Reprint courtesy of Charles H. Goldstein, The Goldstein Law Firm, (310) 553-4746
The Goldstein Law Firm – November 2011 Newsletter
“Employers Who Willfully Misclassify Employees as Independent Contractors Must Admit This Error on Their Websites and Pay Fines for Each Infraction of between $5,000.00 and $15,000.00; It’s Almost the End of the Year and Employer Must Consider Getting Rid of Unproductive Employees Before the New Year and Could Face an Increase in Post Holiday Sexual Harassment Claims From Holiday Season Parties”
Fall 2011 Labor & Employment Law Seminar is a Tremendous Success:
We held our 35th annual Labor & Employment Law Seminar on October 19, 2011 at the Cerritos Center for the Performing Arts. Many of our oldest clients and newest clients as well as professional relationships heard me discuss the following topics: (1) Have economic conditions and the wide spread use of the Internet and Social Media changed the basics of hiring, firing, and the legal protections for business reputation and trade secrets?; (2) How to protect and defend your organization from Plaintiffs’ lawyers targeting your organization for a costly wage and hour class action lawsuit; and (3) New developments in federal and state labor and employment laws that you should be aware of, including how to defend your organization from an unwanted union organizing campaign that will use the National Labor Relations Board’s new rules to unionize your employees and harm your business.
As a professional courtesy, if you were unable to attend our seminar but would like a copy of my seminar presentation, please e-mail me at cgoldstein@gpfirm.com or contact my office and ask to speak with my assistant Mr. William Lam, and he will e-mail you a copy of my presentation.
II. Employers Who Willfully Misclassify Employees as Independent Contractors Must Admit That Error on Their Websites and Pay Fines for Each Infraction between $5,000.00 to $15,000.00:
A new California law is intended to crack down on employers who misclassify their employees as independent contractors. For years I have been warning employers that federal and state agencies believe that 90 % of employees classified as “independent contractors” are in fact employees. In the government’s view, employer misclassification results in the substantial loss of federal and state tax revenues that both employers and independent contractors (who are in actuality employees) should be paying into the government’s coffers.
Under the new law, SB 459, employers who willfully misclassified an employee as an independent contractor when the employee should have been classified as an employee, will be liable for fines per incident of between $5,000.00 and $15,000.00 and will be required to admit their error on their website for a year. The new law is being enforced by the California Labor and Workforce Development Agency (“LWDA”). In my opinion, because LWDA currently lacks the staff and resources to enforce this statute, the new law will ultimately be enforced by attorneys in private lawsuits and class actions.
In determining whether a person is an “independent contractor” or an “employee”, I have found that government agencies and Courts look to the “economic realities” test. Therefore, regardless of the written independent contractor agreement that an employer may have with an employee, government agencies and courts look to the actual relationship between the employer and the person who the employer is contending is an independent contractor.
Ask yourself the following basic questions:
Do you have a written independent contractor agreement with the person that clearly states and shows that you or your organization do not control the methods or means by which the independent contractor performs his or her or its duties under the contract, but clearly states that you are only interested in the end result of the independent contractor’s performance? If the answer to this question is “No”, most government agencies and courts would reject your claim that you have a defensible independent contractor relationship.
Do you provide the location where the work is to be performed and the tools or equipment for the person to perform the contract? If your answer to this question is “Yes”, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.
Do you provide employees to work with the independent contractor to perform their contract? If your answer to this question is “Yes”, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.
Do you direct the independent contractor in the sequence of the work to be performed? If your answer to this question is “Yes”, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.
Is the work performed by the independent contractor a part of the work that your employees regularly perform or is the work performed sporadic, of limited time duration and not a part of the regular work that your employees perform? If your answer to this question is that the work performed is part of the work that your employees regularly perform, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.
Does the person work independently or require close supervision and/or instruction on how to perform his or her job duties? If your answer to this question is that the person requires close supervision and/or instruction on how to perform his or her job duties, it could show together with other evidence that you have control over the method and means by which the independent contractor performs his or her duties thereby establishing an employer-employee relationship.
Does the person have an investment in his or her business? If your answer to this question is “Yes”, it could show together with other evidence the existence of an independent contractor relationship.
Does the person have any professional certifications and/or business licenses that are required to perform the services? If your answer to this question is “Yes”, it could show together with other evidence the existence of an independent contractor relationship.
