Monthly Archives: January 2015

INDEPENDENT CONTRACTOR VERSUS EMPLOYEE: MAKING THE RIGHT CHOICE

It is critical that business owners correctly determine whether individuals providing services to them are employees or independent contractors. In most cases the choice is easy: workers neatly fit within one category or the other. This edition of the HR Law Insider focuses on what to do when the choice is not so easy – when businesses need to carefully evaluate the pros and cons of their decision. As discussed below, making the wrong choice can be costly.

PROPER CLASSIFICATION: THE QUESTIONS EVERY BUSINESS MUST ASK

An employee is “a person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed.” In contrast, an independent contractor” is one who “in the exercise of an independent employment, contracts to do a piece of work according to his own methods and is subject to his employer’s control only as to the end product or final result of his work.”

Companies must evaluate the following before deciding whether a worker should be classified as an employee or as an independent contractor (or reclassified if classified incorrectly):

  • Does the company have the right to control when, where and how the worker performs the job.
  • Does the work require a high level of skill or expertise.
  • Does the employer furnish the tools, materials and equipment for the job.
  • Is the work performed on the employer’s premises.
  • Is there a continuing relationship between the worker and the employer.
  • Does the business have the right to assign additional projects to the worker.
  • Does the business set the hours of work and the duration of the job.
  • Is the worker paid by the hour, week, or month rather than the agreed cost of performing a particular job.
  • Does the worker hire and pay assistants.
  • Is the work performed by the worker part of the regular business of the company.
  • Is the worker engaged in his/her own distinct occupation or business.
  • Does the company provide the worker with benefits such as insurance, leave or workers’ compensation.
  • Is the worker considered an employee of the company for tax purposes (i.e., the company withholds federal, state and Social Security taxes).
  • Can the company discharge the worker.
  • Do the worker and the company believe that they are creating an employer-employee relationship.

Answering the foregoing questions typically yield a clear result: the worker is either an employee or an independent contractor. However, in many cases, the result is anything but clear. In such cases, companies should consult legal counsel to discuss the facts and the pros and cons regarding the important decision to be made.

IMPROPER CLASSIFICATION: PENALTIES AND PAIN

Improperly classifying an employee as an independent contractor can result in significant IRS tax penalties for failure to pay payroll, social security, and medicare taxes, among other things.

Misclassifying an employee as an independent contractor can open a can of worms with the other government agencies, particularly if an agency believes that the business misclassified the employee solely to avoid providing government mandated benefits.

For example, in most instances employees have significantly more rights than independent contractors: overtime must be paid to non-exempt employees; employees are protected by the EEOC enforcement of Title VII and the Americans with Disabilities Act; employees are protected by the Department of Labor and OSHA laws; and employees have a number of other rights in the workplace which do not apply to independent contractors (e.g. workers compensation insurance and unemployment insurance benefits).

 CONCLUSION

Classify workers correctly by evaluating — at the outset — their tasks and relationship to your company. Once you have performed a proper, careful, and supportable analysis, consult counsel if there is no bright line answer.

In future editions of the HR Law Insider, I will address easy ways to bolster any classification decision such that it will better withstand government or third party (e.g. plaintiff’s lawyer) scrutiny. This can be done via, among many other things, a good independent contractor agreement or by specifically delineating projects to be performed.

In the interim, sit back and enjoy a blast from the past about workin’ for a livin’. https://www.youtube.com/watch?v=9N2CANatVYQ

 

WORKPLACE VIOLENCE: HOW TO DEAL WITH DANGEROUS EMPLOYEES AND EXTERNAL THREATS

For many, the thought of workplace violence is similar to that of neighborhood violence:  “that could never happen in MY neighborhood.”  Odds are, however, that during the course of one’s career, violence or the threat of violence will rear its ugly head.  This edition of the HR Law Insider is intended to help employers get ahead of violent situations. Being proactive, instead of reactive, mitigates the risk and liability associated with workplace violence.

DO NOT WHISTLE PAST THE GRAVEYARD:  EARLY RECOGNITION OF PROBLEMS

Businesses and their employees often miss obvious clues that a violent situation is brewing.  In my experience, the following red flags often occur before a situation spirals out of control:

*  Employee exhibiting bizarre or anti-social behavior

*  Spouse of employee acting aggressively in break-up or divorce scenario

*  Over the top reaction to discipline or termination

*  Emails that contain either express or implied threats

*  Anonymous emails or other communications with express or implied threats

*  Employee financial and marital life in tatters — “nothing to lose mentality”

*  Employee known to own firearms, coupled with anger issues and/or talk about using the firearms

*  Employee posting threats on social media

This is certainly not an exhaustive list.  Any number of clues will present themselves that SHOULD forewarn alert business owners and employees to prospective or active risks.

To be sure, there is often a fine line between an employee who poses a risk and one who is harmless — simply struggling with life’s challenges.  Judgment calls are sometimes very difficult.  Simply being aware of a potential threat provides conscious employers with the OPPORTUNITY to make that decision, while ignorant employers remain clueless and subject to the fates.

EMPLOYER OPTIONS AFTER A THREAT IS IDENTIFIED

Dealing with the Active Threat 

911 is the obvious choice when there is an imminent threat of harm. Employers should also have a plan in place as to (1) how they will notify employees and third parties to take steps to protect themselves while a dangerous situation is unfolding and (2) where people should go and what they should do (or not do).

