In DOL/IRS Crosshairs: Independent Contractor Misclassifications

The Obama Administration’s fiscal 2011 budget earmarks $25 million for a joint project by the Department of Labor (DOL) and Internal Revenue Service (IRS) to ferret out employers who abuse the tax code and the Fair Labor Standards Act (FLSA) by misclassifying as independent contractors those who actually qualify as employees.

One of the tests to determine if an independent contractor should actually be treated as an employee involves, well, independence–is the person working independently without much supervision or is s/he simply functioning as someone’s supernumerary or assistant?

At stake, of course, is not only the payment of taxes and Social Security/Medicare contributions by the employer, but also potential overtime wages and benefits for the employee. So the investigation should be of no small concern to any firm that uses (or abuses) the independent contractor classification.

Personnel Concepts publishes a variety of useful tools for adhering to the FLSA. Check out our Human Resources Tools section for a complete listing and purview.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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GINA Could Put Kibosh on Workplace Wellness Programs

The Genetic Information Nondiscrimination Act (GINA), which took effect Nov. 21, 2009, not only forbids employers and health insurers from collecting individuals’ genetic information and using that in their decision-making; it also prohibits the solicitation of family medical histories, again to prevent discrimination in decision-making.

As the Wall Street Journal recently pointed out, however, GINA could put a serious dent in workplace wellness programs, which have often relied on family health histories to help employees make informed life-style decisions to improve their physical well-being and ward off disease and disability.

And wellness programs are hugely popular too, with some 70 percent of the nation’s employers subsidizing them, often with financial rewards for the participants in terms of health premium discounts and other incentives.

The Equal Employment Opportunity Commission (EEOC), which oversees enforcement of GINA, is still finalizing implementing regulations, which may or may not include a dramatic ban on employers’ use of social media sites to screen employees and job applicants (since people frequently post family and medical information on their personal pages).

Meanwhile, employers running wellness programs are trying to figure out how best to proceed, given the new restrictions on information they may obtain from their employees.

Also, when GINA took effect in November, the EEOC updated its notification poster to include language on GINA and on the Americans With Disabilities Amendments Act (ADAAA). The best way to stay current with the new posting requirement is to obtain the latest version for your state of Personnel Concepts Space Saver-1 Labor Law Poster, which aggregates all your mandated state and federal postings into one conveniently sized poster.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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Pilgrim’s Pride Settles Back Wage Claims for $1 Million

In an announcement this past Friday (Jan. 29, 2010), poultry processor Pilgrim’s Pride said it had agreed to fork over $1 million in back and unpaid overtime wages, including an acknowledgment that it will henceforth pay workers for the time spent donning and doffing their uniforms and work-related gear.

Though Pilgrim’s Pride is a substantial operation, no company of any size is immune from unpaid wage investigations and litigation, especially in light of the recent beefing up, personnel-wise, of the Department of Labor’s Wage and Hour Division (WHD).

Employers and human resource professionals should take care to classify their employees correctly, either as exempt (no overtime) or non-exempt (subject to overtime) and then pay accordingly–or be subject to employee complaints and subsequent visits by WHD investigators. Obtain a copy of Personnel Concepts’ Fair Pay Discrimination Compliance Kit to ensure you’re doing everything correctly to avoid the fate of firms like Pilgrim’s Pride.

 


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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Obamacare: How the Reconciliation Process Works

With the election of Scott Brown as the 41st Republican to prevent the full Senate from voting on health care reform, the Democrats are left with difficult choices to see their baby through.

Some bloggers have written of a secret deal between Nancy Pelosi and Harry Reid by which the House would approve the Senate version and thus avoid any further filibuster-possible votes in the upper body, while the Senate would then use the reconciliation process to amend the Senate bill to satisfy House liberals.

With or without this secret plan, Democrats could indeed turn to the reconciliation process to pass some form of health care reform. Reconciliation, though it allows the Senate to pass measures with a simple majority vote and no possibility of a filibuster, does contain some stumbling blocks.

First, it must pertain solely to matters of the budget, which means that many parts of the reform bill could be challenged as non-budgetary.  This is called being given a "Byrdbath" after Senator Robert Byrd and his rule that reconciliation can be used solely for budget reasons.

Second, reconciliation bills expire after ten years, which is what the Bush tax cuts are set to do at the end of this year.

Third, of course, Democrats must weigh the public response. How dearly might it cost them in the November elections, or will it all be forgiven by then?

If something passes, it will carry with it many new forms of compliance for both individuals and businesses, so we’ll closely watch the proceedings and keep you informed.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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Wild Edibles Settles Wage-and-Hour Dispute to Survive Alive

Wild Edibles, a Long Island City, N.Y.-based wholesale seafood purveyor that was forced into bankruptcy in July 2009, has settled with a wage-earners’ group that led a successful boycott of the firm’s provisioning by 70 Manhattan restaurants.

The boycott was orchestrated by the nonprofit group Brandworkers, which alleged overtime and wage-and-hour violations by Wild Edibles and ended up securing a a $340,000 settlement for the workers, many of them from the local immigrant population.

“More than anything, we showed that ordinary workers can get organized, take action together and win,” said Raymundo Lara Molina, a former employee of Wild Edibles.

Once a federal judge approves the settlement, Wild Edibles has 45 days to file a bankruptcy restructuring plan.

