To p Five Issu e s C o n fro n tin g

Yo u r B u sin e ss’ s H u m a n
R e la tio n s Pra ctice s
May 12, 2010
W a g e & H o u r: E m p lo ye e
C la ssifica tio n s
W h y th is M a tte rs
• Department of Labor:
– adding 250 new investigators
– Internet education
initiatives
– will be requiring compliance
audits
– prioritizing
misclassifications
• Mistakes cost big money
Three Issues to Think About
• Employee vs. Contractor
• Employee vs. Intern
• Non-Exempt Employee vs. Exempt
Employee
Employee vs. Contractor
• The Benefits of Using
Independent Contractors
• Reduced Cost
• Employer taxes
–No benefits
–Flexibility in staffing
Employee vs. Contractor (cont.)
• When Will Workers Be Considered “Employees”
– Common Law Test (Right To Control)
• Nationwide Mutual Insurance Co., v. Darden
Insurance Agent – US Supreme Court
factors – consider all aspects of
employment relationship – no single
factor controls
– The IRS 20 Factor Test
• It is not about the numbers!
• You do not need to meet all 20 tests
• All of the relevant facts and
circumstances are considered
• Ultimately, it is about CONTROL
 Employee vs. Contractor
(cont.)
• When Will Workers Be Considered “Employees” (cont.)
– Economic Realities Test
• As an economic reality, is the worker dependent
on the company
– Considered a broader, more liberal test
• Often used in FLSA cases
• Relevant factors
– Level of skill required
– Degree of worker’s financial investment in
equipment and facilities
– Degree of control by Company
– Duration of the relationship
– Worker’s opportunity for profit and loss
Employee vs. Contractor (cont.)
• Effects of Misclassification
– Payroll Tax Liability
• Safe harbor protections – company had a
reasonable basis for not treating workers as
employees.
– past audit
– court case
– letter ruling
– advice of attorney
– FLSA
• FLSA does not cover independent contractors
• Economic realities test
• If misclassified
– Overtime
– minimum wage
 Employee vs. Contractor (cont.)
• Effects of Misclassification (cont.)
– Employment Discrimination Laws and NLRA
• If considered an employee, must count towards
jurisdictional minimum number of employees
(Title VII requires 15 employees , etc.)
• If considered an employee, entitled to
protections of the laws
– Workers’ Compensation
• If independent contractor, then exempt from
workers’ compensation, and can sue in court
for work related injuries
– Employee Benefits
• May sue the plan for benefits denied
• Risk of plan disqualification
• Plan language is key – the definition of who
is eligible for benefits
• Vizcaino v. Microsoft
Employee vs. Contractor (cont.)
• Precautions to Reduce Risk of Liability
– Draft Independent Contractor Agreement
– Key Terms
• The definition of work performed
• Payment – flat rate, or per hour charge, with
submission of reports
• Payment of Expenses
• Responsibility for Taxes
• Equipment, materials, supplies
• No Benefits
• Insurance – contractor to carry
• Indemnification – contractor to indemnify
company for losses if reclassified as
employee
– In practice, adhere to the agreement’s terms
Employee vs. Intern
• DOL is cracking down on companies
that fail to properly pay interns.
• Fact Sheet #71: Internship Programs
Under The Fair Labor Standards Act
• Internships in the “for-profit”
private sector will most often be
viewed as employment, which must be
paid.
Employee vs. Intern
• Six-Factor Test:
– Is the training similar to what would be given
in a vocational school or academic educational
instruction?
– Is the training for the benefit of the trainees
or students?
– Do the trainees or students work under their
close observation of regular employees without
displacing them?
– Does the employer derive no immediate advantage
from the activities of the trainees or
students, and on occasion are the employer’s
operations actually impeded?
– Are the trainees or students not necessarily
entitled to a job at the conclusion of the
training period?
– Do the employer and the trainees or students
understand that the trainees or students are
not entitled to wages for the time spent in
Exemptions: Administrative
Employees
• Employee-by-employee analysis based on:
– Is the employee paid a salary of at least $455 per week?
– Is the employee’s primary duty the performance of office
or non-manual work directly related to the management
or general business operations of the employer or the
employer’s customers?
– Does the employee’s primary duty include the exercise of
discretion and independent judgment with respect to
matters of significance?
• The Case of Mortgage Loan Officers
• Traditionally considered “exempt.”
• DOL Administrator’s Interpretation No. 2010-1
– “Employees who perform the typical job duties of a
mortgage loan officer do not qualify” as exempt
administrative employees.
– “A careful examination of the law as applied to the
mortgage loan officers’ duties demonstrates that their
primary duty is making sales and, therefore, mortgage
loan officers perform the production work [as opposed
to administrative work] of their employers.”
Patient Protection and
Affordable Care Act (PPACA) and
Healthcare and Education
Reconciliation Act (HCERA)
What You Need To Known Now and In the
Future
Main Elements
• Individual Mandate
• Employer Mandate
• Health Insurance Market Reform
– Creation of exchanges
– Insurance mandates
– Required coverage elements
• Tax Changes
Impact on Businesses
• What Your Insurance Must Have
– No lifetime amount restrictions
– Cover up to 26
– Preexisting condition coverage
– No rescissions
– Preventative health services without cost
sharing (with grandfather clause)
• Early retiree reimbursement
• Community Living Assistance Services and
Support Act
• Prohibition on salary discrimination
Employer Coverage Issues
• NOW (2010 and 2011)
– Tax credits for small businesses
– Coverage requirements
– Tax changes
– HSA changes
– CLASS Act – Long-term benefit enrollment
• 2013
– Medicare payroll tax increase
– Cap on salary-reductions for health FSAs
– Change Medicare Part D retiree drug subsidy
(RDS)
Employee Coverage Issues (cont.)
• 2014
– Small Business Exchanges (SHOPs)
– Penalty for No Coverage
– Automatic Enrollment (maybe 2014)
– Tax on Cadillac Plans
• 2016
– Healthcare across state lines
• 2018
– High-value Excise Tax
Healthcare Related Tax
Changes
• W-2 Reporting
• Tax on subsidies for retiree
prescription drug programs
• Medicare payroll taxes increased
for high-wage employees
• “Tax” for not providing health
insurance
• Excise tax on Cadillac plans
• Tax credits for small businesses
• Comparative effectiveness fee
What Your Plan Has to Cover
• 72.5% - employee plan
• 65% - family
• Kids up to 26
• No lifetime limits
• No recissions
• Limits on waiting periods
• No preexisting condition restrictions
for kids under 19
• Automatically enroll – employees opt
out
Grandfather Clauses
• What will cause loss of grandfathered
in status is as yet undetermined
• Group health plans in existence when
PPACA was enacted are not required to
adhere to some of the plan coverage
requirements
– No cost-sharing for preventive health
services
– Prohibition on salary discrimination
– Grievance and appeals procedures
– Certain patient protection provisions
– Remember: enacted March 23, 2010
HSAs
• Limiting its uses
• Only for prescriptions, no
longer for over-the-counter
drugs
• Stiffer penalties
Retiree Only Plans
• Tax subsidies on retiree
benefits starting in 2013
– Companies that provides
retirees with prescription
drugs received a subsidy to do
so
– This will now be taxed
• Caterpillar write-down - $14
Billion
• Boeing, Verizon, Conway also
claim will suffer losses
CBAs
• Similar coverage requirements
• Amendments to CBA solely to
comply with new rules is not
considered termination of the
agreement
• Certain coverage and reporting
mandates not to apply until
date last CBA relating to
coverage terminates
Additional “Surprises”
• Nursing Rooms
• Whistleblower Protection
• 1099 Requirement Changes
Predicted Impacts
• Higher Insurance Premiums for
Businesses on Current Plans
• Potential decrease for small
businesses if SHOPs work as
promised by Congress
• Penalty for Not Providing
Insurance
• Loss of Certain Tax Breaks
Technology in the Workplace

