Tag Archives: employee

Most Independent Contractors are really employees, employers misclassify and that can lead to A costly Labor Lawsuit

Independent Contractor vs Employer

An Independent Contractor is defined differently under labor laws and the IRS code. If an employee derives a significant amount of income from one or two sources, they are not an independent contractor, under Federal Labor Laws. This is important to get right, because employees must be treated differently than independent contractors, and misclassifying someone as an independent contractor opens you up to liability for labor violations, and tax violations. There is a great chart on the differences between the employment conditions of an independent contractor and an employee at https://employment.findlaw.com/hiring-process/being-an-independent-contractor-vs-employee.html.

A house painter who paints your house and ten others that month, is an independent contractor. However, an employee who works 20 hours per-week taking photos for a commercial phot studio, and twenty-hours a week taking photos for a wedding photo company, is not an independent contractor in either job.

You have to ask, to tell whether the employee is an independent contractor, whether the employee is economically dependent on the job, if the employee is, then even if the employee has a second or third job, then they are not an independent contractor. The house painter paints countless houses and is not dependent on the income from any one house. The photographer derives half of his income from each source, and is, therefore, dependent on both, and is not an independent contractor. Even if a third job is obtained by the photographer, and the time every week is split evenly between the three jobs, the photographer is a part-time employee and not an independent contractor at all three jobs.

There is a six-factor test used by both the IRS and Labor Law. In Labor Law these six factors are relevant to the extent they prove the ultimate factor, whether the employee is economically dependent on the employer. If the employee is economically dependent on the employer, none of these six factors matter, except for the extent to which they prove economic dependence. These six factors are:

  1. The extent to which the services rendered are an integral part of the principal’s business;
  2. The permanency of the relationship;
  3. The amount of the alleged contractor’s investment in facilities and equipment;
  4. The alleged contractor’s opportunities for profit and loss;
  5. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and
  6. The degree of independent business organization and operation;

If an employee controls four of these factors, but derives most of their income from the employer, or a couple of employers, they are not an independent contractor for the purposes of Labor Law. For example, the photographer may use his own camera, and his own judgment on how to pose people in pictures, but he/she is still an employee because they are deriving the majority of their income from a limited number of sources with long term relationships. If someone is an employee, and not an independent contractor, they are protected by overtime laws, anti-discrimination laws, and ERISA, if applicable.

Basically, the IRS may consider these six factors determinative, but for labor law purposes you can only depend on them to the extent they prove or disprove economic dependence on the employer. An employee is treated totally differently from an independent contractor and entitled to all labor protections provided by the State and Federal governments. For a helpful list of some of the differences in how independent contractors are treated by the employer, and an employee is treated, see https://www.mbopartners.com/blog/misclassification-compliance/10-differences-between-independent-contractors-and-employees/.

So, the test is, if the employee was not employed by you, would their regular overall income substantially suffer? If the answer is yes, then the person is an employee who must be paid by W-2 and has all the protections of state and federal labor laws. If you are still confused there is a fun seven ways to tell if you are misclassifying a worker as an independent contractor, and while extremely simplified, incomplete, and not legally reliable, it will help you understand some of the basics. It is found at https://www.score.org/resource/7-clues-your-independent-contractor-really-employee-under-law.

Ultimately, you should consult an employment attorney to determine whether you are classifying employees properly. I have given a lot of the basics, and the test used by labor law, but sometimes this test can get confusing or ambiguous. There are a million exceptions that can be taken to the six factors, and an employment lawyer, is, really, the only one who will know if any of the exceptions apply, or if any additional factors apply, which would make someone an employee over an independent contractor.

By: Joshua H. Sheskin, Esquire, M.A., Trial Counsel Lubell Rosen, 954-880-9500 jhs@lubellrosen.com.- Mr. Sheskin focuses his practice on both state, and federal, employment and business defense cases, including ADA, FLSA, EEOC, sexual harassment, and liability issues arising from business disputes.

Salaried Employees are Paid Overtime, The Right System for Paying it can save Countless Dollars

One Hundred Dollar bill with Marijuana leaf on top of it.

One of the biggest reasons that employers get sued for wage violations, is they think that they do not need to pay their salaried employees overtime. Salarieed employees get overtime, unless they meet one of the exemptions (exceptions) from overtime requirements under the Fair Labor Standards Act (FLSA). Basically, if an employee is entitled to overtime pay as an hourly worker, they are, usually, entitled to overtime pay as a salaried worker.https://www.dol.gov/whd/regs/compliance/whdfs23.pdf

An employer can save money on overtime by paying a salary, under certain circumstances, but setting up such a system is best done by an experienced employment lawyer, because getting it wrong can cost you countless lawsuits. When I represented plaintiffs, I brought cases against large companies that used employment firms to design their pay systems, and I found ways to get my clients substantial sums. It is not just necessary to get it most of the way right, if an employer plans to save money by taking advantage of labor laws, the employer does not just have to get it right, but perfect, to get out of a lawsuit.

If a small employer wanted to move someone from hourly to salary to save a few dollars on overtime, then as an employment lawyer I would advise that is a poor decision. However, if a medium or large company is considering moving multiple employees to salary, to save on overtime, it is worth consulting with an employment lawyer.

