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7 Employer Sins and How to Avoid Them What You Always Wanted to Ask an Employment Attorney,

But Didn’t Want to Pay to Ask

Sara E. Hutchins,

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Download slides at: http://www.nfib.com/HotEmploymentTopics

Participate on Twitter: Follow @nfiblive and use hashtag #nfiblive

Meet Our Speaker

Sara E. Hutchins,

Associate Attorney with Ogletree Deakins

Labor and Employment Law from a different angle



Sin 1: Using a Form 1099 For a Worker

• Fact: In 2011 the Obama administration authorized $25 million to the DOL to target employee misclassification.

• Fact: The IRS already started over 6,000 employer audit on the issue.

• Are they really “employees” in disguise?

• Categories typically challenged:

– “Temporary” Workers or workers on

probationary period;

– Independent Contractors;

– Unpaid Interns;

– Volunteers.



Sin 1: Using a Form 1099 For a Worker Temporary Staffing

• Strong likelihood of co-employee or joint employer finding

• Recommendations

– On-Site involvement of representative of agency

– Special orientation for temps

– Specific policies and training for temps

– Golden Rule still applies



Sin 1: Using a Form 1099 For a Worker Independent Contractor or Employee

• No Single Test:

– Common law “Right to Control” test

– IRS Test

– Economic Realities

– Hybrid

– State unemployment variations



Sin 1: Using a Form 1099 For a Worker Independent Contractor or Employee (Con’t)

• Common law “Right to Control” test

– Who controls the details of the work?

– Is the worker engaged in a distinct occupation or business?

– Is this a job that is customarily supervised locally?

– What is the level of skill required?

– Who supplies the tools and the place of work?

– How long is the worker engaged?

– How is the worker paid, .e.g., hourly, per project?

– Is the work being done part of the employer’s regular business?

– Do the parties intend an independent contractor relationship, i.e., is their an IC agreement in place?




• The IRS Test – Former 20 Factor Test – New Test

• Behavioral Control: Does the company control or have the right to control what the worker does and how the worker does his or her job?

• Financial Control: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

• Relationship of the Parties: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?




• The IRS Test

– The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

– Tip: If you still have concerns, ask the IRS?

• Form SS-8, Determination of Worker Status for Purposes of the Federal Employment Taxes and Income Withholding

• Virtual Small Business Tax Workshop – Lesson 6

• http://www.irs.gov/businesses/small/article/0,,id=99921,00.html



http://www.irs.gov/businesses/small/article/0,,id=99921,00.html


• Economic Realities Test

– Degree of control as to “manner and means”

– Opportunity for profit or loss

– Workers’ capital investment in business

– Degree of skill required

– Nature of work (integral part of business)

– Degree of permanence



Sin 1: Using a Form 1099 For a Worker Interns and Volunteers

What Does the US DOL Say About Unpaid Interns and Volunteers?



Sin 1: Using a Form 1099 For a Worker Interns and Volunteers

6 Factor Tests for Unpaid Interns – ALL 6 MUST BE MET FOR PROPER INTERN RELATIONSHIP:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2. The internship experience is for the benefit of the intern; 3. The intern does not displace regular employees, but works under close supervision of

existing staff; 4. The employer that provides the training derives no immediate advantage from the

activities of the intern; and on occasion its operations may actually be impeded; 5. The intern is not necessarily entitled to a job at the conclusion of the internship; and 6. The employer and the intern understand that the intern is not entitled to wages for the

time spent in the internship.

Tip: DOL Fact Sheet #71: Interns under the DOL

Tip: http://www.dol.gov/whd/regs/compliance/whdfs71.pdf



http://www.dol.gov/whd/regs/compliance/whdfs71.pdf

Sin 2: Paying Holiday Pay Absent a Policy Requiring You To

Are you a federal employer?

If “yes,” then you have to pay holidays.

Do you have a written or informal policy that says that you will pay employees holiday pay?

If “yes” then Yes.

If “no” then No.

Fact: There is no federal or state law that requires private employers pay employees holiday pay unless the employee actually works the holiday.

But wait Massachusetts…BLUE LAWS restrict business openings on Sundays and holidays and require payment.

Tip: For more information www.mass.gov and search “Blue Laws.”



http://www.mass.gov/

Sin 3: Including Time Off When Calculating Overtime Pay

Do you have a written or informal policy that says that you will include time off, e.g., vacation, sick, personal time when calculating overtime?

If “yes” then Yes.

If “no” then No.

Fact: There is no federal or state law that requires a private employer to pay employees for time not actually worked.



Sin 4: Not Paying An Employee Vacation Pay Upon Separation

What does your written policy say about vacation pay?

