This document discusses the proper classification of workers as employees, interns, or independent contractors. Misclassifying workers can result in penalties. An internship must meet all six factors of the Fact Sheet #71 test to be considered unpaid, including providing training and primarily benefiting the intern. An employee demonstrates control over their work, while a consultant operates independently. The penalties for misclassification can include criminal fines and back wages owed to workers in both Pennsylvania and New York.
The first of its kind, this seminar is held to provide participants with information and knowledge regarding a constructive dismissal where employee resigns as a result of the employer creating a hostile work environment.
With Congress and the President provisioning to continue Extended Unemployment Benefits, and State UC rates so high, does the employer really have any say in how much a business pays in unemployment taxes? The answer is, “Definitely Yes!”
This webinar offers an excellent opportunity for frontline supervisors, managers and HR professionals to learn more about controlling unemployment costs. Presented by AlphaStaff Unemployment Claims Specialists, Chauncey Gainer and Pam Nading.
In this webinar you will be able to understand purpose and definition of Fair Labor Standards Act. We will cover minimum wage and overtime requirements and exemptions. Ways to properly determine overtime eligibility as well as understanding the employer responsibilities under FLSA and learn best practices on defending against FLSA claims or lawsuits.
The first of its kind, this seminar is held to provide participants with information and knowledge regarding a constructive dismissal where employee resigns as a result of the employer creating a hostile work environment.
With Congress and the President provisioning to continue Extended Unemployment Benefits, and State UC rates so high, does the employer really have any say in how much a business pays in unemployment taxes? The answer is, “Definitely Yes!”
This webinar offers an excellent opportunity for frontline supervisors, managers and HR professionals to learn more about controlling unemployment costs. Presented by AlphaStaff Unemployment Claims Specialists, Chauncey Gainer and Pam Nading.
In this webinar you will be able to understand purpose and definition of Fair Labor Standards Act. We will cover minimum wage and overtime requirements and exemptions. Ways to properly determine overtime eligibility as well as understanding the employer responsibilities under FLSA and learn best practices on defending against FLSA claims or lawsuits.
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...ComplyRight, Inc.
A handful of high-profile cases -- and increased attention by the IRS and Department of Labor – has put worker classification in the spotlight. Now, more than ever, employers must be crystal clear on the differences between an employee and independent contractor, as well as exempt vs. non-exempt status.
In either case, misclassifying workers is a risk your business can’t afford to take. Federal and state agents are monitoring the situation more closely and cracking down with bigger fines and penalties. At the same time, wage and hour lawsuits are on the rise, with many “salaried” employees recognizing they are non-exempt in the eyes of the law -- and therefore owed overtime.
Protect yourself from costly misclassification mistakes and potential legal issues. Attend this timely webinar to learn:
- Factors that define the worker relationship, according to the IRS and Department of Labor
- Warning signs that your contractor is actually an employee under the law
- What determines exempt vs. non-exempt status (Hint: Job title has nothing to do with it.)
- Steps to take if a worker is misclassified
What is FLSA?
Fair Labor Standards Act (FLSA) :
Sets standards for minimum wage and overtime pay.
Establishes record keeping standards.
Prescribes child labor standards.
FLSA does not regulate:
vacation, holiday, severance, or sick pay.
meal or rest periods, holidays off, or vacations.
premium pay for weekend or holiday work.
pay raises or fringe benefits.
discharge, termination, or final payment procedures.
Exempt and Non-exempt Employees
Exempt employees- Employees who meet one of the FLSA exemption tests and who are paid on fixed salary basis, not entitled to overtime.
Non-exempt employees- Employees who do not meet any of the FLSA exemption tests and are paid on hourly basis and are covered by wage and hour laws regarding minimum wage, overtime pay and hours worked.
