Avoiding Employment-Related Pitfalls

General Counsel, P.C.
Presented to Washington Executives Association
July 15, 2015
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 Corporate/Business Law
 Government Contracts
 Labor and Employment
 Dispute Resolution/Litigation
2

 Presumption of At-Will Employment
 Importance of Protecting and Maintaining the
At-Will Employment Relationship
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 Modification through Contract
◦ For some employees, may want to have a contract for definite term
 Modification through Public Policy and/or Statutory Grounds
 Modification through Employee Handbook
◦ Handbook as Contract
◦ IMPORTANCE OF CLEAR DISCLAIMERS
 Employment Applications
 Offer Letter
 Handbook
 Handbook Acknowledgement Forms
4

 Independent Contractor (1099) or W-2
Employee – this is important classification that
affects federal income tax, social security and
Medicare taxes.
 It also impacts eligibility for employer and social
security and Medicare benefits.
5

 Employee or Independent Contractor
◦ Right to Control the Means and Manner of Work
◦ Label Not Determinative
◦ Look at totality of relationship
6

1. Behavior Control: is there a right to direct or control
how the worker does the work?
-- Instructions: if extensive instructions on how work is to
be done, more likely an employee.
-- Instructions include:
- how, when and where to do the work
- what tools or equipment to use
- what assistants to hire to help with the work
- where to purchase supplies and services
-- Training: if extensive training, more likely employee.
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 2. Financial Control
◦ Significant Investment: if you have a significant
investment in your work, more likely an independent
contractor.
◦ Expenses: if you are not reimbursed for some or all
business expenses, more likely an independent
contractor.
◦ Opportunity for Profit or Loss: if you can realize a profit
or incur a loss, more likely an independent contractor.
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 3. Relationship of the Parties
◦ Employee benefits: if person receives benefits such as
insurance, pension, or paid leave, more likely an
employee.
◦ Written Contract: the existence of a written contract may
be evidence of independent contractor relationship.
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 Employer must withhold income tax and
employee’s portion of social security and
Medicare. Also, employer responsible for paying
social security, Medicare, and unemployment
taxes on wages. An employer must provide a
Form W-2 to an employee.
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 The business may be required to provide a Form
1099-MISC
 The independent contractor is required to pay
his/her own income tax and self-employment
tax. The business does not withhold any taxes
from pay.
 Independent contactor may deduct business
expenses on Schedule C of tax return.
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 If an “employee” is misclassified as an
independent contractor, the employer could be
liable for the employment taxes, interest and
penalties.
 Also, the “employee” could be entitled to past
benefits.
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July 15, 2015 13
 Federal Minimum Wage: $7.25 per hour
 Overtime: 1 ½ times the regular rate of pay for all
hours over 40 hours in a work week
 New Overtime Regulations redefine the “white
collar” exemptions from minimum wage and
overtime pay
Copyright 2015 - General Counsel,
P.C.

July 15, 2015 14
 Section 13(a)(1) provides an exemption from both
the minimum wage and overtime pay for
employees who are employed in a bona fide:
◦ Executive;
◦ Administrative;
◦ Professional; or
◦ Outside Sales capacity.
 In addition, certain computer employees may be
exempt professionals under Section 13(a)(1) or
exempt under Section 13(a)(17) of the FLSA.
P.C.

July 15, 2015 15
1. Salary Level
2. Salary Basis
3. Job Duties
P.C.

July 15, 2015 16
 Total annual compensation of at least $100,000
 At least $455 per week paid on a salary or fee basis
 Perform office or non-manual work
 Customarily and regularly perform any one or
more of the exempt duties identified in the
standard tests for the executive, administrative or
professional exemptions
P.C.

July 15, 2015 17
 Regularly receives a predetermined amount of
compensation each pay period (on a weekly or less
frequent basis)
 The compensation cannot be reduced because of
variations in the quality or quantity of the work
performed
 Must be paid the full salary for any week in which
the employee performs any work
 Need not be paid for any workweek when no work
is performed
P.C.

July 15, 2015 18
 An employee is not paid on a salary basis if
deductions from the predetermined salary are
made for absences occasioned by the employer or
by the operating requirements of the businesses
 If the employee is ready, willing and able to work,
deductions may not be made for time when work
in not available
P.C.