If you don’t have a written policy, get one, then determine what you have done about it in the past.

Fact, most states allow employers to do what they want with paying vacation time so long as the employer complies with their own written policy on the issue. This includes:

Use-it-or-lose-it policies; forfeiture clauses; and two weeks notice or no pay upon separation clauses.

Be careful, some states, e.g., California, Illinois, Massachusetts, and others, put limits on what an employer can do regarding vacation, e.g., prohibit the above-type policies, make employers pay pro-rata accrued vacation, etc.

Tip: Find FREE information from your state’s Department of Labor Website, sometimes called Department of Industrial Relations/Workforce Development/etc, and search “vacation pay.”

Just Google search “*Your state’s name+ Department of Labor.” The state department’s website should come up as the first or second item.

Information is sometimes found in an “FAQ” section.



Sin 5: Deducting Earnings From An Employee’s Paycheck

Fact: Most states have laws prohibiting employers from making these types of deductions from paychecks absent written authorization.

Deductions allowed:

Taxes

Social Security

Medicare

Insurance Premiums

401K Contributions

General Rule of Thumb: Employees must provide written authorization for non-tax related deductions, which must not reduce the employee’s wage rate or overtime pay below the statutory minimum wage requirements.

Tip: Find FREE information in your State Code.



Sin 5: Deducting Earnings From An Employee’s Paycheck What Can an Employer Deduct from a Paycheck?

• Alaska Admin. Code § 15.160

• Arizona Rev. Stat. § 23-352

• Arkansas Regs. 9.1 and 9.2

• Cal. Lab. Code § 224; Cal. Code Regs. tit. 8, § 11010-11170.

• Colo. Rev. Stat. § 8-4-105; Colo. Code Regs. § 1103-1.

• Conn. Gen. Stat. § 31-71.

• Del. Cod. Ann. tit. 18, §1107.

• D.C. Code § 32-1304.

• Florida – no provisions.

• Georgia – no provisions.

• Haw. Rev. Stat. § 388-3-6; Haw. Admin. Rules §12-21-4.

• Idaho Code Ann. § 44-902; § § 45-609, 611.

• 820 ILCS 115/9; IL Admin Code § 300.720-790, 800-890.

• Ind. Code § 22-2-5, et set. § 22-2-6, et set.

• Iowa Code § 91A.5 and 7.

• Kan. Stat. Ann. § 44-319; http://www.dol.ks.gov/es/html/wfaq_DEE.html (answers to FAQ’s).

• Ky. Rev. Stat. § 337.060.

• La. Rev. Stat. § § 23:631, 634, 635, 897, 963.




• Me. Rev. Stat. tit. 26, § § 592, 594, 626, 629, 635.

• Md. Code., Labor and Employment § § 3-503, 505; Maryland Department of Labor, The Maryland Guide to Wage Payment and Employment Standards.

• Mass. Gen. Laws ch. 149 § § 152-159.

• Mich. Comp. Laws § 408.477-478.

• Minn. Stat. § 181.06, 181.031, 181.79.

• Mississippi – No provisions.

• Mo. Rev. Stat. § 290.080; Missouri Department of Labor and Industrial Relations; http://www.dolir.mo.gov/ls/faq/faq_general.htm (answers to FAQ’s).

• Mont. Code § § 39-2-204, 205; Montana Department of Labor and Industry; http://erd.dli.mt.gov/laborstandard/documents/frequentquestions.pdf (answers to FAQ’s).

• Neb. Rev. Stat. § § 48-1230; 48-221, 48-224.

• Nev. Rev. Stat. § § 608.110, 608.160.

• N.H. Rev. Stat. § § 275:48, I, 275:3; New Hampshire Department of Labor; http://www.labor.state.nh.us/faq_worker.asp#8 (answers to FAQ’s).

• N.J. Stat. Ann. § § 34:11-4.4(a), 34:11-4.21, 34:11-4.22.

• N.M. Stat. Ann. § § 50-4-2-7.

• N.Y. Lab. Law § § 191, 193(2); New York State Department of Labor, http://www.labor.state.ny.us/workerprotection/laborstandards/faq.shtm#1 (answers to FAQ’s).

• N.C. Gen. Stat. § 95-25.8.

• N.D. Cent. Code § § 34-14-04, 34-01-15.




• Ohio Rev. Code. § § 4113.19, 4113.21.

• Okla. Admin. Code § § 380:30-1-12.

• Or. Rev. Stat. § § 652.160, 652.720.

• Pa. Code tit. 34, § 9.1.

• P.R. Laws tit. 29, § 175.