Test for Exemption
To qualify for exemption, employees must meet certain tests regarding their:
Salary Level:
minimum salary level required for exemption is $455 per week
Job Duties- Categories of Exemption:
Executive Employees
Administrative Employees
Professional Employees
Outside Sales Employees
Computer Employees
Independent Contractors
FLSA does not cover independent contractors. Therefore, its important to learn to distinguish between an independent contractor and an employee.
The Supreme Court considers the following factors significant in determining an employee’s role versus that of an independent contractor:
the extent to which the worker's services are an integral part of the employer's business.
the permanency of the relationship.
the amount of the worker's investment in facilities and equipment.
the nature and degree of control by the principal.
the worker's opportunities for profit and loss.
the level of skill required in performing the job and the amount of initiative, judgment, or foresight in open market competition with others required for the success of the enterprise.
Want to learn more about FLSA, its requirements and best practices to comply with them? ComplianceOnline webinars and seminars are a great training resource. Check out the following links:
Fair Labor Standards Act: Are Your Employees Classified Correctly?
The In's and Out's of FLSA
How to Conduct FLSA Classification Self-Audit
Avoiding Costly Wage and Hour Problems
How to Pay Overtime Correctly under FLSA
Handling Supplemental Pay Under the FLSA
For more Details Visit us at:http://www.complianceonline.com/classifying-employees-under-flsa-webinar-training-703602-prdw?channel=flsappt
HCM strategists from SmartERP cover latest trends in Employee Onboarding. How can you ensure that new talent you’ve spent time and effort to recruit continue to be enthused about working for your organization? Learn about best practices to help workers succeed in their new roles, drive high levels of employee engagement and reduce time to productivity. Based on the latest industry research, discusses how you can reduce recruiting costs and improve retention of new hires with effective onboarding practices. This session will include a brief demonstration of an add-on onboarding solution for PeopleSoft HCM and case studies from organizations that have successfully implemented these practices.
This shows the structure of Integrity and the way the company operates. The products under development include interactive game style information to help small business owners get the employment stuff right
Presentation by Smart ERP Solutions covering automating employee onboarding in PeopleSoft HCM, orchestrating all of the steps/activities new-hires need to follow to become a new employee--with no paper.
This presentation we will cover three of the more difficult to handle areas of employment law.
•Disciplinary procedures for dealing with conduct issues
•Grievance procedures
•Settlement discussions
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Are you ready for the contract work revolution? If you're considering pursuing this path, check out this presentation. Watch the full webinar at www.willory.com/webinar.
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...ComplyRight, Inc.
A handful of high-profile cases -- and increased attention by the IRS and Department of Labor – has put worker classification in the spotlight. Now, more than ever, employers must be crystal clear on the differences between an employee and independent contractor, as well as exempt vs. non-exempt status.
In either case, misclassifying workers is a risk your business can’t afford to take. Federal and state agents are monitoring the situation more closely and cracking down with bigger fines and penalties. At the same time, wage and hour lawsuits are on the rise, with many “salaried” employees recognizing they are non-exempt in the eyes of the law -- and therefore owed overtime.
Protect yourself from costly misclassification mistakes and potential legal issues. Attend this timely webinar to learn:
- Factors that define the worker relationship, according to the IRS and Department of Labor
- Warning signs that your contractor is actually an employee under the law
- What determines exempt vs. non-exempt status (Hint: Job title has nothing to do with it.)
- Steps to take if a worker is misclassified
What is FLSA?
Fair Labor Standards Act (FLSA) :
Sets standards for minimum wage and overtime pay.
Establishes record keeping standards.
Prescribes child labor standards.
FLSA does not regulate:
vacation, holiday, severance, or sick pay.
meal or rest periods, holidays off, or vacations.
premium pay for weekend or holiday work.
pay raises or fringe benefits.
discharge, termination, or final payment procedures.
Exempt and Non-exempt Employees
Exempt employees- Employees who meet one of the FLSA exemption tests and who are paid on fixed salary basis, not entitled to overtime.
