Workplace Compliance Programs for HR: New Employee/Contractor Definition and Third-Party Risk

1. 3 FORUMSThree Financial Workplace Compliance Programs for HR New Employee/Contractor Definition (?) and Third-Party Risk Presenter: Ray Stanford May 23, 2019 The Forum tackles legal challenges faced by workplace professionals. For this reason, the Forum’s comments and discussion are not intended to be legal advice or counsel. As with all legal matters, participants should look to licensed counsel to deal with a specific matter.

2. 10:00 Introduction 10:10 New Employee v Contractor Tests 10:15 Third-Party Risk Responsibility 10:25 Best Practices 10:30 Adjourn New Employee/Contractor Definition (?)and Third-Party Risk

3. Janelle has worked as the bank’s IT consultant for 10 years. Last week, Janelle presented copies of Facebook screenshots in which Frank, a MLO, makes disparaging comments about her. Janelle claims Frank has been propositioning her for the last year. She finally said, “Enough, go away.” Introduction

4. Significance • If Janelle is an employee, financial HR has greater • employment law responsibilities, • contractual responsibilities, and • regulated responsibilities. • If Janelle is a contractor, financial HR still has third-party risk management responsibilities. Introduction

5. Significance • Millennial Culture of Work • Gig Work • Millennials culture champions gig work • Expectation of short-tenure encourages gig work • Culture • Gig workers are either employees or contractors. • Remote Work • Gig workers are either employees or contractors. Introduction

6. NLRB 10-Factor Analysis • April 16, 2019 - NLRB issued Advice Memorandum answering whether Uber drivers are employees or independent contractors. The General Counsel concluded: Uber drivers are contractors. • Memorandum would mean Uber drivers may not: • Organize under the NLRA, • Claim discrimination under Title VII, • Seek overtime under the FLSA, and • Seek protection under countless other federal workplace laws that apply only to employment. Employee v Contractor

7. NLRB 10-Factor Analysis • In January, the NLRB overturned a 2014 NLRB employee/contract test. In finding the franchisee shared-ride van drivers to be contractors, the Board found the franchisees to have a "significant entrepreneurial opportunity.” • In the 2014 Board decision, the a contractor status requires proof of an “actual, but not merely theoretical, entrepreneurial opportunity.” Employee v Contractor

8. NLRB 10-Factor Analysis Employee v Contractor

9. DOL Economic Realities Test • April 29, 2019 (DOL Opinion Letter) considered whether service providers using a “virtual marketplace company” platform to offer services to consumers are the Company’s employees or independent contractors. • Company “empowers service providers to provide services to end-market consumers” and merely provides a referral service. • DOL applied “economic realities” test. • “[A]s a matter of economic reality, [the service providers] are working for the consumer,” not the company providing the platform. • Factors: control, permanency, investment, skill/initiative, judgment & foresight, profit/loss opportunity, integrality. Employee v Contractor

10. DOL Economic Realities Test • The DOL opinion letter applied a six-factor analysis: • Nature and degree of the potential employer’s control • Permanency of the worker’s relationship with the potential employer • Amount of the worker’s investment in the facilities and/or equipment needed to be utilized • The amount of skill, initiative, judgment, or foresight required for the worker’s services • Worker’s opportunities for profit or loss • Extent of integration of the worker’s services into the potential employer’s services Employee v Contractor

11. ABC Test • In 2018, California Supreme Court addressed the employment/contractor issue using a 3-factor (ABC) test: • The worker is free from control and direction of the hiring entity in connection with the performance of the work, both under the contract for performance of the work and in fact; • The worker performs work that is outside the course of the hiring entity’s business; and • The worker is customarily engaged in an independently established trade, occupation, or business. • Under the ABC test, the employer must prove all 3 factors otherwise, the worker will be deemed an employee. Employee v Contractor

12. Assume, Janelleis a contractor, not an employee. She tells her friends about Frank. They mount an online campaign branding Frank as a sexual abuser and the bank the enabler. Third-Party Risk Responsibility

13. If confronted with a third-party claim, financial HR still has responsibilities that include: • fiduciary duty to act in the best interests of the bank; and • third-party risk management Third-Party Risk Responsibility

14. Fiduciary Duty • Fiduciary duty = “utmost good faith.” • Confidential relationship imposes fiduciary duty. • Confidential relationship exists where one party possesses a controlling influence over the will, conduct, and interest of other party. Third-Party Risk Responsibility

15. Fiduciary Duty • Georgia Business Corporation Code requires officers and directors to discharge duties: • in good faith to best interests of corporation (duty of loyalty); and • with care of ordinarily prudent person in like circumstances (duty of care). Third-Party Risk Responsibility

16. Fiduciary Duty • In 2014, Georgia Supreme Court declared that the business judgment rule protects corporate officers and directors from claims of ordinary negligence regarding the wisdom of corporate decisions. Liability of individual wisdom requires proof of gross negligence. • But claims involving the process underlying the decision (reliance or collaboration involving advice of professionals, department heads, etc.) only require proof of ordinary negligence. Third-Party Risk Responsibility

17. Third-party Risk Management • Process of monitoring and managing interactions with all external parties that have a relationship with the bank including contractual and non-contractual parties. • (Alternative definition) Risk is the effect of uncertainty on objectives, whether positive or negative. Risk management is a coordinated and economical application of resources: • to minimize, monitor and control probability and/or impact of unfortunate events, or • to maximize the realization of opportunities. Third-Party Risk Responsibility

18. #MeToo • In many circumstances, business threat greater than legal threat.* • #MeToo movement illustrates power of mass online financial action. • One report claimed “#MeToo Brought Down 201 Powerful Men. Nearly Half of Their Replacements Are Women.” (NY Times, Oct. 29, 2018). • #MeToo movement has leveraged social media and a “corporate campaign.” * Note: Number of EEOC charges for most categories dropped, except harassment (increased by 13.6%) GINA and Equal Pay. Third-Party Risk Responsibility

19. #MeToo • Corporate Campaign - An organized effort to bring pressure on a company that is deemed to be engaged in unjust or undesirable activities through highly publicized protests, political leverage or media assaults. • #MeToo movement attacked sponsors, investors & banks in a corporate campaign. Third-Party Risk Responsibility

20. #MeToo • ”#MeToo movement has put new momentum behind efforts to have companies, especially in finance, disclose details about their workforce diversity.” (Reuters, Jan. 30, 2018). • Third-party pressure also impacting bank employees. “A #MeToo backlash is brewing in banking.” American Banker (March 27, 2018.) • Financial HR must play a role in third-party risk management. Third-Party Risk Responsibility

21. Understand the current definition of employment/contractor status. • Assure that the relationship and performance of intended contractors satisfy the legal tests of contractors. • Understand and implement third-party risk management requirements. Best Practices

22. QUESTIONS? ? New Employee/Contractor Definition (?)and Third-Party Risk

23. Ray Stanford Founding Attorney SIO Law Group Atlanta, GA rstanford@siolaw.com (404) 991 - 7301 Presenter

24. THANK YOU FOR PARTICIPATING!