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When are “Independent Contractors” Really “Employees”? The DOL Unveils Proposed New Test

The U.S. Department of Labor (“DOL”), the agency tasked with enforcing the Fair Labor Standards Act, has long applied a six-factor “economic reality” test to distinguish between employees and independent contractors. Today, the DOL unveiled proposed regulations intended to clarify and streamline the existing test into a new 5-factor “economic realities” test

Under the new 5-factor test, the first two factorsthe employer’s control over the work, and the workers’ opportunity for profit and loss – are to be given the most weight. The other factors the DOL will consider are (1) the amount of skill required for the work, (2) the permanence of the working relationship, and (3) the degree in which the work is part of an integrated unit of production. 

If the DOL finalizes these proposed regulations, it may be easier for employers to appropriately classify their workers, and to defend independent contractor classifications. Generally, independent contractors are not entitled to federal employee protections, including overtime pay, sick leave, or other employee benefits. Thus, if an employer misclassifies an employee as an independent contractor, the employer could face significant damages in unpaid wages and back taxes. 

What Can I Do to Protect My Business?: 

  • Recognize that the proposed rule is not yet final.  The public has limited time to comment on the proposed rules, after which a final rule will be published. 
  • Remember that the DOL is only one source of law on who is an independent contractor.  Different tests are used by the state departments of labor and the IRS, for instance.  The tests adopted through common law are also used to determine employment status in certain contexts.  
  • Consider examining existing independent contractor relationships now in light of the new proposed rule.  While the proposed rule is not yet law, assessing your independent contractors’ relationship against it will make it easier to make changes to your practices if necessary.  Using knowledgeable employment counsel for this kind of review will help keep the review privileged and can help you identify potential pitfalls in your current employment/contracting practices.

The DOL Issues Revised Rules to the FFCRA

Hot off the presses! the Department Of Labor just issued revisions to the Families First Coronavirus Response Act (FFCRA).  The FFCRA is the law that temporarily expands the Family Medical Leave Act (FMLA) to provide leave for a number of COVID-19-related reasons.  The Federal Government ultimately pays for the leave through employer tax credits. The FFCRA expires on December 31, 2020.

QUIZ TIME!

The newly revised rule, which will be effective on Wednesday, September 16, answers 4 questions. Do you know the answers? Answers provided below:

  1. Can employees take FFCRA leave if work is not otherwise available to them?
  2. Can employees take FFCRA leave intermittently, or does it require employer approval?
  3. Employers may exclude “health care employees” from taking FFCRA leave. But just who is included in the definition of “health care employee”?
  4. When must an employee provide notice and documentation supporting his need for leave to his employer?

ANSWERS:

  1. No – work must be available. In other words, furloughed employees cannot take FFCRA leave.
  2. Employees must seek employer approval to take intermittent leave.
  3. “Health care providers” are now defined as employees who are employed to provide diagnostic services, preventive services, treatment services, or other services that are integrated with and necessary to the provision of patient care. This definition is narrower than the ordinary understanding of “health care provider”, which typically includes nurses, physical therapists, pharmacists, and the like.
  4. As soon as practicable: an employee does not need to provide notice and documentation prior to the leave if the need for leave is not foreseeable.

Two Cases Exemplifying the Value of Positive Employee Relations

If you like positive employee relations, you might be interested in two legal developments I saw today.

  • First, an NYC employee alleged that her company’s parental leave was misleading: she claimed the policy appeared to offer more weeks of protected leave than it actually did.
  • Second, the 7th circuit ruled that a gay employee was permitted to sue the Catholic church for hostile work environment, notwithstanding the ministerial exemption, a legal doctrine which, broadly speaking, allows religious employers to hire who they want to perform ministerial duties by barring the application of the US’s anti-discrimination laws against them.

What can employers learn from each of these cases?

One lesson may be HOW you do things in your organization is as important as WHAT you do in your organization. The leave administration practice in the first case may have been “legal,” but there is no doubt it was not received well, and now the company is faced defending a lawsuit — and a class action one at that. Ouch. In the second case, while the church may have been within its rights to terminate this employee, its treatment of him prior to termination was problematic. This case underscores that, at least in the 7th Circuit, the ministerial exception will not give religious employers carte blanche to violate anti-discrimination laws, even if certain hiring/firing provisions are exempted. Bottom line: Even “permissible” actions can create risk if you are not careful in how you deliver them. Treating employees well and mitigating risk means more than just strictly complying with the law.

What other lessons do you see?

How to Save Time While Working Remotely (Harvard Business Review)

While I typically post only about legal news, the below article from Harvard Business Review was so clutch, I couldn’t resist. If I were still running HR at The New York Foundling, I would absolutely share this with my team. Those of you managing people in remote jobs might also want to share.

Harvard Business Review: How to (Actually) Save Time When You’re Working Remotely

New Guidance for Tracking Teleworking Hours

The U.S. Department of Labor has issued guidance regarding employers’ obligations to conduct “reasonable diligence” in tracking teleworking employees’ hours of work. If your company is not tracking remote work time — or you are not sure your company’s tracking efforts are sufficient — there is no time like the present.