It’s time to brush up policies, make sure key people are retainedThis month, June 2011, we are starting to see signs of some economic recovery. It’s time to re-evaluate your risks and determine how the recovery will impact your business.
As the job market begins to heat up, Uncle Sam is gearing up to play a bigger role in employment regulation and enforcement. The government is increasing the number of its field investigators to ensure companies are in compliance with employment rules and regulations. Hot button areas include use of illegal aliens and misclassification of workers.
Are you aware that the State of California and the IRS assume everyone is an "employee" unless they meet certain factors?
According to the Department of Labor Standards Enforcement office, “there is no set definition of the term ‘independent contractor’ and as such, one must look to the interpretations of the courts and enforcement agencies to decide if in a particular situation a worker is an employee or independent contractor. In handling a matter where employment status is an issue, that is, employee or independent contractor, DLSE starts with the presumption that the worker is an employee.” Labor Code Section 3357.
The DLSE website states, “Employers oftentimes improperly classify their employees as independent contractors so that they, the employer, do not have to pay payroll taxes, the minimum wage or overtime, comply with other wage and hour law requirements such as providing meal periods and rest breaks, or reimburse their workers for business expenses incurred in performing their jobs. Additionally, employers do not have to cover independent contractors under workers’ compensation insurance, and are not liable for payments under unemployment insurance, disability insurance, or social security.”
All employers should be aware of the myriad of consequences of misclassification of employees including:
Stop orders and penalty assessments pursuant to Labor Code section 3710.1;
Liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code and Orders of the Industrial Welfare Commission;
Exposure for tort liability for injuries suffered by employees when workers compensation insurance is not secured (LC section 3706);
Exposure for unfair business practices (B&P section 17200);
Tax liability and penalties;
Criminal liability (LC section 3700.5)
Where exempt vs. non-exempt employees are involved, this continues to be a never ending issue of confusion for most employers. The State of California and the government assumes that most staff is “non-exempt,” unless the position meets certain FLSA criteria to be deemed as "Exempt." The FLSA criteria can be confusing for some positions. Back wages and penalties for misclassifying employees as “Exempt” can be financially devastating to employers. Here are some cases resulting in misclassification of “Exempt” employees:
Wachovia Securities Wage & Hour Litigation, $39 million. Employees claimed they were denied overtime pay and other wages.
Veliz v. Cintas Corp., $22.75 million. Delivery drivers claimed that Cintas misclassified route drivers as exempt employees in order to avoid paying overtime.
Conley v. Pacific Gas & Electric, $17.25 million. Employees alleged they were improperly classified as exempt employees and were denied overtime compensation and paid a salary rather than on an hourly basis.
Another hot button issue to be aware of is a phenomena called, Resume Tsunami. After the Depression and previous recessions, there is a historical trend that reflects “voluntary turnover” increases as “unemployment” decreases.