THE USE OF "CONTINGENT WORKERS" ISSUES FOR EMPLOYERS

Transcription

1 THE USE OF "CONTINGENT WORKERS" ISSUES FOR EMPLOYERS First Run Broadcast: August 29, :00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes) Contingent workers are a broad category of workers who are neither fulltime nor part-time employees of an employer. They may be traditional independent contractors hired directly by the employer, or formally work for staffing companies or a vendor who provides services to the employer. Their number is rapidly increasing as workers seek more flexibility, companies are reluctant to commit to hiring fulltime employers with all the associated costs, and new business models require more flexibility than traditional hiring and work practices. But for employers utilizing these workers there are still points of substantial liability depending on the nature of the legal arrangement between the worker and the employer and how the worker is treated and supervised. This program will provide you with guide to identifying contingent workers, their proper classification and treatment, and tips on mitigating employer liability for their use. Nature and liability of using contingent workers in the workplace Tests for classifying contingent workers and identifying potential employer liability Joint employment arrangements and joint and several liability Review of recent federal developments impacting treatment of contingent workers Working with staffing companies v. vendors and the risk/liability of each Practical guidance on documenting & administering contingent workers to mitigate risk Speaker: Zach Hutton is a partner in the San Francisco office of Paul Hastings, LLP, where his is practice spans all aspects of employment law, including drafting employment agreements generally and for sales agents agreements specifically. His practice also includes discrimination and harassment, wrongful termination, family and medical leaves, and wage and hour issues. He has successfully represented employers in numerous class actions, individual plaintiff cases, labor arbitrations, and administrative hearings. Mr. Hutton received his B.A. from the University of Wisconsin-Madison and his J.D. from the University of California, Hastings College of Law.

2 VT Bar Association Continuing Legal Education Registration Form Please complete all of the requested information, print this application, and fax with credit info or mail it with payment to: Vermont Bar Association, PO Box 100, Montpelier, VT Fax: (802) PLEASE USE ONE REGISTRATION FORM PER PERSON. First Name Middle Initial Last Name Firm/Organization Address City State ZIP Code Phone # Fax # Address The Use of Contingent Workers Issues for Employment Lawyers Teleseminar August 29, :00PM 2:00PM 1.0 MCLE GENERAL CREDITS VBA Members $75 Non-VBA Members $115 NO REFUNDS AFTER August 22, 2017 PAYMENT METHOD: Check enclosed (made payable to Vermont Bar Association) Amount: Credit Card (American Express, Discover, Visa or Mastercard) Credit Card # Exp. Date Cardholder:

3 Vermont Bar Association CERTIFICATE OF ATTENDANCE Please note: This form is for your records in the event you are audited Sponsor: Vermont Bar Association Date: August 29, 2017 Seminar Title: Location: Credits: Program Minutes: The Use of Contingent Workers Issues for Employment Lawyers Teleseminar - LIVE 1.0 MCLE General Credit 60 General Luncheon addresses, business meetings, receptions are not to be included in the computation of credit. This form denotes full attendance. If you arrive late or leave prior to the program ending time, it is your responsibility to adjust CLE hours accordingly.

4 CONTINGENT WORKERS Zach Hutton Paul Hastings LLP San Francisco (o) (415) Raymond Bertrand Paul Hastings, LLP San Diego (o) (858)

5 WHAT IS A CONTINGENT WORKER? 2 Broadly defined category of non-employees Can work on site or remotely Typically hired on a per-project basis Includes independent contractors, freelancers, consultants, or other outsourced and non-permanent workers

6 ADVANTAGES OF A CONTINGENT WORKFORCE 3 Financial Do not have to collect and pay taxes from the workers paychecks. Do not have to offer health benefits, provide paid time off or pay for overtime. Significant savings associated with not having to recruit and hire permanent employees. Savings on administrative costs associated with payroll and human resources. Flexibility: as work demands increase, businesses can add contingent workers to perform the extra work. Expertise: contingent workers are often highly skilled workers that businesses need for a specific project.

7 LEGAL RISKS ASSOCIATED WITH A CONTINGENT WORKFORCE 4 Misclassification (the contingent worker is deemed as a matter of law to be an employee of the business that has engaged him/her) Joint employment (exists when an employee is employed by two (or more) employers such that the employers are responsible, both individually and jointly, to the employee for compliance with a statute)

8 5 LEGAL RISKS: MISCLASSIFICATION / JOINT EMPLOYMENT 1. Wage-hour violations 2. Tax liabilities 3. I-9 violations 4. Unemployment insurance shortfalls 5. Worker s compensation violations 6. Improper exclusion from benefit plans 7. Anti-discrimination violations 8. FMLA and other leave law violations 9. WARN Act violations

9 DETERMINATION OF CONTRACTOR STATUS 6 Independent contractor status is defined by law, not by the parties agreement. Different Agencies Use Different Tests IRS: Right to Control Test DOL: Economic Realities Test NLRB: Common Law Agency Test EEOC: Combined Test Many varying state laws

10 GOVERNMENT COMPLIANCE EFFORTS 7 DOL s Administrator s Interpretation No Misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States, in part reflecting larger restructuring of business organizations. The Department of Labor s Wage and Hour Division (WHD) continues to receive numerous complaints from workers alleging misclassification, and the Department continues to bring successful enforcement actions against employers who misclassify workers. DOL Misclassification Initiative: The DOL has been actively partnering with federal and state agencies to reduce instances of worker misclassification. As part of this initiative, the DOL has targeted certain industries, including the construction, restaurant, and landscaping industries, and identified specific cases for investigation. Federal & State MOU s: As part of its Misclassification Initiative, the DOL has signed Memoranda of Understanding ( MOU ) with federal and state agencies.

