California Employment Law » Uncategorized

Independent Contractor versus Employee Crackdown

Rob — Wed, 31 Mar 2010 19:07:28 +0000

Georgia asks about new developments in the area of Independent Contractors vs. Employees both from the IRS perspective and EDD. Improperly characterizing an employee as an independent contractor can have some significant negative effects. Not only will the worker be entitled to all of the protections that come with being an employee (e.g., overtime, timely payment of wages, reimbursement of expenses, protection from discrimination, etc.), the employer could be subject to significant penalties by the EDD, the IRS, the Franchise Tax Board, and the Department of Industrial Relations. Additionally, you may end up losing workers’ compensation coverage when the insurance company realizes the workers were misclassified.

The New York Times recently reported that “Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.” The same article indicates that the President’s 2010 budget “assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.”

Chintamani Abhyankar, author of “Stop Donating your Money to IRS,” reports that the IRS has begun a three-year audit of 6,000 randomly chosen businesses of all types, sizes, and shapes to investigate any sort of suspicion of tax infractions. According to Abhyankar, “they believe that the IRS is just gearing up for a run at businesses under the new administration.”

The Division of Labor Standards Enforcement (Labor Commissioner) provides the following caution:

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. This is a rebuttable presumption however, and the actual determination of whether a worker is an employee or independent contractor depends upon a number of factors, all of which must be considered, and none of which is controlling by itself. Consequently, it is necessary to closely examine the facts of each service relationship and then apply the law to those facts. For most matters before the Division of Labor Standards Enforcement (DLSE), depending on the remedial nature of the legislation at issue, this means applying the “multi-factor” or the “economic realities” test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Additional factors that may be considered depending on the issue involved are:

Whether the person performing services is engaged in an occupation or business distinct from that of the principal;

Whether or not the work is a part of the regular business of the principal or alleged employer;

Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;

The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;

Whether the service rendered requires a special skill;

The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;

The length of time for which the services are to be performed;

The degree of permanence of the working relationship;

The method of payment, whether by time or by the job; and

Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)

Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, Id.at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. (Toyota Motor Sales v. Superior Court (1990) 220 Cal.App.3d 864, 877)

The problem is compounded by the fact that different agencies can come to different conclusions. That same article makes it clear that the Labor Commissioner and the EDD do not always agree on what is an employee versus what is an independent contractor:

Q. How can it be that the Labor Commissioner determined I was an employee with respect to a wage claim I filed and won, and the Employment Development Department (EDD) determined I was an independent contractor, and denied my claim for unemployment insurance benefits?

A. There is no set definition of the term “independent contractor” for all purposes, and the issue of whether a worker is an employee or independent contractor depends upon the particular area of law to be applied. For example, in a wage claim where employment status is an issue, DLSE will often use the five-prong economic realities test to decide the issue. However, in a separate matter before a different state agency with the same parties and same facts, and employment status again being an issue, that agency may be required to use a different test, for example, the “control test,” which may result in a different determination. Thus, it is possible that the same individual will be considered an employee for purposes of one law and an independent contractor under another.

Even court decisions are not always helpful. In Messenger Courier Ass’n of the Americas v. CUIAB, 175 Cal. App. 4th 1074 (2009) the court found that messengers were properly characterized as employees. But in Cristler v. Express Messenger Systems, Inc., 171 Cal. App. 4th 72 (2009), another messenger case, the messengers were independent contractors.

The reality is that if you are using independent contractors to perform the same work as your employees, or if the independent contractors are doing the work that you are in business to perform, you should speak with an attorney knowledgeable about proper classification.

Phillip J. Griego & Associates

95 South Market Street, Suite 520

San Jose, CA 95113

Tel. 408-293-6341

Original article by Robert E. Nuddleman of P hillip J. Griego & Associates

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

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Sorry for the lack of posts

Rob — Wed, 31 Mar 2010 18:32:06 +0000

Well, I’ve been back with Phillip J. Griego & Associates for a few months now, and it’s time to start posting again. In my absence there were a lot of requests for information regarding various aspects of employment law. I will do my best to respond to those requests and provide insights and updates regarding other changes in employment law.

I want to thank everyone for their questions and positive feedback. I look forward to maintaining the blog once again.

Rob Nuddleman

Robert Nuddleman Is Back

Rob — Fri, 01 Jan 2010 16:29:18 +0000

After an 11 month hiatus with another firm, Robert Nuddleman has returned to Phillip J. Griego & Associates. We are extremely pleased at his return. Along with Rutger Heymann and Phil Griego, Robert will continue to help our firm provide quality legal representation and advice to our clients.

Robert hopes that he will be able to begin posting to this blog again on a regular basis.

Federal Minimum Wage Increase

Rob — Mon, 21 Jul 2008 17:05:37 +0000

Effective July 24, 2008, the federal minimum wage for covered non-exempt employees will rise from $5.85 to $6.55 per hour. The Fair Minimum Wage Act of 2007, which amended the Fair Labor Standards Act (FLSA), provides for phased-in increases ultimately reaching $7.25 per hour effective July 24, 2009. A separate provision of the bill brings about phased increases to the minimum wage in American Samoa and the Commonwealth of the Northern Mariana Islands.