Non-exempt employees- Employees who do not meet any of the FLSA exemption tests and are paid on hourly basis and are covered by wage and hour laws regarding minimum wage, overtime pay and hours worked.
Test for Exemption
To qualify for exemption, employees must meet certain tests regarding their:
Salary Level:
minimum salary level required for exemption is $455 per week
Job Duties- Categories of Exemption:
Executive Employees
Administrative Employees
Professional Employees
Outside Sales Employees
Computer Employees
Independent Contractors
FLSA does not cover independent contractors. Therefore, its important to learn to distinguish between an independent contractor and an employee.
The Supreme Court considers the following factors significant in determining an employee’s role versus that of an independent contractor:
the extent to which the worker's services are an integral part of the employer's business.
the permanency of the relationship.
the amount of the worker's investment in facilities and equipment.
the nature and degree of control by the principal.
the worker's opportunities for profit and loss.
the level of skill required in performing the job and the amount of initiative, judgment, or foresight in open market competition with others required for the success of the enterprise.
Want to learn more about FLSA, its requirements and best practices to comply with them? ComplianceOnline webinars and seminars are a great training resource. Check out the following links:
Fair Labor Standards Act: Are Your Employees Classified Correctly?
The In's and Out's of FLSA
How to Conduct FLSA Classification Self-Audit
Avoiding Costly Wage and Hour Problems
How to Pay Overtime Correctly under FLSA
Handling Supplemental Pay Under the FLSA
For more Details Visit us at:http://www.complianceonline.com/classifying-employees-under-flsa-webinar-training-703602-prdw?channel=flsappt
HCM strategists from SmartERP cover latest trends in Employee Onboarding. How can you ensure that new talent you’ve spent time and effort to recruit continue to be enthused about working for your organization? Learn about best practices to help workers succeed in their new roles, drive high levels of employee engagement and reduce time to productivity. Based on the latest industry research, discusses how you can reduce recruiting costs and improve retention of new hires with effective onboarding practices. This session will include a brief demonstration of an add-on onboarding solution for PeopleSoft HCM and case studies from organizations that have successfully implemented these practices.
This shows the structure of Integrity and the way the company operates. The products under development include interactive game style information to help small business owners get the employment stuff right
Presentation by Smart ERP Solutions covering automating employee onboarding in PeopleSoft HCM, orchestrating all of the steps/activities new-hires need to follow to become a new employee--with no paper.
This presentation we will cover three of the more difficult to handle areas of employment law.
•Disciplinary procedures for dealing with conduct issues
•Grievance procedures
•Settlement discussions
The Pros and Cons of Becoming a Contractor-For-Hire (by Willory)Bridgette Klein
Are you ready for the contract work revolution? If you're considering pursuing this path, check out this presentation. Watch the full webinar at www.willory.com/webinar.
How to Classify Your Exempt and Non Exempt Employees Correctly June 15, 2016Allyson Lewis
On May 18, 2016 the Department of Labor released new rules that significantly impact how you pay your employees. Do you know the answer to which employee and which position will be exempt or non-exempt under the new rules?
Join us for an overview of the new DOL rules and a demonstration of the new Classification Wizard tool from KPA HRDrive. Using the Classification Wizard will allow you to quickly and easily determine which employees must be paid overtime, which employees must be paid minimum wage for all hours worked, and which employees are exempt from overtime. The Classification Wizard asks you a series of questions to help determine the appropriate employee classification quickly and easily, and also gives you access to certified HR professionals by phone or email at any point in the process.
The webinar will be presented by Kathryn Carlson, Vice President of HR Management Products. Kathryn has over 25 years of human resources management experience and is a certified HR professional. For the past 13 years she has focused on developing HR software and programs to improve efficiency, reduce risk, and ensure compliance for companies ranging from small businesses to international.
