The Gig Economy and Related Risks of Contingent or Temporary Workers M. Christopher Moon
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1 The Gig Economy and Related Risks of Contingent or Temporary Workers M. Christopher Moon Jackson Lewis PLLC Salt Lake City
2 Agenda I. Introdction to the Gig Economy II. Who is An Employee? Why Does it Matter? III. Department of Labor Scenarios IV. Practical Tips & Takeaways 5
3 What is the Gig Economy? 6
4 What is the Gig Economy? GIG ECONOMY: an economic sector consisting of parttime, temporary, and freelance jobs Often thoght of as services provided throgh applications like Uber, bt also incldes: On-Call work, On-Demand work, Contingent work, Freelance work, Fractional employment, Temp-to-reglar workers, Non-traditional workers 7
5 8
6 9
7 For What is Utah Famos? Fry Sace! 7 Green Jell-O Salad!
8 Mlti-Level Marketing! Utah is the nofficial world capital of mlti-level marketing and direct sales companies Direct sales is the second-biggest indstry in Utah behind torism Per capita, Utah has more MLMs than any other state KUTV News, September
9 What do MLMs have to do with the Gig Economy? Amway s Twitter Accont: Take a look inside the gig economy and what it means for YOU! On Amway s official blog, direct-selling is identified as a common type of gig economy job, right alongside ridesharing and home-sharing 9
10 Why do the Gig or MLM? Do any of these reasons sond familiar? High nmber of Stay at Home Moms - Choose yor own hors. Flexible control over schedle Individals with Door to Door Sales Experience Sales force with International Experience. Be yor own boss. Kirk Jowers (VP at doterra) It wold be difficlt for doterra to experience the sccess it s had in any other state. We are able to rn a global office ot of Utah, with 1,900 employees commnicating in, literally, more than 100 langages. 10
11 Positives and Negative for Employers Positives 1. Flexibility for small projects like consltants 2. Allows for qick staffing-p for temporary increased demand 3. Decreased labor costs, especially benefits Negatives 1. High worker trnover 2. Uncertain employment isses 3. Pay & benefits isses 4. Workers not trained into the company cltre 5. High-skilled worker hired for short-term projects may reqire high compensation 10
12 II. Who is an employee? Why does it Matter? 11
13 Why Does it Matter? Employment laws and benefits generally only apply to employees, not independent contractors Overtime Minimm Wage Most Protections Against Discrimination & Harassment Worker s Compensation Unemployment Insrance LTD/STD Insrance Vacation Pay What abot medical & stock benefits? depends on yor Smmary Plan Description 12
14 Who Conts as an Employee? How is Employee Defined? There is no single definition. Definition of employee may change based pon jrisdiction (Federal/State/Local) or statte (FLSA/OSHA/EO 11246). 13
15 Fair Labor Standards Act Definitions Employee: any individal employed by a employer Employer: any person acting directly or indirectly in the interest of an employer in relation to the employee To Employ: to sffer or permit to work Bottom Line = it s nclear, so corts have differing interpretations depending on geography 15
16 DOL s Changing Test The Obama Administration In the wake of the recession of 2008, the DOL significantly cracked down on practices impacting worker protections Implemented economics realties test: whether the worker is economically dependent on the employer (and ths its employee) or is really in bsiness for him or herself (and ths its independent contractor) President Trmp s Changes Jne 2017, new Labor Secretary Alexander Acosta annonced roll-back of Obama-era economics realties The DOL will take a more bsiness-friendly approach 15
17 DOL s New (Old) Test 1. Is work integral part of the employer s bsiness? 2. Does worker exercise managerial tasks (i.e., hiring workers); 3. The relative investments in facilities and eqipment by the worker; 4. The degree to which worker exercises independent bsiness jdgment; 5. Dration of the engagement; and 6. The natre and degree of control by the employer (inclding who sets pay amont, work hors, how work is performed and whether the worker generally works free from control). 16
18 Employee or Independent Contractor: The Practical Considerations Employee Factors Independent Contractor Factors Benefits Contining Relationship Fll Time Reqired Instrctions Integral Part Of The Principal s Bsiness Meetings Order Or Seqence Set Reglar Reports Right To Fire Right To Qit Services Rendered Personally Set Hors Of Work Training Work Done On Premises Distinct Occpation Or Bsiness Expenses Hiring Assistants Intent Of Parties Investment In Facilities/Eqipment Payment Method Profit Or Loss Services Available To General Pblic Skill Tools And Materials Type Of Work Works For More Than One Person At A Time 17
19 What Happens If We get This Wrong? Insrance implications UI and WC Most common vene for challenge to be raised Unsophisticated tribnals making significant legal rlings Overtime & Minimm Wage Implications One of the top claims in wage & hor class actions Tax isses DOL claims it shares info with IRS Benefits stock, vacation pay, etc. 18
20 Title VII of the Civil Rights Act Main qestion are we an employer? Joint Employment considerations: Who pays for work? Who spervises work? Who controls how work is done? Who provides tools to complete work? All employers are liable for any discrimination most corts will find liability first, apportion responsibility later 19
