Tag Archives: labor

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.

Tipped Employees can still sue under the Fair Labor Standards Act (FLSA) depending on their tasks.

For about thirty years the Fair Labor Standards Act (FLSA) Rule has been that a tipped employee who receives less pay per-hour, because they are a tipped employee, must spend 80% of their time at work doing activities that are tip generating. This means 80% of the employees, time had to be spent on tasks directly related to serving the customer, thereby directly generating tips. Hence, napkin folding, “opening the restaurant,” and other tasks would need to be kept to less than 20% of a tipped employee’s time at work. In November of 2018 the Department of Labor rolled back this Fair Labor Standards Act (FLSA) guidance for tipped employees. However, courts have consistently held that the rule is still in effect, allowing cases to move forward against Buffalo Wild Wings, and Denny’s, as if the rule had not changed. The status of this rule, and how courts will treat it, changes constantly, and depends on the judge, because the Department of Labor rolling back this Fair Labor Standards Act rule for tipped employees was not done in the traditional way that agency rules change.

Whether one assumes that 80% of the time a tipped employee works must be spent on tipped activities to satisfy the Fair Labor Standards Act (FLSA), or less due to the rollback of the rule, what counts as a tipped activity is very specific and defined through hundreds of court decisions. Many activities that restaurants would normally consider tip generating tasks, are not tip generating tasks. It is difficult to know which tasks are tip generating, versus non-tip generating, without a Fair Labor Standards Act (FLSA) lawyer to guide you through the legal swamp that is tipped versus non-tipped tasks under the Fair Labor Standards Act (FLSA). For help in determining if your tipped employees are spending eighty percent of their time on tipped tasks, or if you have been sued by a tipped employee claiming to have done more than the allowed percentage of non-tipped tasks, call Joshua Sheskin at the South Florida Headquarters of Lubell Rosen. – Joshua H. Sheskin,Esq., 954-880-9500, jhs@lubellrosen.com

Workers with Varying Hourly Rates Have Variable Overtime Rates an Employer Must Pay Or Risk Getting Sued Under the Fair Labor Standards Act (FLSA)

Overtime seems like an easy concept; the employee is entitled to 150% of their regular hourly pay for every hour of overtime they work. However, under the Fair Labor Standards Act (FLSA) there are special rules for employees who make different rates throughout the course of the week, and when those different jobs count as independent employment, versus when the work at both jobs must be counted towards the employee’s forty hours per-week. A typical situation where this arises is in a restaurant where an employee sometimes acts as a manager and sometimes as a server, in this case the hours worked as a manager and as a server may or may not need to be added together to determine if overtime is owed, it depends on how you have set up that employment arrangement on paper with the employee. On that note, if management and service is set up improperly, then if the employee makes more as a manager, than they do as a server, you cannot pay them overtime rates based on whether the overtime hours were as a manager or server, nor take the lower of the two numbers.  When an employee has a varying hourly rate, getting the overtime calculation wrong can lead to a very expensive Federal Fair Labor Standards Act (FLSA) suit. If you do not have a contract in place with a worker who does what you think are two separate jobs, a contract that is legally adequate to distinguish the jobs under the Fair Labor Standards Act (FLSA), then you can also face an expensive FLSA lawsuit. For help in avoiding expensive federal lawsuits when paying employees varying hourly rates call Attorney Joshua Sheskin at Lubell Rosen

Strict Time Keeping Rules Are the Only Way to Protect Against Fair Labor Standards Act (FLSA) Lawsuits

 

Often times employers have time records that show they paid an employee correctly, however, even with those records many employers lose Fair Labor Standards Act (FLSA) lawsuits. This is because while these businesses have a time clock, and pay their employees based on the hours that the time clock produces, they fail to have policies that eliminate the possibility of employees alleging that they worked off of the clock. Implementing proper procedures as to when your employee’s clock in and out, and what they must do after clocking out, is essential to avoiding liability in an FLSA suit, because if all you have is a time clock and it shows you paid, the employee will simply claim that they worked off of the clock. It is not as easy as telling employees that they may not work off of the clock, because the definition of work under the FLSA is so broad, and you did not have guidelines in place preventing them from working off of the clock. You do not need to give an employee permission to work off of the clock to owe them pay for off the clock work, they just need to work off of the clock, even if you have a rule against it. A well-written policy and procedure sheet detailing your time keeping rules can save you from tens of thousands of dollars, or more, in liability, and just as much in attorneys’ fees. Having your policies in place, and signatures on policy statements, before an employee attempts to bring a lawsuit, can save your business from paying significant amounts in legal fees, and liability, even if you have a time clock already. Your policies must go beyond prohibiting work off of the clock, and act to prevent any attempt to work off the clock. For help in drafting policies and procedure guides that prevent work from taking place off of the clock contact Joshua Sheskin at the Ft. Lauderdale Headquarters of Lubell Rosen. – By: Joshua H. Sheskin, Esq., 954-880-9500JHS@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