Is the person reimbursed for expenses incurred in the performance of the contract? If you answered “YES” to this question, it could show together with other evidence the existence of an employer-employee relationship because employees are “reimbursed” for their expenses and independent contractors pay for their expenses.
Can the person realize a profit or loss from performing services under the contract? If your answer to this question is “No”, it could show together with other evidence that the person is merely an independent contractor in name only.
Does the person make his or her services available to others in the relevant market? If your answer to this question is “No” then the person is merely an independent contractor in name only because real independent contractors do not have only one (1) client or customer, but have several clients or customers.
Is the person merely paid an hourly, weekly or other wage for performing services under the contract? If your answer to this question is “Yes”, it could show that the independent contractor is merely an employee.
If your organization uses any independent contractors you should not needlessly fall victim to this new and expensive law and immediately have your independent contractor relationships reviewed by The Goldstein Law Firm.
III. It’s Almost the End of the Year and the Holiday Season is Here! Do Not Have 2012 Spoiled By Costly Post Holiday Legal Claims:
As in past years, I have warned employers about the legal risks and rewards of holiday bonuses; holiday cheer and parties; and how to minimize the legal and resulting financial risk that the informality of the Holiday Season creates.
A. Bonuses and Holiday Cheer – Making Certain the Legal Risks Do Not Outweigh the Rewards
Despite the challenging economic environment, many of our clients have asked about the wisdom of giving holiday bonuses and holding parties. If you decide to give holiday bonuses, make certain that you are not creating a permanent expectation and legal obligation to continue to give bonuses year after year, even if your company can no longer afford this practice. The best way to preserve your right to discontinue holiday bonuses is by advising employees, in writing, that holiday bonuses are given at the sole and exclusive discretion of the company and may be discontinued at the sole discretion of the company. Also, recognize that in the age of wage and hour class actions, any Christmas or year-end bonus that you give your employees is dependent on hours worked, production and/or efficiency that they achieve, and becomes a part of the employee’s regular hourly rate of pay for the purpose of calculating overtime during the week in which the bonus is given. However, if the bonus is purely a gift, then the bonus does not have to be folded into the employee’s regular hourly pay rate. Exempt employees’ bonuses do not have to be folded into their salary to create a higher base salary for the purpose of other benefit calculations, such as the calculation of vacation pay.
B. Holiday Cheer
There is usually a legal nexus between holiday parties and the workplace because most employees believe that they are required to attend holiday parties given, and sponsored by, their employer. This nexus becomes even clearer when the holiday party occurs and gifts are exchanged in the workplace. However, if there is a benefit to the employer, or if the holiday party becomes a customary incident of the employment relationship, the employee who attends the party is still acting within the scope of his or her employment. This means that employees who engage in misconduct at a company sponsored event, such as engaging in sexual harassment or a fight, can still be disciplined for their actions. In addition, employers can be sued for sexual harassment that occurs at, or after, the party. Employers also can be sued depending on a wide variety of circumstances for injuries caused by an intoxicated employee who injures someone after the party as a result of becoming intoxicated at your company party.
C. How to Avoid or Minimize Your Liability
- If alcohol is served at your holiday party, limit and control the amount of alcohol your employees and their guests can consume at the party. Open bars with no time limits or controls over how much alcohol is being served, is an open invitation to a lawsuit should one of your employees injure either themselves or someone coming from your party.
- Move in immediately to warn employees who you believe may be consuming too much alcohol and arrange for a safe means of transportation for them to return home.
- Make everyone aware in advance of the holiday party, preferably in writing, that the company will not tolerate any misconduct under the guise of “holiday frivolity.”
- Do not condone employee misconduct at your holiday event. If you are going to warn an employee that he or she is violating company rules, do so in a discrete manner so that you do not embarrass or humiliate the employee in front of their guests or other employees.
The Legal Practice Areas of the Goldstein Law Firm
Employment Law – Wage and Hour Law – Labor Law – Shareholder Disputes
Business Litigation – Corporate Law – Corporate Investigations - Appellate Law
Wrongful Death – Training & Workshops – Workers Compensation – EDD Appeals
Sexual Harassment Law – Discrimination Law – Disability Law – Serious Willful Claims
Labor Code 132(a) Claims – Wrongful Death/Substantial Injury Claims – Cal/Fed OSHA
THE GOLDSTEIN LAW FIRM
8912 Burton Way
Beverly Hills, California 90211
Tel. No. (310) 553-4746
Fax No. (310) 282-8070
EMAIL: cgoldstein@gpfirm.com