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Presented by the Entrepreneurial Law Clinic student lawyers and featuring our distinguished expert panel:
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In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
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This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
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Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
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Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
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Interns, Consultants and Employees
1. Interns, Consultants, and Employees:
The Costs of Misclassification
Drexel Entrepreneurial Law Clinic
Steve Rosard, Director
Garrett Graff
Jason Kuntz
Joel Ruffini
Lauren Strebel
3. Panelists
• Caroline Austin, Duane Morris
• Mike Wietrzychowski, Schnader
• Reena Parambath, Earle Mack School
of Law
4. Agenda
• Definition of employees
• The costs associated with employees
• Two exemptions
o Interns
o Independent Contractors (AKA Consultants)
• Penalties of misclassification
• Discussion
5. Fair Labor Standards Act
• FLSA defines the term “employ” very broadly.
“Employ” is defined to include “to suffer or permit to
work.” 29 U.S.C §203(g).
• Covered and non-exempt individuals must be
compensated under the law for the services they
perform for a company.
10. Consider this…
• Timmy wants to be a
fashion designer
• Notoriously difficult industry
to enter
• Applies for many
positions, most of which
are unpaid
• Takes a position with a
clothing design start-up
11. The Position
1. Start-up claims they are offering Timmy a way to
build his name in the industry
2. Timmy comes to work, is allowed to be creative
and make his own designs. He is provided with
ample material to do so.
3. Timmy does meaningful work, is highly involved in
the design and production of clothes that are sold
on the start-ups website
4. If the designs that Timmy creates gain traction and
30 units are sold on the website, then the start-up
promises to hire Timmy as a permanent designer
14. Fact Sheet #71
1. Similar to vocational training or an educational
environment
2. The internship experience is for the benefit of
the intern
3. The intern does not displace regular
employees, but works under close supervision
of existing staff
4. The employer derives no immediate
advantage from the activities of the intern;
and on occasion its operations may actually
be impeded
5. No job guarantee
6. It’s understood that no wages will be earned
15. 1. Is the Internship Similar to an
Educational Environment?
• Structured around an
academic experience
o Especially if affiliated with an
academic institution
• Training or useful
knowledge is offered
• Internship provides the
individual with skills that
can be used in multiple
employment settings
16. 2. Who is the Primary Beneficiary of
the Activity?
EMPLOYER
EMPLOYEE
17. 3. Does Worker Displace a Regular
Employee?
Remedial Tasks
Skill-building Tasks
Drafting cover letters
Answering phones
Making deliveries
Making photocopies
Running errands
Organizing filing
cabinets
• Assembling office
furniture
• Shadowing
• Creating new projects
• Researching the
industry
• Making personal
connections
•
•
•
•
•
•
18. 4. Does the Employer Receive Immediate
Advantage from the Work Performed?
• May take employer more time to review intern’s
work than if they did it themself.
• Impedes the employer’s operations
• Job shadowing
• “close and constant supervision”
• Perform no or minimal value work
19. 5. No Promised Jobs
• Internship of fixed duration, established prior to the
outset to the internship
• Generally, should not be used as “trial period” for
full-time position
20. 6. No Entitlement To
Wages
• Reimbursement of out-of-pocket expenses may be
allowed (e.g. transportation costs)
• Employer and intern both understand intern is not
entitled to wages from employer during internship
21. Takeaways
• The six-factor test is the test
• All factors must be met
• Employment references, job-specific new skills, and
professional connections are not enough
• If a paid employee would have to perform the
intern duties, it is not an internship.
22. What is Timmy’s
Classification?
1. Line on the resume;
foot in door
2. Independence and
creativity allowed
3. Meaningful work, not
clerical tasks
4. Potential for full-time
job
PANEL?!
23. Panel Discussion of Fact
Sheet #71
1. Similar to vocational training or an educational
environment
2. The internship experience is for the benefit of
the intern
3. The intern does not displace regular
employees, but works under close supervision
of existing staff
4. The employer derives no immediate
advantage from the activities of the intern;
and on occasion its operations may actually
be impeded
5. No job guarantee
6. It’s understood that no wages will be earned
25. The Developer
•Sam is hired to build a website or
product for NewCo.
