Archive for November, 2015

The Times They Are a Changin’

So I read this great article on Forbes online today. One of our partners sent it around for us to see. The article, by a guy named Dan Schawbel, who bills himself as a “millennial expert and workplace futurist,” which is a cool title by the way, is titled “10 Workplace Trends You’ll See in 2016.” You can find it at I’ve got to tell you, I like this guy’s style. It’s not workplace trends you may see – no, it’s trends you will see. You have to like that kind of confidence.   As a matter of fact, I liked it so much that I thought I would do the same thing. Only I’m going to tell you about labor and employment law trends that you will see in 2016. And because I’m not nearly as creative as Mr. Schawbel and because I only get 800 or so words for this article, I’m only going to tell you about one trend you will see in 2016. How’s that for courage? So without further ado, that trend is . . . I need a drum roll here, don’t I? . . .

Independent Contractors are About to Become as Common as the Dinosaur

Back in July of 2015 the Administrator for the Wage and Hour Division of the Department of Labor issued Administrator’s Interpretation No. 2015-1. It was titled “The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors.” Snoozer, right? But it’s really important. It’s 15 pages long and it purports to clarify the standards for when a worker is an independent contractor. Basically, in a highly simplified way, the Guidance says that if the worker is economically dependent on an employer, that worker is an employee. The Guidance gives a bunch of tests and examples but boils it down to this: “Is that worker really in business for himself or herself?” The Guidance ends by saying, “In sum, most workers are employees under the FLSA’s broad definitions.” Doesn’t sound good if you use a lot of independent contractors, does it? And that is not all.

Uber, that uber cool ridesharing company, is being sued in California for misclassifying its drivers as independent contractors. In O’Connor, et al., v Uber Technologies Inc., et al., Case No. 3:13-cv-0386, the judge recently certified a class action alleging that Uber drivers are employees whom Uber has improperly classified as independent contractors. And in a similar suit, Uber competitor Lyft was recently denied summary judgment in a suit alleging similar misclassification issues. See Cotter v. Lyft, Inc., Case No. 13-vc-0465-VC.

Oh, and some states are weighing in too. In Uber Tech., Inc., v. Berwick, Case No. CGC-15-546387, the California Labor Commission determined that Uber driver Barbra Berwick was an employee and not an independent contractor.

So what, you say – all that is out in California and I am in the Midwest (at least you probably are if you are reading this) and that is true. But don’t forget, the Guidance is from the Department of Labor, a federal agency, and the two California cases are applying the FLSA, a federal statute, and they apply to you too. Even if your business is not as hipster chic as Uber.

So what do I do, Steve? I can hear you saying that from way over here. Well, here are some things to consider:

First, we have to get a handle on the scope of the issue for you. How many independent contractors do you use and what do you use them for? Where do you get them? And who are they?

Second, once we know who they are and what we are doing with them, let’s look at whether we have a problem. Are these folks properly classified?

And finally, if we have a problem, how can we fix it? And here you have some options, things like hiring these folks as employees, or sending them to a temp agency. Things like that.

Oh, and one more little piece of advice. Before you do this all yourself, or worse yet, hire a consultant to do it for you, remember that any documents you or your consultants create will be discoverable if you do get sued. On the other hand, communications between you and your lawyer for the purpose of securing legal advice are covered by the attorney-client privilege and documents produced by your lawyer may be covered by the work product doctrine. Keep that in mind when you are deciding who to call.


Exceptions. Deductions from Exempt Employee’s Salary . . . . Again.

Last time we talked about the general rule regarding the Salary Basis Test. Remember, According to the regulations, to meet the salaried basis test, your employee has to “receive each pay period . . . a predetermined amount . . . which is not subject to reduction because of variations in the quality or quantity of the work performed.” The regulations go on to say “Subject to the exceptions provided in paragraph (b) of this section, an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days of hours worked.”

Hold it just a second, what do you mean EXCEPTIONS PROVIDED IN PARAGRAPH (b)? That’s right, there are exceptions. Wouldn’t be a very good rule if there were no exceptions now would it? So what are these exceptions you ask? Well let me just tell you. You can make a deduction from a salaried employee’s pay for:

  • Absences of one or more full days for personal reasons, not sickness (NOT ½ DAYS, FULL DAYS, so if the employee is out for a day and a half you can only deduct for the full day);
  • Absences of one or more full days for sickness, if you have a sick pay plan that replaces the pay;
  • Off sets (not full day deductions) for amounts received for jury duty, military leave or attendance as a witness;
  • Penalties imposed in good faith for infractions of safety rules of MAJOR SIGNIFICANCE (one of the examples given is smoking in the explosives plant);
  • Unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules in accordance with a WRITTEN POLICY APPLICABLE TO ALL EMPLOYEES;
  • Time not worked in the first or last week of employment;
  • Time not worked when an employee is on FMLA LEAVE.

29 CFR §541.602(b).

So, if the employee is paid on a salaried basis how on earth do you decide what to deduct?

When calculating the amount of a deduction from pay allowed under paragraph (b) of this section, the employer may use the hourly or daily equivalent of the employee’s full weekly salary or any other amount proportional to the time actually missed by the employee. A deduction from pay as a penalty for violations of major safety rules under paragraph (b)(4) of this section may be made in any amount.

29 CFR §541.602(c).

OK, now before you get all worked up, let me throw in this caution. You mess these up and take an improper deduction and you have a problem. A big problem. So, before you do any of this CALL YOUR LAWYER. And stick around for next time when we talk about what happens if you do mess this up.


And if all of this seems familiar, it is. I posted this before. You can see it here.