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EE v. IC

Employees vs. Independent Contractors. Independent contractors Individuals engaged in an independent business Offer their services to the general public Have control over when and how to perform tasks and to arrive at the end product for a customer. Employees

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EE v. IC

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  1. Employees vs. Independent Contractors • Independent contractors • Individuals engaged in an independent business • Offer their services to the general public • Have control over when and how to perform tasks and to arrive at the end product for a customer • Employees • Individuals who perform services for an employer • Employer controls what will be done and how it will be done • Employer controls the details of how the work is performed EE v. IC

  2. What is the attraction? • No required “wages” • No expectations of benefits or employee perks • Short-term relationship • Typically less cost to the company • No employment taxes such as FICA, FUTA, unemployment, and workers’ compensation Independent Contractors

  3. Avoid whole host of employment laws: • Occupational Safety & Health Act (OSHA) • National Labor Relations Act (NLRA) • Fair Labor Standards Act (FLSA) • Age Discrimination in Employment Act (ADEA) • Pregnancy Discrimination Act (PDA) • Family & Medical Leave Act (FMLA) • Title VII (race, gender, national origin, religion, etc.) • Equal Pay Act (EPA) • Colorado Anti-Discrimination Act (CADA) • Other Colorado and Federal Laws Independent Contractors

  4. "Misclassification of employees" means erroneously classifying a person as an independent contractor, free from control and direction of the employer in the performance of service for the employer, when the employer cannot show an exception … to the general rule that service being performed for the employer is presumed to be employment… . Colo. Rev. Stat. § 8-72-114(2)(f) (2009). Legislators Want Employment

  5. CDLE may impose fines & penalties: • $5,000 “per misclassified employee for the first misclassification with willful disregard” • $25,000 per misclassified employee “for a second or subsequent misclassification with willful disregard” • “[P]rohibit[ ] the employer from contracting with, or receiving any funds … from, the state for up to two years … .” Colo. Rev. Stat. §§ 8-72-114(3)(e)(III)(A) & (B) Legislators Want Employment

  6. DOL’s “Test” • The extent to which the services remain an integral part of the principal's business. • The permanency of the relationship. • The amount of the contractor's investment in facilities and equipment. • The nature and degree of control by the principal. • The contractor's opportunities for profit and loss. • The amount of initiative, judgment, or foresight in open market competition with others required for the success of the independent contractor. • The degree of independent business organization and operation. CAUTION: no single rule or test controls EE vs IC: Dept. of Labor’s “Test”

  7. Immaterial factors: • Where work is performed • Absence of a formal employment agreement • Licensing by State/local government • Time or mode of pay EE v. IC: Dept. of Labor’s “Test”

  8. CAUTION: no single rule or test controls • IRS “Twenty Factor Test” has been retired • IRS “11 Main Test” • Assesses the level of control over the worker • Behavioral Control • Degree of instruction • Amount of training EE v. IC: IRS “Test”

  9. IRS “11 Main Test” continued… • Financial Control • Unreimbursed business expenses; worker’s financial investment • services available to the market • pay (salary/hourly vs flat fee) • worker’s realization of profit or loss • Type of Relationship • Written contract; benefits and “perks” • permanency of the relationship • extent to which worker provides key aspect of the company’s business EE v. IC: IRS “Test”

  10. CDLE “Misclassification Working Group” • Legislative considerations • Regulatory considerations • Audit considerations • Colorado case authorities • National case authorities Status & Developments

  11. EMPLOYEE • Congratulations, it’s an …. A MOTOR CARRIER EMPLOYEE

  12. The Fair Labor Standards Act The Colorado Wage Act Colorado Wage Order No. ____ • Employees and their money… 29

  13. Applies to employees • 40 hour work week • Minimum Wage (currently $7.78/hour) for all hours worked • Overtime • Record keeping • Youth employment The Fair Labor Standards Act

  14. Numerous exemptions and exceptions from the FLSA’s requirements • Executive, admin., professional, outside sales • Exempt Employees • No overtime due; set salary for each week • Non-Exempt Employees • Must be paid for all hours worked; must be paid overtime • Motor Carrier Exemption The Fair Labor Standards Act

  15. 29 U.S.C. § Section 13(b)(1) • Provides an exemption from overtime • Employees must be • Employed by a motor carrier subject to the power of the Secretary of Transportation FLSA: Motor Carrier Exemption

  16. Engaged in activities that directly affect the operational safety of commercial motor vehicles • Drivers, driver’s helpers, loaders, or mechanics FLSA: Motor Carrier Exemption

  17. The vehicles the employee works on must transport property or passengers on public highways in interstate or foreign commerce BUT still due minimum wage for all hours worked FLSA: Motor Carrier Exemption

  18. BUT still due minimum wage for all hours worked FLSA: Motor Carrier Exemption

  19. INTERSTATE vs intrastate carriers FLSA: Motor Carrier Exemption

  20. [fill in recent cases] • Motor Carriers in Court

  21. “Suffered or Permitted to Work” • If an employee works for you, the employee must be paid for that time • Volunteers • Employee works when he shouldn’t? • Pay the employee for the time work, including any overtime • Discipline the employee for the violation FLSA: Pay for all hours worked

  22. Waiting time • Time is controlled by employer • On-Call time • Employee has little of no control over time • Meal periods/Rest Periods • Not relieved of all duties; less than 30 minutes • Training • Mandatory training; • benefiting employer • Travel • Control and direction of employer; not a commute FLSA: Pay for all hours worked

  23. Requirements on when to pay employees • final pay, pay periods and paydays, and pay statements • Deductions from wages • Loans, advances, goods – pursuant to a written agreement • Money or value of property employee did not return • Defines “wages” to include vacation, commissions, bonuses • Colorado Wage Act (8-4-101)

  24. No matter how you pay, if an employee is non-exempt, overtime must be paid • Hourly rate, piece-rate, salary, commission, day rate, mileage rate • Overtime pay is computed on the basis of the regular rate. • Includes all payments made by the employer to the employee • Does not include: expenses, premium pay, discretionary bonuses, gifts, vacation/ holidays/sick pay Calculating Overtime

  25. Change the classification immediately and adjust the pay as needed • Financial consequences • Failure to classify as an employee • Failure to classify non-exempt • Any overtime due? • Risk / benefits of paying monies due • Communicate with the employee • Explain any policy changes (no more overtime) • Explain and change in pay (hourly vs salary) Misclassification: How to Fix It

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