Employment law for business owners


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Employment law for business owners

  1. 1. The Law Firm of Ekaterina Mouratova, PLLC 154 Grand Street New York, NY 10013 Tel.: (212) 203-2406 Fax: (212) 279-9743 Email: info@mouratovalawfirm.com www.mouratovalawfirm.comBusiness ImmigrationIntellectual Property Real Estate
  2. 2. Employment Law for Business Owners© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  3. 3. “Teamwork is the ability to work togethertoward a common vision. The ability to directindividual accomplishments towardorganizational objectives. It is the fuel thatallows common people to attain uncommonresults.”- Andrew Carnegie
  4. 4. Employment “At-Will”• In New York, employment is generally resumed to be “at-will”• An employer has the right to discharge an employee at any timefor any reason, or no reason at all• An employees is equally free to resign at any time without beingrequired to explain his/her decision• Exception to “at-will” doctrine – when parties entered into awritten employment agreement, proving for a specific term ofemployment and/or that termination can be only for cause• Other writings that can change “at-will” status include codes ofconduct and employee handbook provisions• When examining whether an employment was “at-will” or not,courts examine the entire course of conduct between the parties. Soemployers must be careful what they promise to employees in pre-hiring negotiations© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  5. 5. Claims for Unlawful Termination• “At-will” employment does not protect employers against claims forunlawful termination• Discrimination – an employer cannot terminate or harass an employeebased on race, creed, nationality, age, disability, gender, sexual orientation,or marital status• Retaliation - an employer cannot terminate or harass an employee basedon employee’s opposition to a discriminatory practice, or participation in adiscriminatory investigation• Wrongful termination in violation of other public policies - an employercannot terminate or harass an employee in violation of a public policy ifsuch public policy is embodied in a statute or constitutional provision(e.g., cannot terminate if an employee reports wrongful conduct toauthorities, if an employee is absent due to jury service, takes medicalleave, etc.)© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  6. 6. Other Major Employment Laws• Equal Pay Act – requires that men and women receive “equal pay forequal work”. However, an employer may establish a pay system based onseniority, merit, quantity and quality of production, or any factor other thansex• The Family and Medical Leave Act – provides of up to 12 weeks ofunpaid leave during any 12-month period for certain medical and familysituations of an eligible employee. “Eligible employee” is the one who haveworked for an employer for a total of 12 month and have worked not lessthan 1,250 hours during the previous 12 months. This act applies toemployers with 50 or more employees• The Fair Labor Standards Act – prescribes standards for minimumwage and overtime pay• Taxation - employers must withhold income tax and pay unemploymentinsurance, worker’s compensation insurance, Medicare, Social Security andpayroll taxes for every employee they have• Work Place Safety Requirements – an employer must maintain a workplace safe for its employees to be present there and perform their functions © 2012 The Law Firm of Ekaterina Mouratova, PLLC
  7. 7. Independent Contractors vs. Employees• Properly classified independent contractors are not employees and therefore, are notcovered by the various federal and state employment laws• Independent contractors are paid what they bargained for. They are not entitled tominimum wages and overtime pay as employees are• Independent contractors are not entitled to take medical or family leave with thepresumption that an employer will continue professional relationship with them once theircircumstances have changed as a case may be with employees• An employer is not required to withhold income tax or pay unemployment insurance,worker’s compensation insurance, Medicare, Social Security and payroll taxes forindependent contractors• Relationships between an employer and independent contractor are temporary in nature andare terminated once job is completed. There are much less chances that an employer may faceclaims from independent contractor for unlawful termination based on discrimination,retaliation, or in violation of other public policies• Employers are vicariously liable for the actions of their employees committed within thescope of the employment. In case of independent contractors, employers do not control themanner of the job performance, accordingly they are not liable for the independentcontractor’s misconduct unless the independent contractor was engaged in an “ultra hazardousactivity” (that is most likely to cause damages to third-parties if proper precautions were nottaken)© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  8. 8. Independent Contractors• Sometimes it is more beneficial for employers to utilize independent contractors rather thanemployees to cut labor costs without sacrificing productivity• But improper classification of workers is risky and can lead to administrative audits,assessments, fines, penalties and civil litigation• An employer can be liable for back wages, overtime pay and the taxes it should have paid• Courts and IRS have certain guidelines in determining whether a worker is an employee or anindependent contractor regardless how an employer presents him/her• Due to employers’ misclassifications of their workers as independent contractors the Federalgovernment and state agencies lost billions of dollars in tax revenue in the past years. Now theyhave renewed interest in collecting payroll taxes and enforcing employment laws againstcompanies that improperly classify their workers.• The Federal and state agencies set much bigger budgets than before to increase audits of thecompanies © 2012 The Law Firm of Ekaterina Mouratova, PLLC
  9. 9. Classifying Workers• There is no bright line test to determine if an independent contractorrelationship exists. The combination of all aspects should be evaluated• Generally, an individual is an employee if the employer controls his/her withrespect to the results of the work and the manner and means used to achievethe results• An independent contractor relationship typically exists where an employermay only control or direct the result of the work and not the manner andmeans by which the work is performed• For example, an employee works from the employer’s space usingemployer’s technology; an independent contractor organizes his/her workingconditions himself/herself and delivers the final product to the employer. Theemployer does not control the time, place, and methods of independentcontractor’s performance© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  10. 10. Signs of Employer-Employee Relationship • Employer’s control over individual’s activities (e.g. full-time service, work schedule, meeting attendance, training, permission for absences) • Employer’s control over the time, place, and method of performance • The use of employer’s facilities, equipment and tools • Employer’s payment of an hourly or other regular fee, rather than commissions or per-job fee • Employer-provided fringe benefits • Reimbursement of expenses • Employer’s determination of the rate • Employer’s control over solicitation and billing of customers • The individual’s failure to maintain indicia of an independent business, such as business cards • Employer’s restriction of the individual’s performance of services to others© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  11. 11. Independent Contractor Relationship• Independent contractors (ICs) should be allowed entrepreneurial control overthe manner and means by which services are performed• ICs should make important business decisions, including whether to hireadditional help, what equipment to use, where performs the services, when toservice other clients (can have multiple customers)• ICs should be allowed flexible work time on specific projects of limitedduration (i.e. a client can set a deadline, but cannot direct the hours, duringwhich an IC must work)• ICs should have the resources to operate as an independent business (e.g.have own office or shop, business cards, websites, their own support personneland consultants)• ICs should bear the risk of profit and loss• ICs should be compensated for work completed rather than for hours worked• ICs can perform the same services for multiple clients during the sameperiod of time they are working for a particular organization© 2012 The Law Firm of Ekaterina Mouratova, PLLC
  12. 12. The Importance of Written Agreements• Two main written documents are Employment / Independent Contractor Agreementand Handbooks• These documents are the first place attorneys turn to when contemplating a claimagainst an employer• These documents are the first place an employer’s counsel turns to when preparing adefense• An Employment / Independent Contractor Agreement should unambiguously state theterms and conditions of the employment, including the reasons and procedures for itstermination• An Employment Agreement should clearly define the scope of the employment(remember, employees as well as independent contractors can bind a company to certainliabilities when they act as company’s agents)• Handbooks should address important policies of the company, including at-willemployment, anti-harassment, use of technology, vacation, timekeeping, confidentialitymatters, reasons and procedures for disciplinary actions, and many others• Handbooks should be the primary source, to which employees turn with day-to-dayquestions• These documents should be prepared by a business attorney to ensure that all aspects ofthe employment relationships are covered and various outcomes are foreseen© 2012 The Law Firm of Ekaterina Mouratova, PLLC