Not Your Employer: Navigating the Joint Employer/Independent Contractor Landscape

Transcription

1 Not Your Employer: Navigating the Joint Employer/Independent Contractor Landscape Parker Poe Adams & Bernstein LLP Attorneys and Counselors at Law Shalanna L. Pirtle 2016 Parker Poe Adams & Bernstein LLP March 13, 2017

2 Agenda New 4 th Circuit Joint Employment Test Independent Contractor Misclassification

3 Fair Labor Standards Act Basics Enacted 1938 amidst Great Depression Mandates minimum wage, child labor and overtime pay (1.5 x regular rate) for hours > 40 in a work week No size limit for employers Non-profits generally covered Enforcement DOL complaint or private lawsuit 3

4 Fair Labor Standards Act Basics (Cont.) 2-3 years back wages, doubled plus attorney's fees Class/Collective actions Only applicable to employers and employees Traditionally, employees of an independent contractor/subcontractor were not employees of the contracting entity 4

5 Broad Definitions Employ: to suffer or permit to work Employee: any individual employed by an employer Employer: any person acting directly or indirectly in the interest of an employer in relation to an employee 5

6 Separate and Distinct Employment v. Joint Employment Separate employment two or more employers are acting entirely independently of each other and are completely disassociated with the individual s employment Joint employment employment by one employer is not completely disassociated from employment by the other employer 6

7 Joint Employment Hours an individual works for each joint employer in a single workweek must be aggregated to determine whether and to what extent an individual must be paid overtime to comply with the FLSA 7

8 Salinas v. Commercial Interiors January 25, 2017, 4 th Cir. Plaintiffs were employed by drywall installer J.I. General Contractors ( JI ), owned by the Ramirez brothers JI performed work almost exclusively for Commercial Interiors, Inc. ( Commercial ) a general contractor Plaintiffs were paid by JI

9 Salinas v. Commercial Interiors (cont.) However, Commercial set the working schedules and assigned plaintiffs to particular worksites during the workweek; Plaintiffs filled out timesheets provided by Commercial and bearing commercial s logo, and that were maintained by commercial. JI never saw them; Contract between JI and Commercial dictated that JI would provide tools and materials, but Commercial provided all the tools, safety goggles and other equipment needed for plaintiffs to do the work. JI provided no tools; Plaintiffs wore hard hats and safety vests bearing the Commercial logo and were instructed to tell anyone who asked that they worked for Commercial. JI paid plaintiffs, but on a few occasions Commercial issued the checks

10 Salinas v. Commercial Interiors (cont.) Plaintiffs filed claims for overtime against JI and Commercial arguing joint employment District Ct. dismissed as to Commercial, but found JI and Ramirez brothers liable for overtime wages 4 th Cir. reversed, finding joint employment and adopting new 6-factor test

11 New Test for Joint Employment 1. Whether the presumed joint employers share or allocate the power to directly control or supervise the worker, whether by direct or indirect means 2. Whether the presumed joint employers share or allocate power to hire or fire the worker or modify the terms or conditions of the worker s employment 3. The degree of permanency or duration of the relationship between the presumed joint employers 4. Whether one presumed joint employer controls or is controlled by, or is under common control with the other 5. Whether work is performed on premises owned or controlled by one or more of the presumed joint employers 6. Whether the presumed joint employers jointly determine, share or allocate responsibility over functions ordinarily carried out by an employer (i.e. payroll, providing workers comp insurance, providing facilities, equipment, tools or materials necessary to complete the work)

12 Misclassification of Independent Contractors U.S. DOL study found 10-30% of employers audited had misclassified workers IRS estimates loss of over $20 billion a year due to worker misclassification Concern is that employers are circumventing fair labor standards, health and safety protections, and unemployment and workers compensation benefits Increasing subject of class actions

13 Worker Misclassification Employee vs. Independent Contractor: Why is this important? July 15, 2015 DOL Administrator s Interpretation Ø IC status only in very limited circumstances Ø Economic Realties test prevails Increased regulatory scrutiny (DOL, IRS, ESC)

14 Independent Contractor v. Employee What s the difference? Employee Independent Contractor Employer pays payroll taxes & withholds income taxes Employee may qualify for UC and WC Protection under antidiscrimination laws Protection under federal and state wage and hour laws IC pays self-employment taxes and reports own income No unemployment or workers comp. No protection under antidiscrimination and workplace safety laws No overtime or minimum wage requirements

15 Is the worker in business for herself or dependent on the employer? the extent to which the work performed is an integral part of the employer s business; the worker s opportunity for profit or loss depending on his or her managerial skill; the extent of the relative investments of the employer and the worker; the permanency of the relationship; and the degree of control exercised or retained by the employer

16 Is the worker in business for herself or dependent on the employer? Economic Realties test: Ø whether work is integral part of employer s business Ø worker s opportunity for profit/loss Ø relative investments of employer and worker Ø whether work requires special skills/initiative Ø permanency of relationship Ø degree of control exercised by employer Reality check... Most workers are employees!

17 Factors that Show Control Instructions Training Integration Hiring, supervising and paying assistants Continuing relationship Set hours of work Full time required Doing work on company premises Order or sequence of work set Oral or written reports required Payment by hour, week, month Payment of business and/or traveling expenses Furnishing tools and materials Working for more than one business at a time Investment in facilities Making service available to general public Right to discipline Right to discharge Right to terminate Personal service required

18 Independent Contractor Red Flags Multiple people do the same or similar work, but some are employees and some are independent contractors. People work as independent contractors until they graduate to employee status by becoming full time or completing a probationary period. Independent contractors are engaged in carrying out the department s primary work.

19 Avoid Penalties Review Independent Contractor Arrangements Avoid That s How We ve Always Done It Be Conservative Seek Counsel

20 Office Locations Atlanta, GA Charleston, SC Charlotte, NC Columbia, SC Greenville, SC Raleigh, NC Spartanburg, SC Stay Current with EmployNews!