What You Can and Cannot Do

Privacy and Privilege
• Stengart v. Loving Care Agency, Inc. (N.J. 2009)
– Employee’s emails to her attorney, sent through
Employee’s web based email account, considered
privileged
– Court concluded that Company’s electronic
communications policy, which required
conversion of emails into company business
records, must give way to attorney-client
privilege
• Alamar Ranch LLC v. County of Boise, 2009 WL
3669741 (D. Idaho 2009)
– Privilege waived for emails sent using company
computers
– Attorney should have been aware that client’s
employer would access email sent via company
system
Text Messages
• Quon v. Arch Wireless (9th Cir. 2008)
• Police officers used department – provided cell
phones for work and personal use
• Department had policy of monitoring email and
other communications, but policy did not
specifically include text messages
• Service provider disclosed the text messages to
the Department, as the subscriber under the SCA
• Court concludes that service provider could not
disclose contents to Department
– Employee had reasonable expectation of privacy
that messages would not be reviewed without
consent
• U.S. heard oral arguments on April 19, 2010
Personal Email Accounts
• Employee’s access of personal web-based
email accounts (Gmail, Yahoo, and the
like) on company computer
• Can Employer log in to the personal
account?
• Stored Communications Act
– Violation of SCA to access without
authorization and obtain electronic
communications
– Van Alstyne v. Electronic Scriptorium Ltd.,
560F. 3d 199 (4th Cir. 2009)
(Company found to violate SCA and
punitive damages upheld, where former
boss logged into employee’s AOL account)
The ADA Amendments Act:

