) – Penalty for No Coverage – Automatic Enrollment (maybe 2014) – Tax on Cadillac Plans• 2016 – Healthcare across state lines• 2018 – High-value Excise Tax
Healthcare Related Tax Changes• W-2 Reporting• Tax on subsidies for retiree prescription drug programs• Medicare payroll taxes increased for high- wage employees• “Tax” for not providing health insurance• Excise tax on Cadillac plans• Tax credits for small businesses• Comparative effectiveness fee
What Your Plan Has to Cover• 72.5% - employee plan• 65% - family• Kids up to 26• No lifetime limits• No recissions• Limits on waiting periods• No preexisting condition restrictions for kids under 19• Automatically enroll – employees opt out
Grandfather Clauses• What will cause loss of grandfathered in status is as yet undetermined• Group health plans in existence when PPACA was enacted are not required to adhere to some of the plan coverage requirements – No cost-sharing for preventive health services – Prohibition on salary discrimination – Grievance and appeals procedures – Certain patient protection provisions – Remember: enacted March 23, 2010
HSAs• Limiting its uses• Only for prescriptions, no longer for over-the-counter drugs• Stiffer penalties
Retiree Only Plans• Tax subsidies on retiree benefits starting in 2013 – Companies that provides retirees with prescription drugs received a subsidy to do so – This will now be taxed• Caterpillar write-down - $14 Billion• Boeing, Verizon, Conway also claim will suffer losses
CBAs• Similar coverage requirements• Amendments to CBA solely to comply with new rules is not considered termination of the agreement• Certain coverage and reporting mandates not to apply until date last CBA relating to coverage terminates
Predicted Impacts• Higher Insurance Premiums for Businesses on Current Plans• Potential decrease for small businesses if SHOPs work as promised by Congress• Penalty for Not Providing Insurance• Loss of Certain Tax Breaks
Technology in the Workplace What You Can and Cannot Do
Privacy and Privilege• Stengart v. Loving Care Agency, Inc. (N.J. 2009) – Employee’s emails to her attorney, sent through Employee’s web based email account, considered privileged – Court concluded that Company’s electronic communications policy, which required conversion of emails into company business records, must give way to attorney-client privilege• Alamar Ranch LLC v. County of Boise, 2009 WL 3669741 (D. Idaho 2009) – Privilege waived for emails sent using company computers – Attorney should have been aware that client’s employer would access email sent via company system
Text Messages• Quon v. Arch Wireless (9th Cir. 2008)• Police officers used department – provided cell phones for work and personal use• Department had policy of monitoring email and other communications, but policy did not specifically include text messages• Service provider disclosed the text messages to the Department, as the subscriber under the SCA• Court concludes that service provider could not disclose contents to Department – Employee had reasonable expectation of privacy that messages would not be reviewed without consent• U.S. heard oral arguments on April 19, 2010
Personal Email Accounts• Employee’s access of personal web-based email accounts (Gmail, Yahoo, and the like) on company computer• Can Employer log in to the personal account?• Stored Communications Act – Violation of SCA to access without authorization and obtain electronic communications – Van Alstyne v. Electronic Scriptorium Ltd., 560F. 3d 199 (4th Cir. 2009) (Company found to violate SCA and punitive damages upheld, where former boss logged into employee’s AOL account)
The ADA Amendments Act: Disability Discrimination Redux
ADA Amendments Act• Express purpose is to make it easier to meet the definition of “disability.”• Response to court rulings that rejected claims of disability discrimination because the party wasn’t sufficiently disabled.
ADAAA: What’s New• New definitions of “major life activity”• Re-imagines “substantially limits”• New provision relating to “regarded as”• Refocuses the test of discrimination away from whether a disability exists to whether discrimination exists.
ADAAA: Major Life Activities• Non-exclusive statutory list: – eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating and working; or – Major bodily functions, such as functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine and reproductive functions.
ADAAA: Major Life Activities• Impairments affecting only internal bodily functions without affecting external activities are to be considered disabilities.• Impairment of one from either list is enough.
ADAAA: Substantially Limits• Not an exacting test. – Does not mean prevent, or significantly or severely restrict.• Does not cover temporary, non-chronic impairments of short duration with little or no residual effects.
ADAAA: Substantially Limits• Must also consider limiting nature of impairment when it is “active.” – “An impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.”• Must ignore mitigating measures – E.g., medications, medical devices, assistive technologies, learned behaviors, and surgical interventions.
ADA: Substantially Limits• Examples – Yes: deafness, blindness, intellectual disability, partially or completely missing limbs, mobility impairments requiring use of a wheelchair, autism, cancer, cerebral palsy, diabetes, epilepsy, HIV/AIDS, multiple sclerosis, muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive-compulsive disorder, and schizophrenia. – No: the common cold, seasonal or common influenza, a sprained joint, minor and non-chronic gastrointestinal disorders, or a broken bone that is expected to heal completely. – Maybe: asthma, back and leg impairments, carpal tunnel syndrome, and learning disabilities.
ADAAA: Regarded As• Covers: – actual or perceived disability, whether or not it actually limits or is believed to limit a major life activity – actions taken on basis of mitigating measures used for an impairment, or symptoms of an impairment• Does not cover: – apply to transitory and minor impairments – require reasonable accommodations.
ADAAA: What Does It All Mean?• More ADA claims in federal court• Summary judgment more difficult• Higher settlement values of cases• Disability vs. Accommodation
Rebuilding Your Workforce as theEconomy Rebounds Considerations For 2010
Reconsider Your Hiring Practices as YouBegin to Rebuild Your Workforce
Objective:• Locate and Hire the Best Available Candidate
Re-hire vs. New Hire• Look at the “Pros” and “Cons”