When Part-Time employees are Full-Time Employees:

Transcription

1 When Part-Time employees are Full-Time Employees: The Impact of PPACA, Retirees Returning to Work and the Distinction Between Employees and Independent Contractors 1 Overview PPACA Terms Overview Look-back measurement method for determining fulltime employees Retirees Returning to Work In General Employees vs. Independent Contractors Multiple Appointments 2 Disclaimer: This overview is provided for informational purposes only. The advice or information included is not legal advice and should not replace legal research when evaluating particular situations or cases. When evaluating possible courses of action to take, please consult legal counsel. 3 1

2 Patient Protection and Affordable Care Act (PPACA) 4 PPACA Overview Sets mandates for healthcare coverage Individual mandate 2014 Employer mandate 2015 Employer mandate requires an offer of coverage to all full-time employees Defined as working at least 30 hours per week Substantial penalties for non-compliance Must offer to 70% of FTE in 2015 Must offer 95% of FTE in 2016 and after 5 Terms to Know... Full-Time = 30 hours or more a week Variable Hour Employees hours fluctuate; when hired, we re not sure if they will work over 30 or more hours a week Measurement period Period of 3 to 12 months Could be an initial measurement period or a standard measurement period Administrative period Up to 90 days to determine eligibility and offer coverage Stability Period Employee has coverage (or not, depending on hours worked) No shorter than the measurement period 6 2

3 New Employees (Determining Status) Full-time (using our current criteria and benefiteligible), then we offer coverage immediately Part-time (using our current criteria)? Working 30+ hours? Reasonably expect to work 30+ hours a week Factors to consider: Was the employee that is being replaced full-time? What are the hours for ongoing employees in the same or comparable positions? Was the job advertised as more or less than 30 hours a week? If expected to work 30 or more hours per week, must offer coverage at beginning of employment But... What if we aren t sure... 7 Calculating Hours Worked Variable Hour Employees No offer of coverage at the beginning of employment Hours will be measured during 12 month measurement period Actual paid hours of service are measured Vacation Holiday Sick Jury duty Military leave Leave of absence 8 Calculating Hours (con t) Part-time but non-hourly Must convert to hours Three options Look at actual hours worked (if captured) Count hours using days worked (8 hours) Count weeks worked (40 hours) Seasonal Employees (working less than 6 months) Cannot take into account the likelihood of how long the employee will stay Must be based on business need for the job We do not need to offer coverage to seasonal employees initially, but... We will need to consider hours during their measurement period 9 3

4 What about breaks in service? Break in service = 13 weeks If there is a break in service of more than 13 weeks, the employee is considered a new employee If the employee is a seasonal employee or a variable hour employee, measurement period would start over for this employee 10 Measurement Periods Two types of Measurement Periods On-going employees Annually, using a standard measurement period New employees 12 month period beginning in the month following their start date Coverage must start no later than the 1 st day of the second calendar month following the 1 st anniversary date Measurement periods will be overlapping 11 Our Standard Measurement Period Ongoing (Standard Measurement) period Measurement Period = October 16, 2013 October 15, 2014 Administrative Period = October 16, 2014 December 31, 2014 Stability Period = January 1, 2015 December 31,