• R.I. Gen. Laws § 28-14.

• S.C. Code § § 41-10-40, 41-10-60.

• S.D. Codified Laws § § 6-11-13, § 6-11-2.

• Tennessee Department of Labor and Workforce Development; http://www.state.tn.us/laborwfd/ lsques.html#laborlaws (answers to FAQ’s). See Tenn. Code § 8-23-204; 7-51-204, § 50-2-107(a).

• Tex. Lab. Code § 61.018; 40 Tex. Admin. Code § 821.27.

• Utah Code § 34-28.

• 24-090-003 Vt. Code R. § XI.

• Va. Code Ann. § § 40.1-29, 40.1-62.

• Wash. Rev. Code §§ 49.48.010 and 49.52.060; Wash. Admin. Code 296- 126-025, 296-126-028.

• W. Va. Code § 21-5-1 – 21-5-4; W. Va. Code R. tit. 42, § 42-8-10.

• Wis. Stat. § § 111.06; 103.455.

• Wyo. Stat. Ann. § 27-4-116.



http://www.state.tn.us/laborwfd/

Sin 6: Not Handling an Employee’s Injury/Illness Legally

• Which law(s) ― 6 have potential ―apply to the situation?

1. FMLA?

– Consideration 1: Does FMLA apply?

2. Any applicable state family/parental leave law?

– Consideration 2: Does my state have a family/parental leave law that might apply?

3. Americans with Disabilities Act (ADAAA)?

– Consideration 3: Is this illness/injury considered a “disabling” condition for purposes of the Americans with Disabilities Act?

4. Any applicable state disability law?

– Consideration 4: Does my state disability law apply?

5. State-paid disability/family leave law?

– Does my state have a state-paid disability/family leave law that applies?

6. Workers’ Compensation law?

– Consideration 6: Was this a work-related injury so that workers’ compensation laws may be applicable?



Sin 6: Not Handling an Employee’s Injury/Illness Legally Know the Differences in the Laws

Worker’s Compensation

• Applies when employee gets hurt on the job.

• No fault system for medical and compensation benefits.

ADAAA/State Disability Laws

• Prohibits discrimination against a qualified individual with a disability.

• Requires reasonable accommodations that do not impose undue hardships.

FMLA • 12 weeks job protected leave for eligible employees with qualifying circumstances, such as a serious health condition of self or others. Also includes military leave.

State Family/Parental Leave Laws • May provide state-paid leave, e.g., California, New Jersey. • May require employers of certain number of employees to provide leave. State Disability Leave Laws • May provide state-paid disability leave, e.g., California. • May require employers of certain number of employees to provide leave.



Sin 6: Not Handling an Employee’s Injury/Illness Legally Coverage Differences Between the FMLA, ADAAA and Other Laws

Covered Employer

FMLA: 50 or more employees

State Family/Parental Leave: As provided by state statute.

ADAAA: 15 or more employees

State Disability Law: As provided by state statute.

Workers’ Compensation: As provided by statute, but typically ranges from employers with 1 to at least 4 employees.

Covered Individual FMLA: Protects employees who have: (i) worked at

least 12 months for the employer, (ii) worked at least

1,250 hours during 12 months immediately before

commencement of leave, and (iii) are employed at

worksite where 50 or more employees are employed by

the employer within 75 miles of that worksite.

State Family/Parental Leave: As provided by state statute.

ADAAA: Protects both job applicants and employees. State Disability Law: As provided by state statute. Workers’ Compensation: As provided by statute, but typically ranges from employers with 1 to at least 4 employees.



Sin 6: Not Handling an Employee’s Injury/Illness Legally Coverage Differences Between ADA and FMLA

ADAAA

Doesn’t include illnesses or injuries of brief duration.

Pregnancy isn’t a disability, but pregnancy-related conditions are.

Excludes illegal drug users from definition of “qualified individual with a disability,” but includes employees participating in substance abuse program if they no longer are using illegal drugs.

Applies to employment of any duration and even to applicants who are not yet employees.

FMLA √ Allows eligible employees to take up to 12 weeks of leave for a serious health condition involving inpatient care or continuing treatment, including serious health conditions of family members. √ Applies to pregnancy. √ “Serious health condition” includes substance abuse treatment. √ Doesn’t apply to employment of short duration.



• Disabilities include physical and mental impairments

• Three types of disabilities:

– Substantially limited in a major life activity;

• Mitigating measures cannot be considered

• Examples of major life activity are breathing, sleeping, standing, walking, and working

• Major life activities do not necessarily need to be work-related (e.g., walking, sleeping, etc.)