•Sam signs a non-compete.
•Sam is told to come to work at
NewCo’s incubator space.
•Sam is told to come to meetings so
that he can keep up with the
company happenings.
•NewCo pays for a copy of
WebsiteBuilderPro® for Sam to use
27. The Key: Control
• Company has the right to control the worker.
• Behavioral Control
• Financial Control
• Relationship of Parties
28. Behavioral Control
Employee
• Works on premises of
employer.
• Uses tools of employer.
• Receives training.
• Reports to the
company daily.
• Receives instructions.
• Evaluation system.
Consultant
• Sets own hours.
• Decides how to
accomplish a project.
29. Financial Control
Employee
• Paid based on time.
• Reimburses expenses of
worker.
Consultant
Paid flat fee.
No reimbursement.
Ability to profit/loss.
Significant investment
in tools.
• Able to put services on
the market, seek other
business opportunities.
•
•
•
•
30. Relationship of Parties
Employee
• Typically hired for an
indefinite period.
• Provides key activities
to a business that the
business is likely to want
to control or direct.
Consultant
• Typically hired for a
project or specific
period.
• Has a written contract
outlining responsibilities
indicative of a
consultant relationship.
31. The Developer
•Sam is hired to build a website or
product for NewCo.
•Sam signs a non-compete.
•Sam is told to come to work at
NewCo’s incubator space.
•Sam is told to come to meetings so
that he can keep up with the
company happenings.
•NewCo pays for a copy of
WebsiteBuilderPro® for Sam to use
32. Penalties for
Misclassification
• Federal, state, and/or
local law may
prescribe personal
liability for $ owed to a
misclassified worker
• Back taxes, back
wages, overtime,
unemployment…
33. Penalties in PA
Criminal
Civil
• Fire or discriminate
against whistleblower?
• Payment of missing
wages
• Costs & attorney’s fees
• Liquidated damages
o $500 - $1000 fine
o 10 – 90 days incarceration
• Pay less than
prescribed rate?
o $75 - $300 fine
o 10 – 60 days incarceration
35. Penalties in NY
Criminal
• Misdemeanor (first
offense)
o $500 - $2000 fine
o Up to one year incarceration
• Felony (second offense
within six years)
o $500 - $20,000
o Up to one year + one day
incarceration
Civil
• Payment of missing
wages
• Prejudgment interest +
attorney’s fees
• 100% liquidated
damages
LAURENThis presentation will provide an overview on the importance of classifying workers properly and the consequences of misidentification. We will talk about the differences between interns, consultants and employees under the law and how your companies can comply with government enforcement. But FIRST: I’d like to thank our sponsors…
Drexel University’sBaiada Institute for EntrepreneurshipSchnaderDuane MorrisAnd the Quorum. NEXT: I’d like to introduce our panelists…
Panelists, if you don’t mind providing the audience with a brief bio about yourself, and explain your expertise as it relates to the topic of interns, consultants, and employees. Thank you panelistsNEXT: Agenda
LAURENFirst we’re going to talk briefly about the definition of employees and the costs associated with them. Then we’ll go into the two big segments of the presentation, one on interns, and one on independent contractors. After those topics, we will talk about the penalties of misclassification. Last, we’ll open it up for discussion on these topics. So, quick question: Who has taken an unpaid position for a company, either for work experience or as a resume booster?Who has engaged unpaid labor to build your company?Good, then pay attention. NEXT: Garrett - FLSA
GARRETTYou might be asking “why are we here?” The Fair Labor Standards Act is the rule/law which governs the use and classification of labor under the federal government labor regulations. As is defined here, the term “employ” defined broadly, includes “to suffer or permit to work.”Now, what does this mean for each of you. Essentially, the biggest takeaway from the FLSA is that individuals who are covered and notexempt from the FLSA must be compensated. Otherwise, you may be putting yourself and your company at risk.However, as we continue through this presentation, we will discuss various regulations, standards and interpretative guidelines which define “employee” and how that may apply to any labor you utilize.I should also note that not every person who performs work for his or her own benefit is the employee of another person. However, the default conclusion through the FLSA’s broad language is that of employees.