5 Initial Measurement Periods Periods for new employees Month Hired Initial Measurement Period Administrative Period (+ Stability Period partial month in month hired) January February 1 - December 31 January & February March 1 - February 28 February March 1 - January 31 February & March April 1 - March 31 March April 1 - February 28 March & April May 1 - April 30 April May 1 - March 31 April & May June 1 - May 31 May June 1 - April 30 May & June July 1 - June 30 June July 1 - May 31 June & July August 1 - July 31 July August 1 - June 30 July & August September 1 - August 31 August September 1 - July 31 August & September October 1 - September 30 September October 1 - August 31 September & October November 1 - October 31 October November 1 - September 30 October & November December 1 - November 30 November December - October 31 November & December January 1 - December 31 December January - November 30 December & January February 1 - January Example #1 (Initial Measurement Period) Employee A starts on March 12, 2014 Variable hour No prior state experience (so no stability period yet) Initial measurement period April 1, 2014 February 28, 2015 Worked an average of 32 hours during this period Coverage begin May 1, 2015 Stability Period = May 1, 2015 April 30, 2016 If the employee leaves the State and comes back within less than 13 weeks, coverage will resume upon their return If the employee does not maintain an average 30+ hours a week, their coverage will continue until the end of the stability period. 14 Example #1 (Transition to the Standard Measurement Period) Initial Measurement Period Walk-through Employee A starts on March 12, 2014 Initial measurement period = April 1, 2014 February 28, 2015 Stability Period = May 1, 2015 April 30, 2016 Transition to Standard Measurement Period Ongoing (Standard) measurement period = October 16, 2014 October 15, 2015 Worked 35 hours a week on average Coverage begins (actually continues) January 1, 2016 instead of May 1, 2016 Standard Stability Period = January 1, 2015 December 31,

6 Example #2 Employee B starts on March 12, 2014 Meets 30+ hrs during initial measurement period but not during the ongoing measurement period Stability period = May 1, 2015 April 30, 2016 Employee B terminates employment on June 12, yr and 4 months service Employee B is rehired on August 12, 2015 as a variable hour employee Gap in service of approximately 8 weeks Still in their stability period Coverage will resume upon rehire and will be maintained through the original stability period (until April 30, 2016) 16 Example #2 (con t) What if... Employee B only averages 28 hours of work a week during the next ongoing (standard) measurement period? Ongoing measurement period = October 16, 2014 October 15, 2015 Coverage will continue for employee B until the end of the initial stability period (April 30, 2016) If employee B then has 32 average hours of work in the ongoing measurement period ending October 15, 2016, coverage will be offered again beginning on January 1, Retirees Returning to Work Recent audit report was done related to retirees returning to work (March 2014, Report No ) Want to highlight several things related to the issue of retirees returning to work Concerns were raised about better oversight over these situations MOBIUS report developed to help address this concern Concerns about positions possibly being incorrectly determined as non-benefit eligible MOBIUS report developed to help address this concern Concerns about retirees working as contractors and the distinctions between independent contractors and employees 18 6

7 Retirees Returning to Work MOSERS reiterated some information related to determining whether or not positions are benefit eligible (May 2014 Memo to HR Representatives) For a position to be benefit eligible The position must be in the nature of an ongoing (a multiyear position including a position covered by a contract) or a permanent position. 2. The position must normally require the performance of duties of not less than 1,040 hours per year. The focus should be on the position and not on the incumbent of the position. 19 Retirees Returning to Work If it turns out that the duties of the position change so that it requires at least 1,040 hours of work year, then the agency may need to reassess the position to decide if it really should be a benefit eligible position. On the other hand, if it turns out that the duties of the position change so that it requires less than 1,040 hours of work per year, the agency may need to reassess the position. At times, the determination of whether or not a position is benefit-eligible may need to change 20 Retirees Returning to Work Multiple appointments An employee employed in multiple positions within the same agency is considered to be working a single position. That is, the hours from the positions are added together when considering the issue of benefit eligibility If a retiree is working in a benefit eligible position, it will stop the employee s retirement benefit 21 7