Many states, like California, have their own minimum wage that is higher than the federal minimum wage. California’s minimum wage is currently $8.00 per hour. Additionally, many counties, cities, or local governments have their own prevailing wage laws.

Phillip J. Griego & Associates

95 South Market Street, Suite 520

San Jose, CA 95113

Tel. 408-293-6341

Original article by Robert E. Nuddleman of P hillip J. Griego & Associates

Happy 4th of July – Declaration of Independence

Rob — Fri, 04 Jul 2008 16:04:35 +0000

(Adopted by Congress on July 4, 1776)

The Unanimous Declaration
of the Thirteen United States of America

When, in the course of human events, it becomes necessary for one people to dissolve the political bonds which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security. –Such has been the patient sufferance of these colonies; and such is now the necessity which constrains them to alter their former systems of government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute tyranny over these states. To prove this, let facts be submitted to a candid world.

He has refused his assent to laws, the most wholesome and necessary for the public good.

He has forbidden his governors to pass laws of immediate and pressing importance, unless suspended in their operation till his assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other laws for the accommodation of large districts of people, unless those people would relinquish the right of representation in the legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved representative houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the legislative powers, incapable of annihilation, have returned to the people at large for their exercise; the state remaining in the meantime exposed to all the dangers of invasion from without, and convulsions within.

He has endeavored to prevent the population of these states; for that purpose obstructing the laws for naturalization of foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of new appropriations of lands.

He has obstructed the administration of justice, by refusing his assent to laws for establishing judiciary powers.

He has made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.

He has kept among us, in times of peace, standing armies without the consent of our legislature.

He has affected to render the military independent of and superior to civil power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his assent to their acts of pretended legislation:

For quartering large bodies of armed troops among us:

For protecting them, by mock trial, from punishment for any murders which they should commit on the inhabitants of these states:

For cutting off our trade with all parts of the world:

For imposing taxes on us without our consent:

For depriving us in many cases, of the benefits of trial by jury:

For transporting us beyond seas to be tried for pretended offenses:

For abolishing the free system of English laws in a neighboring province, establishing therein an arbitrary government, and enlarging its boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule in these colonies.

For taking away our charters, abolishing our most valuable laws, and altering fundamentally the forms of our governments.

For suspending our own legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated government here, by declaring us out of his protection and waging war against us.

He has plundered our seas, ravaged our coasts, burned our towns, and destroyed the lives of our people.

He is at this time transporting large armies of foreign mercenaries to complete the works of death, desolation and tyranny, already begun with circumstances of cruelty and perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the head of a civilized nation.

He has constrained our fellow citizens taken captive on the high seas to bear arms against their country, to become the executioners of their friends and brethren, or to fall themselves by their hands.

He has excited domestic insurrections amongst us, and has endeavored to bring on the inhabitants of our frontiers, the merciless Indian savages, whose known rule of warfare, is undistinguished destruction of all ages, sexes and conditions.

In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury. A prince, whose character is thus marked by every act which may define a tyrant, is unfit to be the ruler of a free people.

Nor have we been wanting in attention to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our separation, and hold them, as we hold the rest of mankind, enemies in war, in peace friends.

We, therefore, the representatives of the United States of America, in General Congress, assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the name, and by the authority of the good people of these colonies, solemnly publish and declare, that these united colonies are, and of right ought to be free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain, is and ought to be totally dissolved; and that as free and independent states, they have full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent states may of right do. And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

New Hampshire: Josiah Bartlett, William Whipple, Matthew Thornton

Massachusetts: John Hancock, Samual Adams, John Adams, Robert Treat Paine, Elbridge Gerry

Rhode Island: Stephen Hopkins, William Ellery

Connecticut: Roger Sherman, Samuel Huntington, William Williams, Oliver Wolcott

New York: William Floyd, Philip Livingston, Francis Lewis, Lewis Morris

New Jersey: Richard Stockton, John Witherspoon, Francis Hopkinson, John Hart, Abraham Clark

Pennsylvania: Robert Morris, Benjamin Rush, Benjamin Franklin, John Morton, George Clymer, James Smith, George Taylor, James Wilson, George Ross

Delaware: Caesar Rodney, George Read, Thomas McKean

Maryland: Samuel Chase, William Paca, Thomas Stone, Charles Carroll of Carrollton

Virginia: George Wythe, Richard Henry Lee, Thomas Jefferson, Benjamin Harrison, Thomas Nelson, Jr., Francis Lightfoot Lee, Carter Braxton

North Carolina: William Hooper, Joseph Hewes, John Penn

South Carolina: Edward Rutledge, Thomas Heyward, Jr., Thomas Lynch, Jr., Arthur Middleton

Georgia: Button Gwinnett, Lyman Hall, George Walton

Source: The Pennsylvania Packet, July 8, 1776

Can Employers Recover “Training Costs” From Employees?