GARRETTHowever, all that to say that there is no rigid rule on application and interpretation of the FLSA. Each state treats and interprets the FLSA and the definition of employee with its own nuances.For example, New York is more stringent and will encompass more workers as employees. Other states have been less proactive and less stringent about interpreting the FLSA. Across the board, the DOL and IRS are attempting to enhance their regulation and enforcement of labor misclassification, including the relatively new DOL Misclassification Initiative, which attempts to streamline communication regarding education and enforcement of labor misclassifications.Again, the default under the FLSA is that the worker is an employee, and the burden is on you as the employers to show otherwise. What this means for you is that employers, even in start-ups, should be conscientious about their labor classification and what potential risks and liabilities are involved in having said labor.
GARRETTSince employees are the default classification, it is important to note that employees are expensive.The classification of employee means you must pay minimum wage, possible overtime pay, employment taxes, unemployment and workers’ compensation. You must also withhold federal and state income taxes. These are costs that a start-up needs to consider when determining whether or not to hire help. However, this does not at all mean that you never pay your workers to avoid these costs.However, simply choosing not to pay people for work does not meet you’re in the clear. Noncompliance may result in audits. You may think this is expensive, but wait until you get your lawyer’s bill for having them defend you against an audit and investigation.
GARRETTThe alternatives for qualifying as an employee are qualifying as an intern or an independent contractor. These are the two exemptions we will discuss throughout this presentation. There are guidelines set forth for each classification which must be satisfied for compliance, as we will discuss in more detail. The key is to design each position to meet these requirements. First, we’re going to discuss “interns” and the factors that the Department of Labor sets forth.NEXT: LAUREN – Fox Searchlight Case
LAURENHas anyone in the audience heard of the Fox Searchlight case? Eric Glatt and Alexander Footman, production interns on “Black Swan,” sued Fox Searchlight in September 2011. In the suit, Mr. Glatt and Mr. Footman said they did basic chores, usually undertaken by paid employees. The Interns took lunch orders, answered phones, arranged other employees’ travel plans, tracked purchase orders, took out the trash and assembled office furniture. At the end of the day, even though the unpaid interns received a resume line, job references, and an understanding of how the production facilities work, those benefits were held to be incidental to working in the office just as any other employee. The judge said unpaid internships should be allowed only in very limited circumstances. In doing so, he followed criteria that will be discussed here today.As this presentation will teach you, at the end of the day, your biggest legal risk comes from the disgruntled voices of interns that may reach the various government labor agencies. Read more at http://under30ceo.com/a-startups-legal-guide-to-summer-interns/#jJIiZzB7KcZabBI1.99So now that we know it is important to properly classify workers, let’s discuss how you can comply with the FLSA and corresponding state regulations. We’ll start with discussing the category of interns. Let’s begin w/ a hypoNEXT: Hypo! Timmy!
LAURENAudience, meet Timmy. Timmy wants to be a fashion designer. If you didn’t know, the fashion industry is a notoriously difficult industry to break into. As any ambitious person would do, Timmy decides to apply for positions to get his foot in the door. As he soon finds out, most of them are unpaid. However, realizing the importance of gaining experience in the industry, Timmy accepts a position with a start-up that is developing a new clothing line. NEXT: The Position
LAURENNEXT: Poll the audience
LAURENAudience, what do you think? Who thinks Timmy needs to be paid under the law? NEXT SLIDE -- Who thinks Timmy’s hot?