8 Retirees Returning to Work New Report to Help you Keep on Top of This There is a new report that ITSD staff are working on to help agencies track hours worked for retirees with appointment(s) within the agency. This should help agencies to track this more accurately. We will get you more information on this reports as it becomes finalized. 22 Employees vs. Independent Contractors This issue has implications for both retirees and nonretirees U.S. Internal Revenue Service (IRS) and U.S. Department of Labor have laws regarding the distinction between employees and independent contractors Distinction could impact taxes and labor laws (FLSA, FMLA) If state agencies are found to be improperly classifying individuals under these guidelines, significant penalties may apply. Further, incorrectly classified individuals will likely have claims against their employers for rights and benefits not afforded to them. 23 Employees vs. Independent Contractors In addition, the General Assembly generally appropriates funds to state agencies through Personal Service (PS) and Expense and Equipment (EE) appropriations. State agencies use their PS appropriations to pay their employees, and use their EE appropriations to pay for services rendered by an independent contractor. Contractual arrangements which do not make appropriate distinctions between state employees and contractors risk violation of appropriation bills. 24 8

9 Employees vs. Independent Contractors The Test A Missouri court, in National Heritage Enterprises, Inc. v. Division of Employment Sec., 164 S.W.3d 160, (Mo. App. W.D. 2005), identified and described the twenty factors as follows: 1. Instructions. A worker who is required to comply with other persons instructions about when, where, and how he or she is to work is ordinarily an employee. This control factor is present if the person or persons for whom the services are performed has the right to require compliance with the instructions. 2. Training. Training a worker by; a) requiring an experienced employee to work with the worker; b) corresponding with the worker; c) requiring the worker to attend meetings, or d) using other methods of training generally indicates that the person or persons for whom the services are performed want the services performed in a particular method or manner. 3. Integration. Integration of the worker s services into the business operations generally shows that the worker is subject to direction and control. When the success or continuation of a business depends to an appreciable degree upon the performance of certain services, the workers who perform those services must necessarily be subject to a certain amount of control by the owner of the business. 25 Employees vs. Independent Contractors The Test 4. Services Rendered Personally. If the services must be rendered personally, presumably the person or persons for whom the services are performed are interested in the methods used to accomplish the work as well as the results. 5. Hiring, Supervising, and Paying Assistants. If the person or persons for whom the services are performed hire, supervise, and pay assistants, that factor generally shows control over the workers on the job. However, if one worker hires, supervises, and pays the other assistants pursuant to a contract under which the worker agrees to provide materials and labor and the worker is responsible only for the attainment of a result, this factor indicates an independent contractor status. 6. Continuing Relationship. A continuing relationship between the worker and the person or persons for whom the services are performed may indicate that an employer-employee relationship exists. A continuing relationship may exist where work is performed at frequently recurring although irregular intervals. 7. Set Hours of Work. The establishment of set hours of work by the person or persons for whom the services are performed is a factor indicating control. 26 Employees vs. Independent Contractors The Test 8. Full Time Required. If the worker must devote substantially full time to the business of the person or persons for whom the services are performed, such person or persons have control over the amount of time the worker spends working and impliedly restrict the worker from doing other gainful work. An independent contractor on the other hand, is free to work when and for whom he or she chooses. 9. Doing Work on Employer s Premises. If the work is performed on the premises of the person or persons for whom the services are performed, this may suggest control over the worker, especially if the work could be done elsewhere. Work done off the premises of the person or persons receiving the services, such as at the office of the worker, indicates some freedom from control. However, this fact by itself does not mean that the worker is not an employee. The importance of this factor depends on the nature of the service involved and the extent to which an employer generally would require employees to perform such services on the employer s premises. Control over the work is generally indicated when the person or persons for whom the services are performed have the right to compel the worker to travel a designated route, to canvass a territory within 27 a certain time, or to work at specific places as required. 9