11 IRS TEST: OVERVIEW 8 For federal tax purposes, the usual common law rules are applicable to determine whether a worker is an independent contractor or an employee. Under the common law, you must examine the relationship between the worker and the business. All evidence of the degree of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories: Behavioral Control Financial Control The Relationship of the Parties.

12 KEY DEFINITIONS UNDER THE FLSA 9 An "employee" is "any individual employed by an employer. An employer is "any person acting directly or indirectly in the interest of an employer in relation to an employee."

13 FLSA: ECONOMIC REALITIES TEST 10 The economic realities factors typically include: 1. The degree of control exercised by the employer over the work performed; 2. The relative investments by the employer and the worker in materials and equipment; 3. The degree to which the worker s opportunity for profit and loss is determined by the employer; 4. The skill and initiative required in performing the job; 5. The permanency of the relationship; and 6. Whether the worker s service is an integral part of the employer s business.

14 DETERMINATION IF JOINT EMPLOYMENT EXISTS 11 The focus is the employee s relationship with the other employer (as opposed to the intermediary employer). The analysis includes an examination of the economic realities of the relationship to determine the degree of the employee s economic dependence on the other employer the potential joint employer.

15 DETERMINATION IF JOINT EMPLOYMENT EXISTS: FACTORS TO CONSIDER Does the other employer direct, control, or supervise (even indirectly) the work? 2. Does the other employer have the power (even indirectly) to hire or fire the employee, change employment conditions, or determine the rate and method of pay? 3. How permanent or lengthy is the relationship between the employee and the other employer? 4. Does the employee perform repetitive work or work requiring little skill? 5. Is the employee s work integral to the other employer s business? 6. Is the work performed on the other employer s premises? 7. Does the other employer perform functions for the employee typically performed by employers, such as handling payroll or providing tools, equipment, or workers compensation insurance?

16 PRACTICAL CONSIDERATIONS 13

17 VARIOUS TYPES OF VENDOR RELATIONSHIPS 14 Traditional commercial vendors Outsourced services Staffing Companies Other Individuals or Entities Engaged as Independent Contractors

18 TRADITIONAL COMMERCIAL VENDORS 15 Characteristics Potential risk mitigation steps

19 OUTSOURCED SERVICES 16 Characteristics On-site versus off-site Potential risk mitigation steps

20 STAFFING COMPANY ARRANGEMENTS: REDUCING LIKELIHOOD OF JOINT EMPLOYMENT 17 Screening/hiring Duration of project Type of work Control exercised over work Training/meetings Performance discussions Setting pay, negotiating increases External identification

21 STAFFING COMPANY ARRANGEMENTS: OTHER POSSIBLE STEPS 18 Make sure that temporary employees are employees of the agency. Considering providing a set of contingent worker guidelines that prohibit off-the-clock work, inform contingent workers of their entitlement to meal periods and rest breaks, and also other issues (such as procedures for reporting harassment). Work with well capitalized companies that make assurances in their contracts that they will comply with all applicable laws and indemnify for claims.

22 BEST PRACTICES FOR DRAFTING INDEPENDENT CONTRACTOR AGREEMENTS 19 Affirmatively state that the contractor is engaged as an independent contractor. Specify the particular purpose for the engagement the services the contractor will render but do not dictate how the services must be performed. Have a definite duration or project parameters and state that the relationship will terminate at the close of the specified time or project. Specify in writing that the contractor will not receive any employee benefits. Non-Exclusivity: Allow the contractor to work with other clients.

23 BEST PRACTICES FOR DRAFTING INDEPENDENT CONTRACTOR AGREEMENTS 20 Specify that the contractor is responsible for obtaining all general business and liability insurance, as well as appropriate licenses. Specify the method of payment. The agreement should allow the contractor to have the discretion to decide where to perform the work, if appropriate. Specify whether the contractor is responsible for paying business expenses related to furnishing services under the contract, such as the cost of equipment, tools, office space and support services.

24 BEST PRACTICES FOR DRAFTING INDEPENDENT CONTRACTOR AGREEMENTS 21 Include a written agreement regarding confidentiality of information and the ownership rights of the Company with respect to material created by the contractor. Consider whether to include an arbitration agreement.

25 INDEPENDENT CONTRACTOR STATUS: OTHER PRACTICAL ISSUES 22 Independent contractors who perform the same duties as company employees (or who previously were employees). Limit training provided to the independent contractor to need to know items that are related to a specific project. Do not provide a new independent contractor with the full panoply of training or orientation you would provide to a new employee. Schedule and hours of work. Place limits on direction given to independent contractors. Although some degree of communication regarding the execution of a project is acceptable, you should avoid controlling the way in which the goals of the independent contractor are accomplished.

26 INDEPENDENT CONTRACTOR STATUS: OTHER PRACTICAL ISSUES 23 Limit the length and scope of independent contractor projects. Do not use one independent contractor agreement to cover a lengthy or open ended retention. Enter into new independent contractor agreements for each significant project. Exclusivity: working for more than one client at a time.

27 REVIEWING INDEPENDENT CONTRACTOR RELATIONSHIPS 24 Look closely at your independent contractor and vendor relationships, whether directly with individuals or indirectly through staffing agencies, temporary employee agencies, and other entities that may be deemed joint employers. In a privileged analysis, assign positions classified as independent contractor a risk level. Subject high-risk positions and those you are uncertain of to more stringent privileged analyses.

28 REVIEWING INDEPENDENT CONTRACTOR RELATIONSHIPS 25 Identify and implement internal controls to reduce risk. Are new determinations regarding independent contractor status subject to automatic legal review? Are relationships with incumbents periodically reviewed for compliance? Have sample forms and services agreements been reviewed with these issues in mind?

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