Disability Discrimination Redux

ADA Amendments Act
• Express purpose is to make it
easier to meet the
definition of “disability.”
• Response to court rulings that
rejected claims of
disability discrimination
because the party wasn’t
sufficiently disabled.
ADAAA: What’s New
• New definitions of “major life
activity”
• Re-imagines “substantially
limits”
• New provision relating to
“regarded as”
• Refocuses the test of
discrimination away from
whether a disability exists to
whether discrimination exists.
ADAAA: Major Life Activities
• Non-exclusive statutory list:
– eating, sleeping, walking, standing,
lifting, bending, speaking,
breathing, learning, reading,
concentrating, thinking,
communicating and working; or
– Major bodily functions, such as
functions of the immune system,
normal cell growth, digestive,
bowel, bladder, neurological,
brain, respiratory, circulatory,
endocrine and reproductive
functions.
ADAAA: Major Life Activities
• Impairments affecting only
internal bodily functions
without affecting external
activities are to be
considered disabilities.
• Impairment of one from either
list is enough.
ADAAA: Substantially Limits
• Not an exacting test.
– Does not mean prevent, or
significantly or severely
restrict.
• Does not cover temporary, non-
chronic impairments of short
duration with little or no
residual effects.
ADAAA: Substantially Limits
• Must also consider limiting nature
of impairment when it is “active.”
– “An impairment that is episodic or
in remission is a disability if
it would substantially limit a
major life activity when active.”
• Must ignore mitigating measures
– E.g., medications, medical devices,
assistive technologies, learned
behaviors, and surgical
interventions.
ADA: Substantially Limits
• Examples
– Yes : deafness, blindness, intellectual disability,
partially or completely missing limbs, mobility
impairments requiring use of a wheelchair,
autism, cancer, cerebral palsy, diabetes,
epilepsy, HIV/AIDS, multiple sclerosis, muscular
dystrophy, major depression, bipolar disorder,
post-traumatic stress disorder, obsessive-
compulsive disorder, and schizophrenia.
– No : the common cold, seasonal or common
influenza, a sprained joint, minor and non-
chronic gastrointestinal disorders, or a broken
bone that is expected to heal completely.
– Maybe : asthma, back and leg impairments, carpal
tunnel syndrome, and learning disabilities.
ADAAA: Regarded As
• Covers:
– actual or perceived disability,
whether or not it actually limits
or is believed to limit a major
life activity
– actions taken on basis of
mitigating measures used for an
impairment, or symptoms of an
impairment
• Does not cover:
– apply to transitory and minor
impairments
– require reasonable accommodations.
ADAAA: What Does It All Mean?
• More ADA claims in federal
court
• Summary judgment more
difficult
• Higher settlement values of
cases
• Disability vs. Accommodation
Rebuilding Your Workforce as
the Economy Rebounds
Considerations For 2010
Reconsider Your Hiring
Practices as You Begin to
Rebuild Your Workforce
Objective:
• Locate and Hire the Best
Available Candidate
Re-hire vs. New Hire
• Look at the “Pros” and “Cons”
Where do you Look for
People?
How Broad is Your Applicant
Pool?
When Did you Last Read Your
Application Form?
Should You Conduct Reference
and/or Background Checks?
Do You Use…
• Social Networking Tools?
• Online Sources of
Information?
Interviews:
• Are you asking the Right
Questions?
Do You Do…
• Applicant Testing
Do You Require…
• Physical Examinations?
• Drug and Alcohol Testing?
Do You Go Through the Same
Steps
• Rehire vs. New Applicant?
Terms and Conditions of
Employment
• Confidentiality Agreement?
• Non-Compete?
• Employment Agreement?
• Review Employee Handbook?
Result:
• A Productive Workforce!
Presenter Information