Though the sum of $340,000 seems tiny compared to many of the nation’s multi-million-dollar settlements, it points up the pitfalls of avoiding one’s obligation as a business owner to pay time-and-a-half for overtime.

Fortunately, Personnel Concepts does provide a handy resource for complying with the federal wage law with its FLSA Fair Pay Overtime Rules Compliance Kit. Get yours today and avoid the fate of Wild Edibles.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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IRS to Audit 6,000 Firms on Worker Misclassification

Strapped for cash, the Internal Revenue Service has announced plans to audit 6,000 businesses, both large and small, with a focus on worker misclassification, fringe benefits, reimbursed expenses, and executive compensation.

If the IRS discovers personnel listed as independent contractors who are in fact company employees, the results could be costly. The firm could owe large sums in past taxes and fringe benefits–retroactively applied.

The last time the IRS launched a worker classification audit in 1984, it estimated that 15 percent of all employers misclassified some 3.4 million workers. That’s a lot of loot in back taxes and health insurance/retirement payments.

With an estimated 10.3 million independent contractors in the U.S., that 15 percent today potentially represents 1.54 million misclassified workers. The IRS could hit a gold mine, but with the audit focusing on just 6,000 businesses over the next three years, it would take a lot of willful employee reclassifications to really ring up the IRS cash registers.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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Maine Floats Paid Sick Leave Law, Businesses Recoil

First Congress proposed a paid sick leave policy for all the nation’s businesses, but that initiative seems to have stalled behind some minor issues like health care reform and carbon transfers. Now Maine is getting into the act, and the proposal has state businesspeople up in arms, especially those who run small businesses.

The bill was introduced by State Senate President Elizabeth Mitchell, a Democrat who also happens to be running for governor.

Mitchell seems to be playing off the H1N1 influenza scare in proposing her legislation.

"Spreading a disease by going to work because you can’t afford to stay home is not good for the employer, it’s not good for the public, and it’s not good, of course, for the employee," she says.

Business, large, medium and small, is crying foul.

"An outsider, no matter how well intentioned he or she may be, does not have the means or adequate knowledge required to make a valid decision about a company’s day-to-day operations, nor are they in a position to decide what benefits a company must offer," Rod Wiles says. "Suggesting that businesses can and should absorb additional labor costs at this time is ill-advised and irresponsible."

Wiles, of course, is a lobbyist for the Retail Lumber Dealers Association of Maine.

The bill is currently being considered by the Labor Committee, which may compromise by extending an exemption to businesses below a certain size, determined by number of employees.

If the Maine bill passes, it will be the first state paid sick leave measure on the books.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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Becker to Be Renominated to NLRB, Sources Say

Though there’s been no official announcement, the New York Times is reporting that the White House will renominate Craig Becker to the National Labor Relations Board (NLRB). Obama’s original nomination of Becker was sent back by the U.S. Senate on Dec. 24, 2009, for reconsideration.

Becker met a hailstorm of criticism from Republicans and business interests when he was first nominated, largely due to his call for a gag order and an enforceable hands-off policy for businesses facing union organization. In other words, the organizers should have free rein, but employers should shut up and disappear.

Should Becker be renominated, it’s unlikely that his critics would suddenly back off, which makes one wonder why Obama doesn’t use a recess appointment to put Becker in office.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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EEOC Warns About Background Checks and Hiring Decisions

When the Equal Employment Opportunity Commission (EEOC) in recent years noticed an increase in complaints about employment background checks and their effect on minorities, it unveiled its E-RACE (Eradicating Racism And Colorism from Employment) program.

With adverse hiring decisions arising from background checks still hurting black and Latin applicants, the agency is reissuing its warning about the use of background checks, specifically when certain information on the inquiries leads to automatic employment disqualification, specifically a criminal record or poor credit score. Using such blanket standards, the EEOC says, has a disparate impact on minorities, which then leads to actionable complaints.

The agency has pinpointed two practices that get employers in the hottest of hot EEOC water: First, what was mentioned above, a blanket policy against hiring anyone with a poor credit score or a criminal record. Second, the failure by the employer to show how information found in an applicant’s background disqualifies that person from a particular job.

While some background information and some positions have definite negative correlations–such as a conviction for embezzlement in an bank teller applicant’s background–many connections are not clear at all and can lead to EEOC investigations and possible action.

Employers, you may want to revisit your use of background checks in light of this recent EEOC advisory.

 


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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EEOC Claims Fall–to Second Highest Level Ever!

Complaints filed with the Equal Employment Opportunity Commission (EEOC) in fiscal 2009 fell to 93,277, but that was still the second highest total ever. In addition, the agency obtained $376 million in relief for complainants.

Topping the list were charges alleging discrimination based on race (36 percent), followed by retaliation (also 36 percent) and then sex-based discrimination (30 percent). Charges involving age bias reached the second highest level ever, while complaints alleging discrimination based on disability, religion and/or national origin hit their highest levels ever.

"The latest data tells us that, as the first decade of the 21st century comes to a close, the Commission’s work is far from finished," said EEOC Acting Chairman Stuart J. Ishimaru. "Equal employment opportunity remains elusive for far too many workers, and the Commission will continue to fight for their rights. Employers must step up their efforts to foster discrimination-free and inclusive workplaces, or risk enforcement and litigation by the EEOC."


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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