GARRETTThe Department of Labor has compiled six factors in order to qualify as a “trainee”, which are listed on this slide. In order to comply with the Fair Labor Standards Act, a valid internship or training program MUST satisfy all six factors according to the Department of Labor. This is an all or nothing test; every criteria has to be met.
GARRETTThe first criteria is whether the internship is similar to an educational environment or not. Of course, the DOL interpretations favors programs which provide educational benefit to the worker and/or correlate to the worker’s educational program. To meet this criteria, if the individual is performing work for credit, that’s one way the program could satisfy Factor #1. Other examples are opportunities for feedback and coaching as well as providing the individual widely applicable skills that are useful in other employment settings outside of one particular employer. In general, the more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience.
GARRETTThe second factor is who primarily benefits from the individual’s activity? The key for this factor is that the individual comes out of the internship with tools and skills he or she can use in other jobs. On the other hand, if an intern is engaged in the operations of the employer or is performing work that an employee would otherwise be doing, then the fact that they may be receiving some benefit in the form of a new skill or improved work habit will not exclude them from the FLSA’s regulations because the employer is benefiting. Especially considering the status of the economy and the job market, many of those seeking jobs may need that line on the resume. BUT, a line on the resume is NOT enough. A regular employee also would receive a line item on their resume, so a resume line item is not compelling in order to satisfy the DOL’s guidelines. Factors which weigh in favor of the company as the primary beneficiary, and thus, classification are that the intern learns skills only applicable to that employer’s operations as well as the company being dependent on the intern’s work products.
LAURENThis question is centered around the type of work the individual performs at the position. Does he perform remedial tasks? Or does he perform skill-building tasks? Whereas the criteria Garrett just discussed focuses on who gains the benefit of the individual’s work, this criteria focuses on that activity and who would typically perform it. Again, if an employer uses interns as substitutes for regular workers, those individuals are not “interns” under the FLSA and would instead be either employees or perhaps independent contractors, and should be paid for the work performed.NEXT: EE receive Immediate Advantage
LAURENThe employer receives no immediate advantage from the activities of the individual and, on occasion, his operations may even be impeded. This criteria is interesting, because it suggests that the worker should perform no or minimal value work. The idea behind this criteria is that the employer should really take the time to teach the intern new skills by providing close supervision. NEXT: No promised jobs.
LAURENIt is possible to hire interns subsequently as employees – however, the internship should not be premised on such a promiseNEXT: No entitlement to wages
LAURENThe employer and the intern understand that the interns is not entitled to wages for the time spent at the company. NEXT: Garrett - Takeaways
GARRETTSome of the important takeaways of the DOL’s Fact Sheet #71 is that all 6 factors MUST be met according to the Department of Labor. As you might find relevant to many in the entrepreneurial eco-system, employment references and resume line items are not enough to “sanitize” using unpaid labor. And lastly, if you would otherwise be using a paid employee to perform the duties performed by the intern, the intern cannot be classified as unpaid labor.Now, after having looked at each of the six factors individually, it seems like this DOL test is quite stringent and virtually impossible to meet, right? If we read Fact Sheet #71 verbatim, only shadowing type of internships would pass this test. However, we must also think about each jurisdiction and its courts actually interpret these guidelines. So remember Timmy?
GARRETTStart-up claims they are offering Timmy a way to build his name in the industryTimmy comes to work, is allowed to be creative and make his own designs with material provided by the employerTimmy does meaningful work, is highly involved in the design and production of clothes that are sold on the start-ups websiteIf the designs that Timmy creates gain traction and 30 units are sold on the website, then the start-up promises to hire Timmy as a permanent designerTaking each of the six factors we just discussed as they apply to Timmy, who thinks Timmy should be paid now?