July 15, 2015 19
Seven exceptions from the “no pay-docking” rule:
1. Absence from work for one or more full days for
personal reasons, other than sickness or disability
2. Absence from work for one or more full days due to
sickness or disability if deductions made under a bona
fide plan, policy or practice of providing wage
replacement benefits for these types of absences
3. To offset any amounts received as payment for jury fees,
witness fees, or military pay
P.C.

July 15, 2015 20
4. Penalties imposed in good faith for violating safety rules
of “major significance”
5. Unpaid disciplinary suspension of one or more full days
imposed in good faith for violations of workplace
conduct rules
6. Proportionate part of an employee’s full salary may be
paid for time actually worked in the first and last weeks
of employment
7. Unpaid leave taken pursuant to the Family and Medical
Leave Act
P.C.

July 15, 2015 21
 Taking deductions from exempt employees’
accrued leave accounts
 Requiring exempt employees to keep track of and
record their hours worked
 Requiring exempt employees to work a specified
schedule
 Implementing bona fide, across-the-board
schedule changes
P.C.

July 15, 2015 22
 Deduction for a partial-day absence to attend a
parent-teacher conference
 Deduction of a day of pay because the employer
was closed due to inclement weather
 Deduction of three days of pay because the
employee was absent from work for jury duty,
rather than merely offsetting any amount received
as payment for the jury duty
 Deduction for a two day absence due to a minor
illness when the employer does not provide wage
replacement benefits for such absences
P.C.

July 15, 2015 23
 Executive
 Administrative
 Professional
 Computer; and
 Outside Sales Employees
P.C.

July 15, 2015 24
 Primary duty is management of the enterprise or
of a customarily recognized department or
subdivision;
 Customarily and regularly directs the work of two
or more other employees; and
 Authority to hire or fire other employees or whose
suggestions and recommendations as to hiring,
firing, advancement, promotion or other change of
status of other employees are given particular
weight.
P.C.

July 15, 2015 25
 Whose primary duty is 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; and
 Whose primary duty includes the exercise of
discretion and independent judgment with respect
to matters of significance.
P.C.

July 15, 2015 26
 Human resource managers who formulate,
interpret or implement employment policies
generally meet the administrative duties
requirements
 Personnel clerks who “screen” applicants to obtain
data regarding minimum qualifications and fitness
for employment generally are not exempt
administrative employees
P.C.

July 15, 2015 27
 The employee’s primary duty must be the
performance of work requiring advanced
knowledge
 In a field of science or learning
 Customarily acquired by a prolonged course of
specialized intellectual instruction
P.C.

July 15, 2015 28
 Occupations with recognized professional status,
as distinguished from the mechanical arts or
skilled trades
Law Accounting Actuarial Computation
Theology Teaching Physical Sciences
Medicine Architecture Chemical Sciences
Pharmacy Engineering Biological Sciences
P.C.

July 15, 2015 29
To qualify, the following tests must be met:
a. The employee must be compensated either on a salary or fee basis at a rate
of not less than $455 per week or, if compensated on an hourly basis, at a
rate not less than $27.63 an hour;
b. The employee must be employed as a computer systems analyst, computer
programmer, software engineer or other similarly skilled worker in the
computer field; and
c. The employee’s primary duties must consist of:
P.C.

July 15, 2015 30
1. The application of systems analysis techniques
and procedures, including consulting with users,
to determine hardware, software or system
functional specifications;
2. The design, development, documentation,
analysis, creation, testing or modification of
computer systems or programs, including
prototypes, based on and related to user or system
design specifications;
P.C.

July 15, 2015 31
3. The design, documentation, testing, creation or
modification of computer programs related to
machine operating systems; or
4. A combination of the aforementioned duties,
the performance of which requires the same level
of skills.
P.C.

July 15, 2015 32
 To qualify for the outside sales employee
exemption, all of the following tests must be met:
◦ The employee’s primary duty must be the making of sales
or obtaining orders or contracts for services or for the use
of facilities for which a consideration will be paid by the
client or customer; and
◦ The employee must be customarily and regularly engaged
away from the employers’ place or places of business.
P.C.

General Counsel, P.C.
6849 Old Dominion Drive
Suite 220
McLean, VA 22101
Telephone: 703-556-0411
mgreen@gcpc.com
www.generalcounsellaw.com
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