1871- Employment Issues PP Presentation

7/31/2019 1871- Employment Issues PP Presentation

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Worker Classification and MajorEmployment Legislation Presentation

at 1871


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Worker Classification


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Employee vs. Independent Contractor

Why is this distinction so critical?

If a worker is an employee, the employer must adhere to anumber of state and federal requirements that are notapplicable if the worker is an independent contractor.

Examples: State and federal wage and hours laws

Workers compensation insurance

State and federal workplace safety laws

Sate and federal equal employment laws

Unemployment tax Job benefits

Social Security and Medicare taxes

Tax withholding and depositing

Reporting requirements

Other federal and state laws


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Improper Classification

Improper classification exposes acompany to substantial liability for the

payment of back taxes, back pay,penalties and potential violations ofemployment laws.


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Worker Classification Test

There is no single, clear cut test for determiningworker classification.Different legal tests are used by variousgovernment agencies and courts (IRS,Department of Labor, Department of Revenueetc).Generally, under all of the tests, thedetermination is based on an analysis of therelationship between the worker and the

organization. How much control does the business have over the

worker? Does the worker offer services to the public or just to

the one business?


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IRS Test

The IRS considers many factors indetermining whether a worker is anemployee or an independent contractor.

The factors can be divided into three maincategories: (i) behavioral control, (ii)financial control and (iii) the relationshipof the parties.

Form SS-8: Determination of WorkerStatus for Purposes of FederalEmployment Taxes and Income TaxWithholding. *


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Behavioral Control

The IRS considers whether the business has theright to direct and control the worker.

Instructions: Extensive instructions from a business on

how the worker should accomplish the task suggest theworker is an employee. Examples include:

how, when and where to do the work;

what tools or equipment to use;

what assistant to hire; and

where to purchase supplies.

Training: The more training a worker receives on theprocedures and policies of a business, the more theworker looks like an employee.


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Financial Control

The IRS considers whether the business has aright to control the business aspects of theworkers job.

A significant investment in the work helps show that aworker is an independent contractor (no dollar test).

A worker who is not reimbursed for expenses is morelikely to be considered an independent contractor.

Opportunity for profit or loss indicates a worker is an

independent contractor.

How the worker is paid also helps establish status.


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Relationship of Parties

The IRS will analyze the type of relationship thatexists between the parties.There are facts thatshow how the parties view the relationship.

Does the worker receive benefits-insurance, pension,paid vacation?

What is the duration of the work relationship?

Are the services performed by the worker an integralpart of the companys primary business?

Is there a written contract? What does the contractsay?


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Steps to Establish Independent Contractor

StatusTasks should not be central part ofbusiness.

Allow independent contractor to maintainsome control.

Make it clear that independent contractormay have other work.

Use independent contractors that havetheir own business offices and/ orequipment if possible.

Have a written agreement.


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Unpaid Interns

May a business have students work for it as unpaid interns?Why is this determination important?Student interns will not be considered employees under the Fair LaborStandards Act if the training program is designed to further education and

the following six criteria are met: The training, even though it includes actual operation of the facilities of the

employer, is similar to that which would be given in a vocational school; The training is for the benefit of the trainee; The trainees do not displace regular employees, but work under close

observation; The employer that provides the training derives no immediate advantage from

the activities of the trainees and on occasion the employers operations mayactually be impeded;

The trainees are not necessarily entitled to a job at the completion of thetraining period; and

The employer and the trainee understand that the trainee is not entitled towages for the time spent training.

What is the policy reason for this rule?


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Employment Legislation


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Title VII of the Civil Rights Act of 1964All businesses with 15 or more employees are covered byTitle VII

Title VII protects employees from discrimination based onrace, color, religion, sex, or national origin

Later expanded coverage of sex discrimination to includediscrimination on the basis of pregnancy, childbirth, orrelated medical conditions, as well as discrimination againstmarried women

Of all civil rights legislation, Title VII has had the greatestimpact on employment practices of businesses

Some states have adopted similar statutes with broadercoverage

Does not apply to ICs


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Damages Under Title VII

Compensation for lost salary and benefitsuntil the date of trial (backpay)

Injunctive relief such as reinstatement orpay for a limited time instead ofreinstatement (frontpay)

Compensatory damages (emotional

distress, damages to reputation, or otherlosses)

Punitive damages (subject to caps basedon the size of the employee)


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Types of Discrimination

Three distinct theories of discrimination

Disparate Treatment

Disparate Impact Harassment


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Age Discrimination in Employment Act

The ADEA applies to all companies that affectinterstate commerce and have at least 20employees. The ADEA prohibits employers from

age discriminating employment practcies.

The Act covers workers age 40 and over and itapplies to applicants for employment as well ascurrent employees

ICs are excluded


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Americans With Disabilities Act

The ADA covers all employers with 15 or moreemployees who work at least 20 or morecalendar weeks in a year.

The ADA prohibits discrimination against qualifiedindividuals with known disabilities.

It also requires the employer to providereasonable accommodations so that the qualified

disabled employee can perform the essentialfunctions of his job unless doing so wouldconstitute an undue hardship for the employer.


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EEOC

Equal Employment Opportunity Commission

The EEOC is the federal administrative agencycreated for the purpose of enforcing Title VII and

other federal antidiscrimination statutes.

An individual with a grievance must first exhaustthe admin procedures of the EEOC before filing alawsuit.

Theory is that the EEOC may help resolve issueswo having to resort to litigation.


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Thank you!

Esther BarronDirector, Entrepreneurship Law Center

Clinical Associate ProfessorNorthwestern University School of Law

375 East Chicago AvenueChicago, Illinois 60611

(312) [email protected]

1871- Employment Issues PP Presentation

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