DISCUSSION – BOTHWhat do you think about Timmy’s internship? How can a start-up structure its internship to comply with the educational requirement? (Professor Parambath)Factor 2 – is a line on a resume enough to be considered the benefit of the intern? It seems as though for a start-up to meet all of the requirements, it could only have interns shadow and watch what they do? Practically, what does that mean? Can an employer ever derive no immediate advantage? (Caroline)
Well that was an informative discussion. So we’re moving on to part two, to discuss independent contrators. So to reiterate, everyone’s an employee by default, it’s up to an employer to show whether a worker is an employer or not. You tried to put your worker as an intern, but failed the test. Now you have to choose, employee or independent contractor.
So take this situation for example. You need a website developed, you need it now. This position entails more skill and work than an intern can provide for you.
So what does everyone think? Is Sam an Employee? Or is Sam more like a Consultant?
The answer to whether Sam in an Employee or a Consultant depends upon the control the employer has over the worker.This is based largely on the facts of the situation. There are 3 major categories of factors that weigh into the analysis. These are Behavioral control, financial control, and what the parties agree to have their relationship look like.
Instructions – such as when and where to do work, what tools to use, what workers to hire to assist them, where to purchase supplies and services, what order to follow when performing work.
Employees are usually Paid based on time – usually linked to hours, weekly, monthly, etc. An Independent contractor on the other hand is paid
Panel, what do you think about Sam’s internship?How can NewCo make Sam a consultant rather than an employee? Are there legal considerations for what FMV is for IC?What are the benefits of being an IC/employee that we didn’t discuss. When should a startup choose IC, when choose employee?If an agreement wasn’t made at the beginning of the relationship, should a company formalize the relationship?
We’ve said it a couple time, but it’s worth repeating. The states will assume that a worker is an employee and it is up to the employer to prove otherwise. The DOL and the individual states have formulated penalties for improper classification of employees. This liability is personal to the employer, not the company. You cannot rely on the limited liability of the entity to protect you from your obligations. The liability will include everything from back wages, to workers compensation, to overtime pay. Employers – if you discriminate b/c someone will testify against you for min wage act $500 – 1,000 fineJail time?!Requirements for conviction - ? Back taxes include social security, federal and state income tax withholding. Just a heads up, the DOL is trending toward stricter regulations. Since the economy has tanked, the various federal and state agencies are looking anywhere to get money that is slipping through their fingers. The DOL has signed memorandum of understanding with the IRS and 15 states including New York, Maryland, Connecticut and Massachusetts, with the specific and mutual goals of \enhancing enforcement by conducting joint investigations.New York recently signed this initiative on November 18, 2013. Some states are taking misclassification very seriously, including California which has a $5,000 – $15,000 penalty per worker misclassified. http://www.hrcsuite.com/profitability/independantcontractorsQUESTION – Joel is researching – is an IP assignment for an invalid internship valid? Is there consideration? http://www.dol.gov/whd/workers/misclassification/#stateDetails
There is a moral/ethical argument for proper treatment of workers. But states recognize that this may not provide a compelling enough motivation or that economic realities limit an otherwise ethical employer from following the letter of the law.It is worth repeating that state laws start from the presumption that a worker is an “employee” subject to min. wage, overtime, etc.In our region, PA’s penalties are typical, and may be on the “lighter” side compared to other states.[Describe various penalties prescribed by PA laws/regs]
On their face, PA’s penalties may seem like a reasonable gamble based on the costs that can be avoided by improper classification. However, each week in which an employee is underpaid triggers a separate offense.
NY penalties follow a similar framework as PA but with harsher results.[Describe NY labor law penalties]Like PA, each week of underpayment results in a separate offense.Trend towards regulation.
Ask ‘what is market’ for equity for workers – where is the threshold that they are still treated as members.The worker can be a member of the LLC – equity. Utilize educational externships – ask local universities if they have programs[Properly contract with consultants; continually review relationships – jpk][properly use intern/consultant relationships to identify candidates for employee status – jpk][considerations: costs, skills, loyalty, risk of misclassification,… - jpk]Treat workers fairlyKnow your state laws
Again, a huge thank you to our panelists and to our sponsors.