Rob — Tue, 01 Jul 2008 17:10:55 +0000

In a recent decision by the First Appellate District in California, a court of appeals concluded that the City of Oakland could require an employee to repay training costs the employer incurred in training the employee. When Ken Hassey was hired by the Oakland Police Department, he signed a “conditional offer” that required Hassey to repay $8,000.00 in training costs if he failed to work for the Police Department for 5 years. Additionally, the Memorandum of Understanding negotiated by Hassey’s union allowed the City of Oakland to withhold any training costs from Hassey’s final paycheck. Partway through his initial training Hassey was encouraged to resign from the police department. Hassey signed a Training Cost Repayment Plan agreeing to repay the training costs. Despite the fact that the Training Cost Repayment Plan did not authorize the City to deduct the training costs from Hassey’s final paycheck, the City of Oakland withheld a portion of Hassey’s final paycheck and applied it to the debt.

When Hassey failed to make the required payments, the City of Oakland sued Hassey for the remaining balance. Hassey filed a cross-complaint alleging, among other things, that the repayment obligation was unlawful, that the City unlawfully withheld Hassey’s final paycheck and that the repayment obligation was an unenforceable covenant not to compete.

Analyzing the case under federal and California law, the appellate court concluded that the reimbursement agreement was valid. Relying on a Wisconsin case with similar facts, the court concluded that, “Oakland was permitted to seek reimbursement from police officers who gained the benefit of its training program at the Oakland Police Academy but did not stay with the police department long enough for Oakland to benefit from that training.”

The court also held, however, that the City of Oakland could not withhold Hassey’s final wages. California courts have long held that “an employer is not entitled to a setoff of debts owing it by an employee against any wages due that employee.” In particular, employers need to ensure that employees always receive at least minimum wage and any required overtime payments.

Finally, the court held that the repayment obligation was not an unlawful covenant not to compete. Although California has a strong public policy against covenants not to compete, nothing in the repayment obligation limited Hassey’s right to seek employment elsewhere. Although not specifically stated, the fact that Hassey had to repay the training costs regardless of whether he accepted another job that utilized Hassey’s training likely made it easier for the court to decide that Business and Professions Code Section 16600 was not implicated in the case.

Employers should be careful before deciding they can require employees to repay training costs and they should never take money from an employee’s paycheck without specific written authorization from the employee for that specific deduction. Even if the employee authorizes the deduction, the employer should ensure the employee receives at least minimum wages.

You can download an audio version of this article here: California Employment Lawyer Netcast for July 1, 2008.

Phillip J. Griego & Associates

95 South Market Street, Suite 520

San Jose, CA 95113

Tel. 408-293-6341

Original article by Robert E. Nuddleman of P hillip J. Griego & Associates

Time for Your Sexual Harassment Prevention Training

Rob — Tue, 11 Sep 2007 19:39:53 +0000

Employers with 50 or more employees are required to provide two hours of sexual harassment prevention training every two years. Most employers completed their training at the end of 2005. Those same employer are now looking to conduct the training again.

Some employers have decided to conduct the training in-house, or through Internet or computer-based training. Before you spend time or money on training that does not meet the minimum standards required by the newly enacted regulations, ensure the training is up to par.

The training must be conducted by:

An attorney admitted for 2 or more years to the bard of any state and whose practice includes employment law; or
A human resources professional or “harassment prevention consultant” with 2 or more years practical experience in providing sexual harassment training, responding to sexual harassment complaints, conducting investigation of sexual harassment complaints, or advising employers or employees regarding sexual harassment prevention; or
A law school, college or university professor with 2 years experience teaching about employment law.

The training itself must last a minimum of 2 hours, although the hours can be broken up over multiple days. The training must include;

A definition of unlawful sexual harassment;
The statutory provisions and case law principles concerning the prevention of sexual harassment, discrimination and retaliation;
Types of conduct that constitutes sexual harassment;
Remedies available for sexual harassment;
Strategies to prevent sexual harassment;
“Practical examples” (i.e., case law, news and media accounts, hypotheticals) illustrating sexual harassment, discrimination and retaliation using training modalities such as role plays, case studies, and group discussions.
The limited confidentiality of the complaint process;
Resources for victims of unlawful harassment;
The employer’s obligation to conduct an effective workplace investigation;
Training on what to do if the supervisor is personally accused of harassment;
The essential elements of an anti-harassment policy and how to utilize the policy (employees must sign and receive copies of the employer’s anti-harassment policy)

Many web-based or computer-based training programs do not meet these requirements. Additionally, if the trainer does not meet the minimum specifications, the training will not suffice. Employers that fail to provide the requisite training can be ordered to do so. You can guarantee that if you are ever involved in a sexual harassment lawsuit, your supervisors and HR employees will be questioned regarding the sexual harassment prevention training.

Our office is happy to review your training program or provide the required training. Our sexual harassment prevention training is tailored to your company. We can also “team teach” the training with individuals from your office who may not meet the training qualifications due to insufficient years of experience so that you can that the employee can conduct the training in the future.

Original article by Robert E. Nuddleman of Phillip J. Griego & Associates

Declaration of Independence

Rob — Thu, 05 Jul 2007 19:08:57 +0000