Transcript Slide 1

INDEPENDENT CONTRACTORS &
OVERTIME ISSUES:
How to meet the requirements of
the Department of Transportation and
the Department of Labor
Presented by
Nancy C. Rodgers, Esq.
Paul D. Godec, Esq.
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
• 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
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Independent Contractors
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
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Independent Contractors
Avoid whole host of employment laws:
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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
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Legislators Want Employment
"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).
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Legislators Want Employment
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)
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EE vs IC: Dept. of Labor’s “Test”
• 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
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EE v. IC: Dept. of Labor’s “Test”
• Immaterial factors:
–Where work is performed
–Absence of a formal
employment agreement
–Licensing by State/local
government
–Time or mode of pay
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EE v. IC: IRS “Test”
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
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EE v. IC: IRS “Test”
• 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
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Status & Developments
• CDLE “Misclassification Working Group”
– Legislative considerations
– Regulatory considerations
– Audit considerations
• Colorado case authorities
• National case authorities
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Congratulations, it’s an ….
EMPLOYEE
A MOTOR CARRIER
EMPLOYEE
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Employees and their money…
The Fair Labor Standards Act
The Colorado Wage Act
29
Colorado Wage Order No. ____
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The Fair Labor Standards Act
• Applies to employees
• 40 hour work week
• Minimum Wage (currently $7.78/hour)
for all hours worked
• Overtime
• Record keeping
• Youth employment
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The Fair Labor Standards Act
• 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
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FLSA: Motor Carrier Exemption
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
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FLSA: Motor Carrier Exemption
• Engaged in activities that directly
affect the operational safety of
commercial motor vehicles
– Drivers, driver’s helpers, loaders, or
mechanics
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FLSA: Motor Carrier Exemption
• 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
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FLSA: Motor Carrier Exemption
BUT still due minimum wage for all hours
worked
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FLSA: Motor Carrier Exemption
INTERSTATE vs intrastate carriers
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Motor Carriers in Court
• [fill in recent cases]
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FLSA: Pay for all hours worked
• “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
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FLSA: Pay for all hours worked
• 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
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Colorado Wage Act (8-4-101)
• 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
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Calculating Overtime
• 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
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Misclassification: How to Fix It
• 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)
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Questions?
Nancy C. Rodgers
Email: [email protected]
Phone: (303) 320-6100
Paul D. Godec
Email: [email protected]
Phone: (303) 320-6100