There are two factors. The first is if the number of hours the employee works varies throughout the year. The second is what the employer and and the employee understand the salary is meant to cover. A worker and employer cannot agree that no overtime payment is owed for hours worked over forty per-week. An employer must pay over-time for hours worked over forty per-week, the only question is whether payment is one-half times the regular rate, or one-and-one-half times the regular rate.

The first factor has to do with the Fluctuating Work Week Method, codified at 29. U.S.C. § 778.114. https://www.law.cornell.edu/cfr/text/29/778.114 The Fluctuating Work Week Method allows an employer to save money by paying less per-hour in regular hourly rate, and one-half that rate for every hour over forty worked in a week. A lot of large companies use this method. Basically when a worker’s hours fluctuate throughout the year, so some weeks the worker works more than forty hours, and some weeks the worker works less than forty hours, but the worker is paid the same base salary, the worker can be paid less in overtime, to make up for the times when the worker works less than forty hours and still makes the salary. When executed properly, this system can save a company an enormous amount of money in overtime payments, because the overtime rate is one-half of the number gotten when the total weekly salary is divided by the total number of hours worked that week.

While the Fluctuating Work Week Method is very attractive, strict compliance with countless conditions is necessary, requiring a meticulously structured system with built-in safeguards.

The second factor is what the understanding of the salary is between the employer and employee. https://www.law.cornell.edu/cfr/text/29/778.108 Does the employee and employer understand that the salary is to cover all hours worked in a week, or does the salary cover a specific number of hours per-week.

If the understanding with the employee is that the salary is to cover forty hours per-week, then every hour over forty that the employee works, must be paid at one-and-a-half times the employee’s normal hourly rate. However, if the employee and employer come to an understanding that the salary is to cover fifty hours per week, from hours forty-one to fifty, the employer pays one half the normal hourly rate, and for hours fifty-one and over, the employer pays the worker one-and-a-half times their normal hourly rate. In order to get the regular hourly rate, to base overtime off of, the employer divides the salary by the number of hours it was intended to compensate, and that number is halved or paid at one-and-a-half times per-hour.

If the employee and employer agree that the salary is to compensate all hours worked in a week, no matter how many, all overtime hours are paid at the rate obtained by multiplying .5 by the weekly salary, divided by forty.

Written by: Joshua H. Sheskin, Esq., M.A. -Trial Counsel- Lubell & Rosen, LLC. 954-880-9500 JHS@LubellRosen.com

Just because someone is A Manager does not mean they do not need to be paid Overtime under the FLSA

On February 28, 2019, a jury verdict of 2.9 million dollars was entered against Stake ‘N Shake, for not paying overtime to their managers.

That amount is likely to be doubled by the Court within the two months, or so, because under the FLSA the amount the jury awards is often doubled as a legally mandated penalty against the employer. The issue is that the employees suing Stake ‘N Shake were managers, and they were still entitled to overtime. In a famous case Family Dollar was hit with a judgement against them of over ten million dollars when their managers sued them, and they appealed and the appellate court determined their managers were entitled to overtime.

However, one of the most common things that people claim to have knowledge of about the Fair Labor Standards Act (FLSA), and its overtime requirements, is that managers are not entitled to overtime pay. It is patently false that giving someone the title of manager means you do not have to pay them overtime. To not pay overtime, to someone you call a manager, they must fit a very specific set of legal guidelines that are interpreted through hundreds, if not thousands, of Court decisions. Failing to pay someone overtime, who meets the complex regulations interpreted through court decisions, means you can be sued for overtime in a very expensive Federal or State Fair Labor Standards Act (FLSA) Lawsuit. Often time payroll companies, and non FLSA Lawyers, get wrong which managers get overtime, and which do not. For help in knowing if your managers should be paid overtime, or if one of your managers is suing you for overtime, call Joshua Sheskin at the Ft. Lauderdale Florida Headquarters of Lubell Rosen LLC.- By: Joshua H. Sheskin, Esq., 954-880-9500 jhs@lubellrosen.com

YOU CANNOT AGREE WITH YOUR EMPLOYEES THAT YOU DO NOT HAVE TO PAY THEM OVERTIME, EVEN IF THE AGREEMENT YOU MAKE PAYS THEM MORE

The right to overtime under the Fair Labor Standards Act (FLSA) cannot be given up in an employment contract, or agreed between the employer and employee not to apply. In hundreds of FLSA cases I have been involved in, one of the most common things employers are sued for is coming up with ways to pay their employees more, but that do not pay them overtime at one-and-one half times their regular hourly rate. Often times these employers tell me that the employee gladly signed a contract to be paid that way because it meant more money. A contract to pay less than one-and-one-half times the regular hourly rate for overtime hours is an illegal contract and completely unenforceable. An employee cannot give up his/her right to overtime, and an employer cannot agree to not follow the law. However, if you do want to pay your employees in a way that is not a strict hourly rate, and one-and-one-half times that rate for overtime, there are ways to do that for some employees. Other employees the Fair Labor Standards Act (FLSA) does not require you to pay overtime to. While exceptions to overtime laws can be applied to some employees, and other employees can be paid a salary that reduces the overtime rate (salaried employees are entitled to overtime), complex legal rules apply. Implementing a system of payment that does not subject you to lawsuits usually requires a labor lawyer. The Fair Labor Standards Act is a specialized field. To have a specialist help you avoid costly lawsuits call or email Joshua Sheskin at Lubell Rosen today – By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com