– Having a record of such an impairment; or

– Being regarded as having such an impairment

Sin 6: Not Handling an Employee’s Injury/Illness Legally ADAAA - Disabilities



• Qualified individuals must be able to perform the essential functions of their jobs

– With or without a reasonable accommodation

• Essential functions are generally defined by employers, not employees

– Evidence of essential functions may include:

• Job descriptions;

• Advertisements; and

• Job postings

Sin 6: Not Handling an Employee’s Injury/Illness Legally ADAAA – Qualified Individuals



• FMLA – Employee is required to provide 30 days’ notice of foreseeable need for FMLA leave. If leave is not foreseeable, the employee must provide notice “as soon as practicable.”

• State Family/Parental Leave – As set out in the statute.

• ADAAA – Employee must put employer on notice of disability and need for accommodations. (Employee does not have to mention ADA or ask for an “accommodation.”)

• State Disability Leave – As set out in the statute.

• Worker’s Compensation – Employee is required to notify employer of work-related injury.

Sin 6: Not Handling an Employee’s Injury/Illness Legally Comparison of Notice Requirements



• FMLA

Cannot require employee to work in light duty position in lieu of taking FMLA leave, but can offer as an option

FMLA permits suspension of workers’ comp benefits if an employee refuses light duty assignment

Employee may decline a medically approved light duty assignment and begin or continue to exercise FMLA rights and remain on leave for remaining portion of FMLA leave entitlement

Sin 6: Not Handling an Employee’s Injury/Illness Legally Reasonable Accommodations - Light Duty



• ADAAA:

– MUST ENGAGE IN THE INTERACTIVE PROCESS

– Employer required to keep employee in regular position, unless undue hardship

• Hard to prove an undue hardship, e.g., financial, staffing.

– Employee may request light duty as reasonable accommodation

– Employers not required to create light duty positions for employees with disabilities

– If light duty position exists, may be reasonable accommodation to reassign injured employee

• Workers’ Comp:

– Light duty position often created to permit injured employee to return to work with restriction

– Employees can be required to accept light duty unless it violates ADAAA

Sin 6: Not Handling an Employee’s Injury/Illness Legally Reasonable Accommodations - Light Duty (Con’t)



Tip: Employee who incurs work-related illness or injury must elect whether to receive paid leave from employer or workers’ comp benefits – the employee can’t have both.

Tip: Workers’ comp absences CAN and SHOULD count against an employee’s FMLA entitlement if it meets the criteria for FMLA leave.

Tip: Payments under any other types of plans covering temporary disabilities also should be treated as FMLA leave.

FMLA does not prevent continuation of lawful policies under state workers’ comp programs that discontinue wage replacement payments if and when an employee refuses to accept a medically-approved light duty assignment.

Sin 6: Not Handling an Employee’s Injury/Illness Legally Length and Payment for Leave: FMLA v. Workers’ Compensation



FMLA permits medical certification verifying serious health condition and likely periods of absence, but no unnecessary info.

Tip: You don’t have to make up your own forms. Use the ones the DOL has drafted: http://www.dol.gov/whd/fmla/index.htm

All info on form may only relate to condition for which the employee is taking FMLA leave.

Under FMLA, an employer may ask for more information if required to determine if an employee qualifies for payments from an employer benefit plan or if required by the workers’ comp program or statute.

If FMLA leave is running concurrently with workers’ comp absence that permits direct contacts with treating health care provider, then FMLA permits those contacts.

Sin 6: Not Handling an Employee’s Injury/Illness Legally Medical Certification: FMLA v. Workers’ Compensation



http://www.dol.gov/whd/fmla/index.htm









Sin 6: Not Handling an Employee’s Injury/Illness Legally Medical Exams: ADAAA v. FMLA

ADAAA

Imposes significant limits on pre-employment exams.

Prohibits employer from inquiring (including through medical exams) whether an individual has a disability and, if so, the nature of the disability unless “job related and consistent with business necessity.”

May request medical documentation if employee asks for accommodation.

All confidential medical information must be protected in separate, controlled files.

FMLA • Employer may require employee to submit a certification from a health care provider to substantiate leave is due to a serious health condition.

• Under certain circumstances, the employer may require second and third opinions.

• Employee can be required to present a fitness to return to work certification before coming back to work.

• All medical exams must be job-related and consistent with business necessity, just like under the ADA.



Sin 6: Not Handling an Employee’s Injury/Illness Legally Tips Regarding Obtaining Medical Information

• Tip: Keep medical information protected in separate, controlled files, not with the employee’s personnel file and/or payroll information.

