Storm & Security

PEOPLE IN THE KNOW 2015 / STORM & SECURITY PROTECTION 17 PROTECT / YOURSELF | by Don Leggett | So You Think You Know Who Your Employees Are Employee status under judicial review. Who is an employee depends on who is asking the question. Being in business has never been straight- forward, but some aspects of the employee question were rather apparent: If the corporation compensates a person, he or she is an employee; if the corporation pays a staffing company for an employee, he or she is a staffing employee; and if a business pays a separate company to perform work, then the separate company is an independent contractor. Anyone who performs a service to a party that is not an independent contractor or an employee is considered a contingent employee. There are always gray areas concerning independent contractors, but contingent employees were well defined. Staffing, temporary or leased employees were always the employees of the entity from which your company paid to use the services of the hired individuals. Recently, the Department of Labor (DOL) became concerned that the definition of an employee was too ambiguous to be of value in our modern society. Therefore, it decided the description should be changed to a singular definition that would be used by everyone to clearly define who is an employee. Evolving Definition For nearly a century, business owners and the staffing industry thought the classification of an employee had been well defined and the definitions had served society to provide jobs and opportunities for many Americans. Anyone who has dealt with federal labor laws will agree that DOL is correct; there needs to be one definition of who is an employee. Currently, many federal laws, including the National Labor Relations Act (NLRA), the Civil Rights Act, the Fair Labor Standards Act (FLSA) and the Employee Retirement Income Security Act, all contain similar yet different definitions of employees. The explanation of who is an employee has evolved over a century of both congressional delegation and judicial review. Different interpretations of the written laws verses judicial analysis might mean a worker be deemed an employee for purposes of the FLSA, but an independent contractor for purposes of the NLRA, without any apparent policy justification for the disparity of treatment. The DOL has issued the following statement, "The determination of whether a worker is an employee protected by federal labor and employment law should not be based on the degree of immediate control the employer exercises over the worker, but rather on the underlying economic realities of the relationship." Another example to clarify where the employee definition is and where government agencies would like it to be is illustrated in the following scenario: Under the economic test for determining an employee's status, if an electrician hires installers to pull wire for an alarm system, the cable installers could be deemed employees. The complexity of this economic definition is seen if the workers were hired from a third party, such as a temporary staffing agency. If they were, their incomes still would be counted as if they were employees of the original employer because the labor of the workers is being used to increase the economic output of that business and the function/work of the workers is parallel to its business objectives. For a better understanding of DOL's thought process, I have included some quotes from recent DOL position papers: • "As employers seek new ways to make the employment relationship more flexible, they have increasingly relied on a variety of arrangements popularly known as 'contingent work.' The use of independent contractors and part-time, temporary, seasonal and leased workers has expanded tremendously in recent years. On the positive side, contingent employment relationships are in many respects a sensible response to today's competitive global marketplace." • "Not being a full-time employee is negative and contingent arrangements may be introduced simply to reduce the amount of compensation paid by the firm for the same amount and value of work, which raises some serious social questions. This is partic- ularly true because contingent workers are drawn disproportionately from the most vulnerable

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