labor and employment spotlight address · 2020. 2. 7. · sources: “millennial careers: 2020...

Labor and Employment Spotlight Address

2019 Food & Beverage ExchangeOctober 3, 2019

— Recruiting and retaining talent—best practices

— Managing a contingent workforce

— Employee background checks

— Social Security “No Match” Letters

Agenda

Recruiting and Retaining Top Talent

U.S. economy is relatively strong, labor market is tight

— Quality talent is in high demand and short supply across the spectrum of skill and compensation in most functional areas—manufacturing, R&D, sales, marketing, finance, technology, customer service, etc.

— Employees have more choices of where to work. Younger workers, including Millennials and Generation Zs, want more than a competitive wage/salary and health benefits

The Talent Problem

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The Talent Pool—Millennials

“Millennials” (born 1981–1996)—close to 50% of U.S. workforce today; estimated to reach 75% by 2030 (Bureau of Labor Statistics).

— Change jobs more often than prior generations

— Value diversity and inclusion in peer groups and management ranks

— Believe companies should behave ethically and address social and environmental interests—not just profits

— Digital natives—comfortable with social media, sharing applications, and technology solutions at work

— Seek high level of engagement with their managers

— Value flexible work arrangements, work-life balance, and “high-trust” culture

Sources: “Millennial Careers: 2020 Vision (ManpowerGroup); The Deloitte Global Millennial Survey 20195

Talent Recruiting and Retention—Solutions

—Social media campaign—meet candidates where they are

— Internships—develop new talent from the inside

—Employee recruiting incentives—use your talent to grow it

—Career days—showcase your company

— Industry conferences and trade shows—brand your company as a great place to work

—Re-think the interview/application process—panel interviews, skills assessments, creativity/problem solving exercises

—Diversity and inclusion—identify a strategy, develop a culture

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Talent Recruiting and Retention—Solutions

The competition is on for innovative employee benefits . . .

— Competitive wage and salary schedules—know your market

— Incentive compensation: bonus plans (MBO/financial performance), equity plans, award programs

— In-house training programs

— Flexible scheduling/telecommuting

— Career ladders

— Education reimbursement

— Community service—paid days, team outings

— Wellness programs

— Product discounts

— “Family friendly” benefits: maternity/paternity leaves, child care benefits, sabbaticals7

Managing A Contingent Workforce

Categories:

— Independent contractors

— Temporary employees

— Interns

Benefits:

— Fill need for limited scope or temporary work

— Respond to exigent circumstances (e.g., surge in product demand)

— Lower labor costs (no benefits, payroll taxes)

— Flexibility—adjust workforce to fluctuating business needs

Contingent Workforce

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Independent Contractors

Risks/consequences of misclassifying workers as contractors v. employees . . .

For Workers:

— Payroll taxes

— Employee benefit eligibility

— Minimum wage/overtime laws

— Antidiscrimination/leave coverage

— Workplace safety/worker’s comp

— Unemployment benefit eligibility

— Union organizing

For Companies:

— Back taxes, interest, and penalties

— Back benefits (Microsoft)

— Back wages if below minimum wage

— Missed overtime wages (1.5X)

— Unpaid workers comp premiums + penalties

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The Classification Challenge

— No single or simple test to determine employee/contractor status

— Different tests used by different agencies and under different laws

— Lack of past scrutiny may lead to false sense of security and lack of diligence

IC Classification Tests

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IC v. Employee Differences

Employees

— Paid on a W-2

— Provided with tools by employer

— Work in an environment controlled by their employer

— Output controlled by employer

— Provided training, instruction, and supervision by their employer

— Work on-site

— Access to benefits, workers’ comp, and unemployment insurance protection

— Perform core functions within company

— Participate in company sponsored programs and events

— Work for single employer for multiple years

Independent Contractors

— Paid on a 1099

— Provide own tools

— Operate in business-to-business contractual relationships

— Work from negotiated statements of work on per-project basis

— Not supervised by company

— Usually do not work solely on-site

— File own taxes

— Invoice company per deliverables

— Have multiple clients

— Invest in their businesses

— Maintain business licenses and insurance

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IRS Test: Right to Control

Three categories considered:

Behavioral control over what the worker does and how s/he does it

Financial control over the business

Relationship between the parties

Behavioral control factors:

— Instructions

— Training

— Integration

— Assistance

— Continuity

— Delegation


— Hours of work

— Percentage of time

— Place of performance

— Sequence of work

— Oral/written reports

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Financial control factors

— Compensation (per hour/per job)

— Expenses

— Tools and Materials

— Facilities

— Entrepreneurial risk


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Relationship factors

— Exclusivity

— Availability

— Employer’s right to discharge

— Employee’s right to end relationship

Other considerations

— W-2 or 1099?

— Intent of parties—agreement?

— Benefits


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With your contractors, you should

— Know your vendors

— Define the relationship clearly, in writing

— Engage ICs only for non-core, project work

— Focus on end result, not means

— Establish discrete, shorter-term assignments

— Encourage an “open relationship”

Minimize IC Misclassification Risk

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With your contractors, you should avoid

— Dictating hours of work, dress codes, etc.

— Getting involved in hiring/training/discharge

— Including ICs in company benefit plans

— Including ICs in employee performance review process or employee trainings

— Bringing back ex-employees as ICs for same job


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Within your company, you should

— Document basis for classification

— Be consistent in your classifications

— Review benefit plans to expressly exclude workers the company treats as ICs

— Regularly review and audit company’s compliance with attorney guidance


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Joint employer risk—same challenges . . .

— No single or simple test to determine joint employer liability

— Different tests used by different agencies and under different laws

— Tests change under different administrations

Temporary Employees

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U.S. Department of Labor: “not completely disassociated”standard under FLSA (29 CFR § 791.2).