– Why: Some statutes require it and many state laws allow an employer or former employee access to his personnel file. Typically, the state laws do not include personnel files to include medication information. By keeping separate files, you can avoid disclosure absent subpoena, court order and/or protective order.

• Tip: Make sure that any post-offer and/or pre-employment medical examinations do not include family medical history.

• Tip: Inform physicians conducting examinations for you that they must avoid questions about family medical history.

• Tip: Make sure any fitness-for-duty medical examinations or second fund, workers’ compensation data requests do not seek family medical history.




Maintenance of Health Care Benefits

ADAAA

• Reasonable accommodation may allow an employer to offer employees a part-time job or leave with no benefits.

• Loss of working hours, may trigger COBRA (if employer has 20+ employees) or state Mini-COBRA law (if employer has 1-19 employees).

FMLA • Requires the employer to maintain health care benefits for employees on FMLA leave. • Employer cannot recover premium payments paid during the leave period if the employee does not return to work for reasons beyond the employee’s control (such as serious health condition).

Workers’ Compensation • Only a few states require the employer to maintain health care benefits for employees on workers’ compensation leave. • Loss of working hours, may trigger COBRA (if employer has 20+ employees) or state Mini-COBRA law (if employer has 1-19 employees).




Job Reinstatement Rights

ADAAA

• Employee is entitled to position held prior to leave unless the employee no longer can perform it (with or without a reasonable accommodation) or the position is no longer vacant because it would have been an “undue hardship” to keep it open.

FMLA • Employer does not have to establish “undue hardship” to transfer an employee to an equivalent position (with equal pay, benefits, and other terms) instead of restoring the employee to the position held prior to leave.

Workers’ Compensation • Some state have statute that prohibit employers from terminating or retaliating against employees for filing workers’ compensation claims. Not holding a job open may be considered “retaliation” under the state statute depending on the timing. •Tip: Some states allow use of continuous absenteeism statute to defeat application of retaliation statute.



• ADA prohibits pre-employment inquiries about whether an individual has suffered an on-the-job injury or filed a workers’ comp claim.

• Pre-offer inquiries limited to the applicant’s ability to perform essential job functions and meet attendance requirements.

• Post-offer inquiries about workers’ comp injuries and claims history are permitted, but cannot disqualify an individual from employment unless the basis is job-related and consistent with business necessity, and no reasonable accommodation is available.

• Workers’ comp claims cannot be used to “screen out” applicants.

Sin 7: Asking An Employee About Prior Workers’ Comp Claims Pre-Offer



• Covered Employers

– Title II Applies to employers who employ 15 or more employees for each working day in each of the 20 or more calendar weeks in the current or preceding calendar year

• Employee includes “former employee,” e.g., disclosure of former employee’s genetic information to a prospective employer

• No Exception to prohibition against use/discrimination.

Sin 7: Asking An Employee About Prior Workers’ Comp Claims Pre-Offer Other Considerations When Obtaining Employee Medical Information – GINA



• Inadvertent acquisition

• Wellness programs

• Information received as part of medical certification under federal or state leave law or policy

• Acquisition of genetic information through documents commercially and publicly available for review or purchase

• Information acquired to monitor adverse effects of hazardous/toxic workplace substances (OSHA, MSHA)

• Employer conducts DNA analysis for law enforcement or human remains identification purposes


Six Exceptions to Prohibition Against Acquiring Genetic Information



• Lawful requests for medical information

– Employee request for leave of absence

– Employee request for accommodation (where the disability or accommodation is not obvious)

• Exception is generally available only if covered entity directs individual or health care provider NOT to provide genetic information

– Tip: EEOC has suggested “Safe Harbor Language”

– BETTER TIP: USE IT!


Inadvertent Acquisition Exception



• The Genetic Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting, or requiring, genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. “Genetic information,” as defined by GINA, includes an individual’s family medical history, the results of an individual’s or family member’s genetic tests, the fact that an individual or an individual’s family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual’s family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.


GINA Safe Harbor Language



• FMLA certification forms for the serious health condition of the employee (but not a covered family member; because providing health-related information regarding a family member (or “family medical history”) is necessary to comply with the certification provisions of FMLA to take leave for a sick family member, it is an exception to GINA’s non-disclosure rules;

• Medical certifications (non-FMLA) to support an employee’s absence or a request for an ADA accommodation;

• Requests for additional health-related information to support a medical leave of absence;

• Fitness for duty certifications certifying an employee’s ability to return to work;

• Pre-employment post offer medical questionnaires, which should be revised to eliminate all questions relating to family medical history;

• Requests for a pre-employment, post-offer medical examination or an independent medical examination to support fitness for duty.


GINA Safe Harbor Language – Include It In These Documents





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