Legal Compliance 1

1. Legal Compliance 1 MANA 4328 Dr. George Benson benson@uta.edu

2. Classifying Employees “Flexible” employment practices have risen sharply last 10-15 years. • Independent Contractors • Temporary Employees • FLSA (Salaried vs. Hourly)

3. What is an Independent Contractor? • An employer does not generally have to withhold or pay any taxes on payments to independent contractors. • W2 vs. 1099 • General rule: An individual is a contractor if the employer controls only the result of the work and not the means and methods of accomplishing the result. • Behavioral control • Financial control • Relationship with firm http://www.irs.ustreas.gov/pub/irs-utl/emporind.pdf

4. IRS Example • Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours.  • She is to receive $1,280 every 2 weeks for the next 10 weeks.  This is not considered payment by the hour.  Even if she works more or less than 400 hours to complete the work, Vera will receive $6,400.  • Vera sets her own schedule but is required to complete the work in 10 weeks subject to inspection upon completion. She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. 

5. IRS Example • Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours.  • She is to receive $1,280 every 2 weeks for the next 10 weeks.  This is not considered payment by the hour.  Even if she works more or less than 400 hours to complete the work, Vera will receive $6,400.  • Vera sets her own schedule but is required to complete the work in 10 weeks subject to inspection upon completion. She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements.  • Vera is an Independent Contractor

6. Temporary Employees • Temps are employees of an employment agency, not the organization where they work. • Companies cannot use long-term temporary employment only to deny benefits to employees. • Vizcaino vs. Microsoft Microsoft Corp. will pay $97 million to settle a federal lawsuit from employees who claimed the software giant classified them as "temporary" workers for years to deny them standard benefits such as health insurance and the lucrative employee stock purchase plan, thereby saving the company millions. Between 8,000 and 12,000 people are eligible for a share of the settlement. LA Times 12.13.00

7. Changes at Microsoft • Guidelines to help managers figure out when a job shouldn't be given to a temporary employee. • Policy prohibiting temporary employees from working more than 12 months at a stretch without taking at least a 100-day break. • Temporary workers wear orange badges instead of the blue badges for permanent employees. • Temporary workers are not permitted to use the company health club, play on the company baseball and soccer fields or allowed to attend company parties.

8. Fair Labor Standards Act (FSLA) • Passed in 1938 and amended many times • Nonexempt workers earn a minimum wage of not less than $5.15 an hour, effective September 1, 1997. • Overtime pay at not less than one and one-half times regular pay is required after 40 hours a workweek. • An employee must be at least 16years old to work in most non-farm jobs and at least18to work in non-farm jobs declared hazardous by the Secretary of Labor. • Youths 14and 15years old may work outside school hours in various non-manufacturing, non-mining, non-hazardous jobs under certain conditions

9. FSLA – Special Cases • Tipped employees • Domestic service workers • Teachers and administrative personnel in elementary and secondary schools • Outside sales employees • Employees in certain computer-related occupations • Employees of certain seasonal amusement or recreational establishments • Employees engaged in fishing operations • Employees engaged in newspaper delivery • Farm workers • Casual babysitters • Certain commissioned employees of retail or service establishments • Employees of railroads and air carriers • Taxi drivers • Nurses • Announcers of certain non-metropolitan broadcasting stations • Employees of motion picture theaters • Employees of certain bulk petroleum distributors • Many others….

10. New Overtime Rules • First major change to FSLA in 50 years. http://www.dol.gov/esa/regs/compliance/whd/fairpay/ • In 2003 record $212.5 million in back wages was collected from employers – a 20% increase from 2002. • RadioShack will pay $29.9 million in unpaid overtime claims of 1,300 managers in California. Similar suits at Eckerd, Starbucks, and Farmer’s Insurance.

11. To be exempt from FLSA: • Salary Basis Test • Be paid a salary • Salary Level Test • Earn a minimum of $23,660/yr (old $8060/yr) • White collar workers who earn more than $100k are exempt • Blue collar workers “skilled trades” • “Duties” Test • “Administrative” • “Professional” • “Executive” • “Outside Sales” • “An employee who leads a team of other employees assigned to complete major projects”

12. “Administrative Duties” • Whose primary duty (50%) is 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; and • Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

13. ADEA (1967) and Age Discrimination • Age Discrimination in Employment Act of 1967 • Protects employees 70 million workers over 40 • Nearly 50% of workers • Cases most often arise from layoff or dismissal • It is legitimate to consider salary in layoffs • No standard of “reverse discrimination” for age suits • Disparate impact rules apply • Adams vs. Florida Power Corp • Dismissed by the Supreme Court 2002 • Smith vs. City of Jackson • Affirmed by the Supreme Court 2005

14. Americans with Disabilities Act (ADA) • Discrimination is prohibited against individuals with disabilities who can perform essential job functions with reasonable accommodation unless it would cause undue hardship. • Employers not required to change work rules if they are business necessity. • OFCCP vs. Ozark Airlines (1986) – employers must prove applicant could not perform the job safely.

15. Man fired for getting gassed on spilled ethanol at work… An Iowa judge has denied unemployment benefits to a man who claimed discrimination after being fired from an ethanol plant for drinking "automobile fuel" produced by the company. According to Neddermeyer, he showed up for work and saw that there had been a spill of 190-proof fuel alcohol contained in a 6-inch-deep holding pond. “I am a recovering alcoholic, and … curious about the taste and its effects, I dipped into this lake of liquor ….” At a subsequent state hearing, the plant manager expressed shock. “This is a fuel alcohol,” he said, “This is an explosive product.” Neddermeyer argued that his employer shared responsibility by providing an “opportunity” for him to drink. He also argued that Amaizing Energy was discriminating against him due to his “disease of alcoholism” and asked the judge whether ADA protections could be applied to his request for unemployment benefits. The judge denied the request for benefits. "The employer has a right to expect employees not to drink the fuel," Des Moines Register 7.9.06

16. Americans with Disabilities Act (ADA) • Disability is a physical or mental impairment that affects a major life activity. • Essential vs. marginal job functions • Categories of "reasonable accommodations": • changes to a job application process • changes to the work environment • changes to the way a job is usually done • employee training

17. Undue Hardship • “Undue hardship” means significant difficulty or expense. • Not only financial difficulty • Those that would fundamentally alter the nature or operation of the business. • Every request for reasonable accommodation should be evaluated separately taking into account: • Nature and cost of the accommodation needed • Overall financial resources of the business • Number of persons employed by the business • Impact of the accommodation on the business