Proposed DOL rule would apply four-factor test focusing on whether alleged joint employer entity actually exercises control to:

— Hire or fire the worker

— Supervise and control the worker’s schedule or employment conditions

— Determine the worker's rate and method of pay

— Maintain the worker's employment records

Temporary Employees

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— NLRB: Browning–Ferris Industries of California, Inc., 362 N.L.R.B. No. 186 (August 27, 2015). Two-part test. Two entities are joint employers if they:

1) have “right to control” work done and how that work is done;

2) co-determine matters governing essential terms and conditions of employment (e.g., hiring, firing, discipline, supervision, direction of work, wages, hours of work, scheduling the number of workers, seniority, overtime, and work assignments).

— Proposed NLRB Rule would reverse Browning-Ferris test and focus on whether entity possesses and exercises “substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.”

Temporary Employees

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— Laws to Consider

— Procedure to Obtain Information

— How to Lawfully Use Information

— Procedure for Rejecting an Applicant because of a Criminal History

Overview—Background Checks

Ban the Box

The Fair Credit Reporting Act (FCRA)

State law mini-FCRAs

Non Discrimination Laws

Laws to Consider

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Ban The Box

Illinois, Chicago, and Cook County—No criminal history inquiries prior to job interview, or until after conditional job offer if no interview occurs

Other jurisdictions with Ban the Box—California, Connecticut, Washington D.C., Hawaii, Baltimore, Massachusetts, Minnesota, Kansas City, New Jersey, New Mexico, NYC, Oregon, Philadelphia, Rhode Island, Vermont, Washington

• Not all inclusive

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When is FCRA Applicable?

— Employers may require applicants for employment to submit to background checks as a condition of hiring

— Similarly, employers may require their current employees to submit to background checks as a condition of continued employment and to terminate employees who refuse

— Applies when employer uses an outside “consumer reporting agency” to obtain information about an individual’s background, motor vehicle, record, credit history, or other background

The Fair Credit Reporting Act

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Pre-check Disclosure and Authorization Requirements

Before requesting a background check, an employer must:

— Provide written disclosure

— Obtain written authorization

— Provide certification to the agency

Procedure to Obtain Information

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Obtain Written Authorization

— Employers must obtain prior written authorization from the applicant before obtaining a report

— FCRA disclosure and authorization cannot be part of the employment application—must be a separate document

— Applicant signature may be electronic

Procedure to Obtain Information

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If you decide to reject a candidate, you must be able to show that the candidate’s conviction bears a “rational relationship” to the duties and responsibilities of the position sought.

This policy must be applied uniformly to all candidates with criminal backgrounds (i.e., candidates of all racial backgrounds, both genders, etc.) in order to prevent a disparate treatment discrimination claim.

Examples:

— Embezzlement

— Theft

— DUI

How to Lawfully Use Information

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Pre-Adverse Action Disclosure

— Before you can take any adverse action based in whole or in part on information in the consumer report, you are required to give the individual a pre-adverse action disclosure that includes a copy of the individual’s consumer report and a written description of the individual’s rights under the FCRA

— “Adverse action” = decision not to hire, not to promote, to deny a raise, to demote, to terminate, or to take any other action that negatively affects the applicant or employee

— Should give applicant a reasonable amount of time (five days) to notify you of an error

Procedure for Rejecting an Applicant

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Arrest Records

In Illinois, cannot rely on arrest records to take adverse action.

But, can rely on the underlying “acts” to justify adverse action.

If absent, then possibly terminate?

No retaliation

Maintaining records

Confidentiality

— Keep information about applicants’ and employees’ criminal records confidential

— Only use it for the purpose for which it was intended

Final Notes On Background Checks

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SS No Match—What is it?

— SSA Letter—Notice that employee’s name/SS#, as reported by employer regarding wages, do not match SSA records

Reasons

— Invalid SS#, identity theft, administrative errors, name discrepancy such as unreported name change or hyphenated or multiple last names

Background—On again, off-again, and litigation

On the rise again due to new administration

— Policy move to address illegal immigration

Social Security No Match Letters

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Received a No-Match Letter; Now What?

Best Practices

— Do Not Ignore. Why? In event of raid or I-9 audit by ICE, evidence that employer “knowingly” hired persons without proper U.S. work authorization

— But, do not immediately terminate. Why? Prohibited from terminating based on no-match letter alone, per law

Best Practices—No Match Letter

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— Check your records to determine if name/SS# on file match those listed by SSA on no-match letter

— If no longer employed, document efforts to confirm the accuracy of the information. No further action. Retain documents for four years

— If employed, provide employee with copy of letter and confirm that information on the SSA letter is accurate. If the information in the employer’s files is not accurate, revise the employer information and wage reporting accordingly (e.g., administrative errors), submit a tax form W2-C and retain the no-match letter and documentation of change

Best Practices—No Match Letter (cont’d)

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If employee confirms that the information listed in the no-match letter is accurate, ask him or her to contact the local SSA office and allow a “reasonable” period of time (i.e., 120 days) for resolution. Document efforts to resolve discrepancy and retain no-match letter

If no “resolution” contact counsel and proceed with caution

Best Practices—No Match Letter (cont’d)

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This presentation contains images used under license. Retransmission, republication, redistribution, and downloading of this presentation, including any of the images as stand-alone files, is prohibited. This presentation may be considered advertising under certain rules of professional conduct. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. ©2019. Nixon Peabody LLP. All rights reserved.

Brian Alcala, PartnerChicago, [email protected]+1 (312) 977-4366

Seth Neulight, PartnerSan Francisco, [email protected]+1 (415) 984-8377

labor and employment spotlight address · 2020. 2. 7. · sources: “millennial careers: 2020...

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