In many instances, “no battle plan survives contact with the enemy.”  In a fluid situation it is thus very important to keep one’s cool, rely on one’s common sense and training (if one has training), and contact the police or other professionals.

It is prudent for employers to have legal counsel’s cell phone number on speed dial for use when the unexpected occurs.  Businesses should be comfortable knowing that they can call counsel at any moment of the day or night if a situation requires immediate action. Counsel can be used to develop an immediate plan or simply to confirm that the employer is undertaking a prudent plan.

By way of example, I was recently able to convince the police to immediately get out to a client’s property where there was an unstable, paranoid apartment resident acting bizarrely with a gun in his pocket. Before my call to the police, the police had essentially told the client they “couldn’t do anything” until something bad happened. The police removed the unstable resident within an hour and the threat was avoided.

Dealing with the Potential Threat

Hiring a security guard or off-duty police can be an effective way of dealing with a threat that is unlikely to last for more than a week or two (obviously, some employers have full-time security depending upon their location, business, and other factors).

Self-help — removing a potential threat by terminating an employee or removing someone from the workplace — is often the best option for employers confronting potentially violent behavior.  However, when self-help is impractical or unsuccessful, Arizona law provides additional options for dealing with threats.

Arizona employers can file for an injunction against workplace harassment to keep a threatening person out of the workplace.  “Harassment” means a “single threat or act of physical harm or damage or a series of acts over any period of time that would cause a reasonable person to be seriously alarmed or annoyed and includes unlawful picketing, trespassory assembly, unlawful mass assembly, concerted interference with lawful exercise of business activity…”

Injunctions are quickly and easily obtained as long as the employer presents solid evidence showing there has been “harassment.”  There is little downside to filing for an injunction because “an employer is immune from civil liability for seeking or failing to seek an injunction under this section unless the employer is seeking an injunction primarily to accomplish a purpose for which the injunction was not designed.”

There is a similar Arizona statute prohibiting cyber-harassment, also known as cyber-stalking. With the rise of the internet and social media, cyber-stalking has become a “popular” way to harass and attack employers.

One must always ask:  will seeking an injunction resolve or further inflame the situation? This is often a difficult question to answer. No two situations are alike. Employers should retain counsel to help perform a cost/benefit analysis and obtain the injunction — if that is the chosen course of action.

CONCLUSION:  BE AWARE AND HAVE A PLAN 

“If you think education is expensive, try ignorance.” Derek Bok

Businesses should take responsibility for (1) having a plan when confronted with a violent situation and (2) identifying potentially threatening situations. Employers have many tools to deal with such situations, including contacting the police, calling legal counsel, engaging in self-help, hiring a security guard, and obtaining an injunction against harassment.  A small amount of planning can secure peace of mind, reduce the risk of liability, and, most important, keep you and your employees safe.

 

 

 

 

DRAFTING A GOOD VACATION POLICY IS AS EASY AS A DAY AT THE BEACH

January is a time to get back to work. With holiday vacations and 2014 now solidly in the rear view mirror, employees are working hard — and again starting to accrue vacation time. This edition of the HR Law Insider discusses what is required of employers when it comes to vacation time and vacation pay.

No law requires Arizona employers to provide vacation or vacation pay (PTO is treated the same). Providing vacation or PTO to employees is purely voluntary. Most employers provide the benefit to attract quality employees, allow employees time to recharge, and because it is almost unheard of not to provide it.

HOWEVER, if an employer provides a vacation benefit, the employer will be bound by its policy — until and unless it changes that policy. Once vacation is “accrued” or earned, an employer cannot retroactively change its policy. Rather, any change must be applied prospectively, to future events.

In my experience, employers frequently err by not a evaluating what they truly want their vacation policy to look like or how it will work in real world situations. This typically results from the use of “form” employee handbooks handed down from third parties or cut and pasted off the internet. Significant problems can occur when an employer binds itself to something it didn’t intend, such as the unpleasant surprise of having to pay a long time employee tens of thousands of dollars in unused, accrued vacation pay upon the employee’s departure.

Here are important questions every employer should ask and answer when implementing or updating it’s vacation policy:

*  Whether to allow employees to take vacation time before it is accrued.  If allowed, and an employee ends employment with a negative balance, how to treat the situation.

* Whether to allow vacation time or vacation pay to roll over into the next year, or to have a use it or lose it policy.

*  Whether to cap the maximum amount if rollover is allowed.

*  Whether to reduce exempt employees’ vacation balance if they take partial days off (this will not remove the exemption from paying overtime, whereas docking the employee’s pay would remove it).

*  Whether and how much notice will be required of employees requesting vacation.

*  Whether to have a policy that any accrued vacation is forfeited at the end of employment, or forfeited if the employee is terminated or resigns without notice.

*  Whether to treat some employees differently, and if so, how to evaluate the risk of a discrimination claim presently or in the future.

*  Whether the employer is keeping good track of vacation time and accounting for any large balances in employees’ accounts (if rollover of vacation time is allowed).

*  When and how to seamlessly implement a new policy.

Employers should review their vacation policy annually to determine whether it needs to be tweaked, overhauled, or outright scrapped. This simple task will result in a policy that works for your business, your employees, and your needs. Because there is no requirement to provide vacation, employers have unlimited discretion in drafting a policy that fits their needs.