YOU CANNOT AGREE WITH YOUR EMPLOYEES THAT YOU DO NOT HAVE TO PAY THEM OVERTIME, EVEN IF THE AGREEMENT YOU MAKE PAYS THEM MORE

The right to overtime under the Fair Labor Standards Act (FLSA) cannot be given up in an employment contract, or agreed between the employer and employee not to apply. In hundreds of FLSA cases I have been involved in, one of the most common things employers are sued for is coming up with ways to pay their employees more, but that do not pay them overtime at one-and-one half times their regular hourly rate. Often times these employers tell me that the employee gladly signed a contract to be paid that way because it meant more money. A contract to pay less than one-and-one-half times the regular hourly rate for overtime hours is an illegal contract and completely unenforceable. An employee cannot give up his/her right to overtime, and an employer cannot agree to not follow the law. However, if you do want to pay your employees in a way that is not a strict hourly rate, and one-and-one-half times that rate for overtime, there are ways to do that for some employees. Other employees the Fair Labor Standards Act (FLSA) does not require you to pay overtime to. While exceptions to overtime laws can be applied to some employees, and other employees can be paid a salary that reduces the overtime rate (salaried employees are entitled to overtime), complex legal rules apply. Implementing a system of payment that does not subject you to lawsuits usually requires a labor lawyer. The Fair Labor Standards Act is a specialized field. To have a specialist help you avoid costly lawsuits call or email Joshua Sheskin at Lubell Rosen today – By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com

There are Complex Rules as to How to Pay Nannies and Housekeepers

Your nanny or housekeeper may feel like family but housekeepers and nannies the families that serve all the time, and these lawsuits can get far more expensive than other lawsuits brought by employees because of the number of hours involved. There are very specific rules as to how nannies and housekeepers are paid, and often they sue when their employers part ways with them, even after ten years, or more, in the home. Defending against lawsuits brought under the Fair Labor Standards Act (FLSA) I run into cases all the time when in which a nanny was with a family for twenty years, or more, and then shocks them with a lawsuit when she leaves.

You must pay some nannies and housekeepers overtime, and other nannies and housekeepers you do not need to pay overtime. A nanny or housekeeper must be paid minimum wage for all hours they work. However, which hours a live-in nanny or housekeeper must be paid is a question that strongly depends on what their duties are, and, physically, where they sleep. Furthermore, whether you can claim a credit for what you pay a nanny or housekeeper for room and board is a complex question of law that depends heavily on the circumstances. If you can take a credit towards what you pay your nanny or housekeeper, for room and board, the amount is a question of law that depends on numerous factors. The Fair Labor Standards Act (FLSA) has different regulations for live-in domestic employees than non-live in domestic employees. Contact Attorney Joshua Sheskin at the Broward County Headquarters of Lubell Rosen, at 954-880-9500 or JHS@LubellRosen.com, for help in paying your nanny or housekeeper in accordance with the law. – By Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com

An Illegal Immigrant Can Sue Their Employer in Federal Court

One of the most common misconceptions that employers have is that illegal immigrants cannot sue their employers. Illegal immigrants can sue their employers in Federal Court for the non-payment of minimum wage, and overtime, pay under the Fair Labor Standards Act (FLSA). Under the FLSA it does not matter whether someone is in the country illegally, nor will they be deported for filing a lawsuit. There are places in the country where an illegal immigrant cannot bring a Federal Lawsuit, but in Florida, Alabama, Georgia, and other states, an illegal immigrant can bring a lawsuit under the Fair Labor Standards Act (FLSA). Employers have to pay all of their employees in accordance with Federal Regulations or risk an expensive lawsuit. – By Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com

Under Federal Labor Law Very Few Employees are Independent Contractors

The law does not give the option to employers to pay their employees as independent contractors by paying them via 1099 rather than W-2. For purposes of Federal Labor Laws, and the Fair Labor Standards Act (FLSA), an independent contractor is a person who is not economically dependent on any one employer as a primary source of income. When you hire someone to paint your house you are hiring them as an independent contractor, but when you own a business and your employees depend on you to make a living you cannot hire them as independent contractors. This comes as a surprise to many business owners, and I defend businesses all of the time that make the mistake of classifying their employees as independent contractors. The line between independent contractor and employee can get fuzzy, even a part time employee with a second job may, or may not, be an independent contractor. Companies such as Grub Hub have come under fire, recently, for classifying their drivers as independent contractors. Do not risk misclassifying your employees, it can be a costly mistake. For advice as to whether your employees are independent contractors call, or email, attorney Joshua Sheskin of Lubell Rosen. – By Joshua H. Sheskin, Esq., 954-880-9500JHS@LubellRosen.com