Employment Law Problem-Prevention for Employers

1. Employment LawProblem-Prevention for Employers Attorney Ruth-Ellen Post Office: 56 Stiles Road, Suite 103 Salem, NH 03079 Phone: 603-212-9004 Email: postlawoffice@comcast.net Home: 15 Stonehedge Road Windham, NH 03087 Cell: 603-557-5395

2. ProfessionalBackground • Attorney for 35 years • Rutgers Law School • Licensed in NH, MA, and NJ • Practice mainly serves local businesses • Former law and legal studies professor • Community Service: • Windham Planning Board, currently Chairman • Founding Member, Windham Economic Development Committee • SCORE Volunteer Small Business Mentor • Greater Salem Chamber of Commerce • Windham Women’s Club

3. Outline • Introductions • The Dangers of Employee Misclassification: 1099- Independent Contractor vs. W-4 Employee • Discrimination Traps for the Unwary • Using Interns: New Government Rules • When to Put In in Writing • Open Q & A Session* * The “Fine Print”: To protect your interests, please avoid disclosing confidential information , whether personal or business, in this public setting

4. More Fine Print • This presentation and accompanying materials are NOT a substitute for personal legal advice, which may vary considerably depending the particular circumstances of your business situation. • For accurate legal advice on your own business decisions, it is important to consult a professional in a confidential setting.

5. 1. Employee vs. Independent Contractor Federal (IRS) Implications: • Who is responsible for tax withholding, Social Security, etc. – you or your new hire? • Require new hire to complete a W-4, or not? • What to file at the end of the year: 1099 or W-2? State (NH) Implications: • Is your new hire eligible unemployment compensation? • Is your new hire eligible for workers compensation ?

6. NH Cracking Down on Employee Misclassification • NH Unemployment Comp. Fund overwhelmed and almost depleted after 2008-09 recession • Law-abiding businesses suffer financial disadvantage • Misclassified workers left unprotected if injured or laid off • Stepped-up investigations and enforcement • New NH penalties on employers: up to $2,500 fine plus $100 per day, per employee (2010) • IRS pay-back and penalties imposed separately for non-compliance

7. NH Guidelines on Employee Misclassification • Looks at 12 factors to justify “Independent Contractor” status (see NH DOL website) • Mainly: Is your new hire actually an independent business? For example: • Serves clients other than your business (or is free to do so) • Bills you per job, per hour, or per project • Structures own time, determines own work methods, and is judged by the product (not by work methods you regularly oversee) • May work off-premises • Pays own expenses, assumes all his/her own liabilities including taxes, Social Security, and insurance • Written employment contract not necessarily the deciding factor

8. IRS Guidelines on Employee Misclassification IRS has a three-pronged test (see article at irs.gov website): • Behavioral: Who controls how job is done? 2. Financial: New hire pays own costs, own insurance, own tools or supplies, etc. 3. Nature of relationship: Indefinite vs. project- specific; expectation of benefits or not

9. 2. Discrimination Traps for the Unwary Trends beyond the “usual” categories: • EEOC complaints at a record high in 2010 (99,922) • Top category: employer retaliation, so care is needed in handling internal complaints objectively and fairly • Grounds for complaint may go beyond race, color, gender, age, religion, national origin, marital status – may also include sexual orientation, physical disability, medical conditions including pregnancy and obesity

10. Avoiding Discrimination Claims General Rules for Job Interviews: • Ask only about matters clearly related to potential job performance • Example: Don’t ask “Are you pregnant?” Ask “Barring unforeseen circumstances, can you assure uninterrupted availability for this position for the next 2 to 3 years?” (and only if that is an important factor for the position involved).

11. Avoiding Discrimination Claims Another Interviewing Example (marital status): Don’t ask, “Is your husband/wife also employed locally?” Say “Because we will invest ten weeks of training in whoever is hired for this position, we hope, in return for that training, for a reasonably firm commitment to remaining at this location, preferably for at least two years; are you able to make such a commitment if hired?”

12. AvoidingDiscrimination Claims • Another Interviewing Example: Don’t say, “You look a little young (old, etc.) to be applying for this kind of position.” Instead, say, “we are seeking someone with at least 5 years of experience in XYZ” or “knowledge of the latest applications … ” etc. MAKE ALL QUESTION EXPLICITLY JOB-RELATED OR DON’T ASK THEM

13. Avoiding Discrimination Traps in Firing Have a regular performance-evaluation process in place for all employees. • Appraisals must be candid – not just “kind” • Appraisals should allow a chance for improvement plus clear instructions on what that requires. • The consequences of failure to improve must also be clear. • Create a “paper trail” of legitimate reasons for firing.

14. New Rules About Using Interns • The US Department of Labor (DOL) noticed that unpaid interns were displacing paid workers at an alarming rate. • Unable to find paying work but eager for resume-boosting experience, interns were often an easy target for financial exploitation. • Many college-related internship experiences were reported to have no genuine educational component, benefitting only the employer.

15. New DOL Rules for Unpaid Internships in For-Profit Settings • Internship similar to training in an educational environment • The experience is for the intern’s benefit • Regular employees are not displaced • Employer derives no immediate advantage from the intern’s activities • Internship does not necessarily lead to a job offer • Both intern and employer understand there are no wages for the intern’s time

16. Protecting Your Business if Using Interns • Have close collaborative relationship with appropriate office of a reputable college or university; follow their guidelines closely. • Alternatively, pay your intern! Often, the minimum wage or something close to that is sufficient. This buys you the freedom to assign whatever work your business needs. • These rules only apply to for-profit businesses.

17. When to “Put It in Writing” • All key events beg for a written agreement • Written agreement signed by both parties is your best protection. • Hiring (employee OR independent contractor) • Arrangements requiring trade secrets, confidentiality, or non-competition • Agreed services for a client • Purchasing, leasing, licensing, storage – any arrangement with a third party • Pre-agreement offers often give rise to conflicting expectations if not in writing • A letter of confirmation or even email can serve as a “writing” where recipient’s signature is not an issue

18. Questions and Answers