10 Employees vs. Independent Contractors The Test 10. Order or Sequence Set. If a worker must perform services in the order or sequence set by the person or persons for whom the services are performed, that factor shows that the worker is not free to follow the worker s own pattern of work but must follow the established routines and schedules of the person for whom the services are performed. 11.Oral or Written Reports. A requirement that the worker submit regular or written reports to the person or persons for whom the services are performed indicates a degree of control. 12. Payment by Hour, Week, Month. Payment by the hour, week, or month generally points to an employer-employee relationship, provided that this method of payment is not just a convenient way of giving a lump sum agreed upon as the cost of the job. Payment made by the job or on a straight commission generally indicates that the worker is an independent contractor. 13. Payment of Business and/or Traveling Expenses. If the person or persons for whom the services are performed ordinarily pay the worker s business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be able to control expenses, generally retains the right to regulate and direct the worker s business activities. 28 Employees vs. Independent Contractors The Test 14. Furnishing Tools and Materials. The fact that the person or persons for whom the services are performed furnished significant tools, materials, and other equipment tends to show the existence of an employer-employee relationship. 15. Significant Investment. If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees (such as maintenance of an office rented at fair market value from an unrelated party), that factor tends to indicate that the worker is an independent contractor. On the other hand, lack of investment in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer-employee relationship. Special scrutiny is required with respect to certain types of facilities, such as home offices. 16. Realization of Profit or Loss. A worker who can realize a profit or loss as a result of the worker s services (in addition to the profit or loss ordinarily realized by employees) is generally an independent contractor, but the worker who cannot is generally an employee. For example, if the worker is subject to a real risk of economic loss due to significant investments or a bona fide liability for expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent contractor. 29 Employees vs. Independent Contractors The Test 17.Working for More Than One Firm at a Time. If a worker performs more than de minimis services for a multiple of unrelated persons or firms at the same time, that factor generally indicates that the worker is an independent contractor. However, a worker who performs services for more than one person may be an employee of each of the persons, especially where such persons are part of the same service arrangement. 18. Making Services Available to the General Public. The fact that a worker makes his or her services available to the general public on a regular and consistent basis indicates an independent contractor relationship. 19. Right to Discharge. The right to discharge a worker is a factor indicating that the worker is an employee and the person possessing the right is an employer. An employer exercises control through the threat of dismissal, which causes the worker to obey the employer s instructions. An independent contractor, on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications. 20. Right to Terminate. If the worker has the right to end his or her relationship with the person for whom the services are performed at any time he or she wishes without incurring liability, that factor 30 indicates an employer-employee relationship. 10

11 Employees vs. Independent Contractors Other Factors to Consider... Per the U.S. Supreme Court 1. The extent to which the services rendered are an integral part of the principal's business. 2. The permanency of the relationship. 3. The amount of the alleged contractor's investment in facilities and equipment. 4. The nature and degree of control by the principal. 5. The alleged contractor's opportunities for profit and loss. 6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor. 7. The degree of independent business organization and operation. But the bottom line... We strongly encourage you to review, evaluate and consult with your legal counsel regarding the distinctions between employees and independent contractors and the implications for you agency. 31 Multiple Appointments In the past, concerns have been raised regarding the overtime implications of employees working in multiple appointments FLSA allows for employees to work in multiple appointments, under specific conditions, without potentially changing an employees overtime status or owing an employee overtime payments or comp time. 32 Multiple Appointments 29 CFR Occasional or sporadic employmentsection 7(p)(2). (a) Section 7(p)(2) of the FLSA provides that where State or local government employees, solely at their option, work occasionally or sporadically on a part-time basis for the same public agency in a different capacity from their regular employment, the hours worked in the different jobs shall not be combined for the purpose of determining overtime liability under the Act