21 Lawson v. Grbhb (N.D. Ca. 2018) Part-time driver, sed Grbhb for minimm wage, OT, expense reimbrsement, saying the company exerted significant control over when and where he delivered food dring his shifts Following a bench trial, the U.S. Dist. Cort in Northern California fond he was appropriately classified as an independent contractor. Cort fond some factors in favor of both sides. Cort remarked that the qestion of whether an individal is an employee or independent contractor is an all-or-nothing proposition. 21
22 Office of Federal Contract Compliance Programs (OFCCP) OFCCP generally ses the common-law agency test Also known as the Darden Analysis * To determine if there is an employment relationship consider all circmstances in the relationship sch as: 1. Skill reqired for job 2. Whether it is same type of work as contractor 3. Sorce of the instrmentalities or tools 4. Location of the work 5. Dration of relationship between parties 6. Whether Contractor has the right to assign additional projects 7. Extent of the individal s discretion over when and how long they work 8. Method of payment (W-2 or 1099) 9. Contractor s role in hiring and paying 10. Etc. *Nationwide Mt. Ins. Co. v. Darden, 503 U.S. 318, (1992). 20
23 Hypothetical: Employee or Not? Darden Factors Yor company, an Office Spply Distribtor, with a large federal contract, hires a Software Consltant to develop its new HRIS. The Consltant signs an agreement prior to starting work that specifies a list of deliverables and the amont the company will pay him pon completion of each phase. Yo provide the Consltant with office space in yor bilding and reqire him to attend a weekly planning meeting with HR Staff. However, the Consltant has discretion to work offsite when he chooses and may generally select his hors. The Consltant can se an office compter when he is present, bt he primarily ses his own compter eqipment for coding the software he is developing. Yor company also allows him to participate in work/life programs available to employees, sch as the se of an in hose gym and free shttle service to the sbway station. Yor company does not provide heath benefits or withhold federal and state taxes. 21
24 Hypothetical: Employee or Not? Darden Factors Yor company, an Office Spply Distribtor, with a large federal contract, hires a Software Consltant to develop its new HRIS. The Consltant signs an agreement prior to starting work that specifies a list of deliverables and the amont the company will pay him pon completion of each phase. Yo provide the Consltant with office space in yor bilding and reqire him to attend a weekly planning meeting with HR Staff. However, the Consltant has discretion to work offsite when he chooses and may generally select his hors. The Consltant can se an office compter when he is present, bt he primarily ses his own compter eqipment for coding the software he is developing. Yor company also allows him to participate in work/life programs available to employees, sch as the se of an in hose gym and free shttle service to the sbway station. Yor company does not provide health benefits or withhold federal and state taxes. 22
25 Is the Consltant an Employee? Employee 1. Provided office space 2. Reqired to attend weekly meetings 3. Provided with compter 4. May participate in employee work-life programs Not an Employee 1. Software Consltant is a different bsiness 2. Signed an agreement before starting 3. Discretion to set own hors 4. Often ses his own compter 5. Company doesn t provide healthcare 6. Taxes not withheld (1099) 23
26 Who is an Employee? Why does it Matter? If, after analyzing all of the Darden factors, the contractor determines that the individal is not an employee, the individal shold not be inclded in AAP As a best practice, an OFCCP FAQ recommends that contractors docment the analysis and retain this docmentation OFCCP will condct its own analysis to make the final determination Generally, this will only occr in the context of an adit 26
27 OFCCP Examples 2017 OFCCP Adit Reqest for Information (RFI) 25
28 OFCCP Enforcement: The Risks?? Risks of Inclding Contingent Workers in yor AAP 1. Potentially large job grops 2. Adverse Impact 3. EEO Data may not have been collected 4. Held liable for decisions of others 5. Can yo explain pay differences between contingent and reglar workers? Risks of Leaving Contingent Workers ot of yor AAP 1. Will OFCCP notice? 2. OFCCP may assme adverse inference 3. OFCCP cold create its own labor pool 4. Technical non-compliance 5. Lose proactive opportnity to review EEO problem areas 26
29 Practical Tips & Takeaways 27
30 Key Takeaways 1. Understand the factors that establish an employee/employer relationship 2. Condct an analysis of potentially qestionable worker arrangements 3. Enter written agreements with all non-employee workers, inclding (if possible): Confirmation that worker controls how work is done Confirmation that worker provides tools Strict statement that worker is responsible for taxes 28
31 Key Takeaways (cont.) 4. Benefit Plans Review Smmary Plan Descriptions 5. Staffing agencies: Details abot hiring process and work relationship Indemnification provisions Conversions Be mindfl of replacing hiring process with conversations is it worth the risk? 6. Federal Contractors: Exclde non-employee workers from AAP Docment analysis to spport this position 29
32 32 QUESTIONS?
33 Thank Yo With 800 attorneys practicing in major locations throghot the U.S. and Perto Rico, Jackson Lewis provides the resorces to address every aspect of the employer/employee relationship. jacksonlewis.com 33
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