12 Multiple Appointments 29 CFR Occasional or sporadic employment-section 7(p)(2) (b) Occasional or sporadic. (1) The term occasional or sporadic means infrequent, irregular, or occurring in scattered instances. There may be an occasional need for additional resources in the delivery of certain types of public services which is at times best met by the part-time employment of an individual who is already a public employee. Where employees freely and solely at their own option enter into such activity, the total hours worked will not be combined for purposes of determining any overtime compensation due on the regular, primary job. However, in order to prevent overtime abuse, such hours worked are to be excluded from computing overtime compensation due only where the occasional or sporadic assignments are not within the same general occupational category as the employee's regular work. 34 Multiple Appointments 29 CFR Occasional or sporadic employmentsection 7(p)(2). (2) In order for an employee's occasional or sporadic work on a part-time basis to qualify for exemption under section 7(p)(2), the employee's decision to work in a different capacity must be made freely and without coercion, implicit or explicit, by the employer. An employer may suggest that an employee undertake another kind of work for the same unit of government when the need for assistance arises, but the employee must be free to refuse to perform such work without sanction and without being required to explain or justify the decision. 35 Multiple Appointments 29 CFR Occasional or sporadic employmentsection 7(p)(2). (3) Typically, public recreation and park facilities, and stadiums or auditoriums utilize employees in occasional or sporadic work. Some of these employment activities are the taking of tickets, providing security for special events (e.g., concerts, sports events, and lectures), officiating at youth or other recreation and sports events, or engaging in food or beverage sales at special events, such as a county fair. Employment in such activity may be considered occasional or sporadic for regular employees of State or local government agencies even where the need can be anticipated because it recurs seasonally (e.g., a holiday concert at a city college, a program of scheduled sports events, or assistance by a city payroll clerk in processing returns at tax filing time). An activity does not fail to be occasional merely because it is recurring. In contrast, for example, if a parks department clerk, in addition to his or her regular job, also regularly works additional hours on a part-time basis (e.g., every week or every other week) at a public park food and beverage sales center operated by that agency, the additional work does not constitute intermittent and irregular employment and, therefore, the hours worked would be combined in computing any overtime compensation due

13 Multiple Appointments 29 CFR Occasional or sporadic employment-section 7(p)(2). (c) Different capacity. (1) In order for employment in these occasional or sporadic activities not to be considered subject to the overtime requirements of section 7 of the FLSA, the regular government employment of the individual performing them must also be in a different capacity, i.e., it must not fall within the same general occupational category. (2) In general, the Administrator will consider the duties and other factors contained in the definitions of the 3-digit categories of occupations in the Dictionary of Occupational Titles (except in the case of public safety employees as discussed below in section (3)), as well as all the facts and circumstances in a particular case, in determining whether employment in a second capacity is substantially different from the regular employment. 37 Multiple Appointments 29 CFR Occasional or sporadic employment-section 7(p)(2). (3) For example, if a public park employee primarily engaged in playground maintenance also from time to time cleans an evening recreation center operated by the same agency, the additional work would be considered hours worked for the same employer and subject to the Act's overtime requirements because it is not in a different capacity. This would be the case even though the work was occasional or sporadic, and, was not regularly scheduled. Public safety employees taking on any kind of security or safety function within the same local government are never considered to be employed in a different capacity. 38 Multiple Appointments 29 CFR Occasional or sporadic employment-section 7(p)(2). (4) However, if a bookkeeper for a municipal park agency or a city mail clerk occasionally referees for an adult evening basketball league sponsored by the city, the hours worked as a referee would be considered to be in a different general occupational category than the primary employment and would not be counted as hours worked for overtime purposes on the regular job. A person regularly employed as a bus driver may assist in crowd control, for example, at an event such as a winter festival, and in doing so, would be deemed to be serving in a different capacity

14 Multiple Appointments 29 CFR Occasional or sporadic employment-section 7(p)(2). (5) In addition, any activity traditionally associated with teaching (e.g., coaching, career counseling, etc.) will not be considered as employment in a different capacity. However, where personnel other than teachers engage in such teaching-related activities, the work will be viewed as employment in a different capacity, provided that these activities are performed on an occasional or sporadic basis and all other requirements for this provision are met. For example, a school secretary could substitute as a coach for a basketball team or a maintenance engineer could provide instruction on auto repair on an occasional or sporadic basis. 40 Multiple Appointments.... the bottom line is... Each agency needs to carefully consider their use of employees in multiple appointments to ensure that they are not accruing unintended overtime obligations. 41 Any questions? 42 14