The Department of Labor (DOL) has been very aggressive in auditing employers over the misclassification of workers as independent contractors, instead of employees.  Properly classifying workers is important for employers to avoid hefty fines, additional taxes, interest, and additional wage and overtime obligations.

The old test focused on the employer’s control over the worker.  Since 2015, the DOL has applied an “economic realities test,” to determine whether the worker is economically dependent on the employer.  The test asks six questions to determine a worker’s proper employment status.  They are:

  1. Is the work to be performed integral to the operation of the business? If the work is integral to the business of the employer, the worker is economically dependent on the employer and therefore considered an employee.
  2. Does the worker’s managerial skills affect their opportunity for profit and loss? This is generally determined by whether or not the worker has the ability to make decisions and use their managerial skill and initiative to impact their profit and loss.
  3. How does the worker’s relative investments in facilities and equipment compare to the employer? Under this test the worker must make an investment and bear some risk of loss in order to be an independent contractor in business for themselves. Examples of investments might include the purchase of a specialized business vehicle, advertising for the business, rented office space for the business, etc.  The investment can’t be minor and needs to be compared to the employer’s investment.
  4. Does the work require special skills and initiative? To qualify as an independent contractor, the worker would need to exhibit independent business judgment. Business judgment must be used in some independent manner which demonstrates initiative.  These may include marketing the business, ordering supplies and equipment for the business etc.
  5. Is the work relationship indefinite? Indefiniteness in the working relationship makes it appear more likely the worker is an employee. Generally, an independent contractor relationship is evidenced by a contract for a limited period of time or a special project.
  6. What is the nature and degree of the employer’s control? Analysis of this factor takes into consideration who sets the amount of and hours of work, who determines how the work is performed, as well as whether the worker is free to work for others and/or hire helpers.

The DOL has specifically stated however, that the fact a worker has incorporated a business and/or is licensed by a state or local government has little bearing on determining the nature of the employment relationship.  Similarly, the mode or time of the payment to the worker is not determinative.

Since the DOL has declared most workers are employees under their broad definition, it is a good time for employers to review their independent contractors, to determine if they in fact are misclassified.  Getting it right will save a lot of time, effort, and money.

During the past legislative session, the legislature passed several significant changes to the Minnesota Veteran’s Preference Act, including reducing the 60 day notice period to 30 days, eliminating the three-person panel and replacing it with a single arbitrator, providing for the termination of a Veteran during probation without the protection of a Veteran’s hearing, and providing for the possibility the employer may be responsible for a discharged Veteran’s reasonable attorneys fees.

Minn. Stat. § 197.455 now allows, counties, cities, towns, school districts and other municipalities to require a veteran to complete an initial hiring probation period.  After the initial probation period is completed, a veteran may not be removed from a position except for incompetency or misconduct shown after a hearing.

The legislature also made changes to Minn. Stat. § 197.46.  After a veteran receives notice of the government’s intent to discharge him/her from employment, the veteran now has only 30 days to request a hearing, instead of the previously allowed 60 days.  The failure of the veteran to request a hearing within 30 days constitutes a waiver of the right to a hearing and all other legal remedies for reinstatement.  Additionally, the option to have the hearing before a “three-person panel” has now been changed to “an arbitrator.” In cases where the hearing will be before an arbitrator, the employer is to request a list of seven possible arbitrators from the Bureau of Mediation Services.  The legislature also stated the employer is required to strike first from the list of seven arbitrators, giving the Veteran the final selection.

The last significant change involves the costs associated with the hearing.  The statute will now read, “For disputes heard by a civil service board, commission or merit system authority, or an arbitrator, the governmental subdivisions shall bear all costs associated with the hearing, but not including attorney fees for attorneys representing the veteran.  If the veteran prevails in a dispute heard by a civil service board, commission or merit system authority, or an arbitrator and the hearing reverses the level of the alleged incompetency or misconduct requiring discharge, the governmental subdivision shall pay the veteran’s reasonable attorney fees.”

The most significant change for employers is the exposure to liability for the Veteran’s reasonable attorney’s fees in the event a discharge is reversed.

FMLA employerguideThe Department of Labor has announced a new FMLA guide designed to help employers through the FMLA process.  “The Guide is organized to correspond to the order of events from an employee’s leave request, to restoration of the employee to the same or equivalent job at the end of the employee’s FMLA leave. It also includes a topical index for ease of use.”  The new employer guide comes almost four years after the DOL published an employee’s guide to the FMLA.

An FMLA covered employer is required to prominently post an FMLA poster, whether or not there are FMLA eligible employees at that location.  A free download of the required poster is available through the DOL.  The DOL is in the process of reworking the poster to make it more reader friendly.  According to the DOL website, the 2013 version of the poster is still acceptable and employers will not be required to use the new version of the poster.  The information has not changed, and the new poster reflects new formatting rather than any substantive changes.

The employer guide is long overdue, and hopefully will help employers as they implement FMLA in their workplaces.

September 4, 2015 is the last day to submit your opinion on the proposed overhaul of FLSA overtime.  The Department of Labor has proposed revising the FLSA, extending overtime protections to nearly 5 million white collar workers.  Under the proposal, salaried managers earning less than $50,440 per year would now be eligible for overtime.  The intended group expected to benefit from the changes include occupations as diverse as graphic designers, assistant store managers, fast-food managers, and business analysts.  The proposed new rule more than doubles the salary test for those eligible to earn overtime from the current $445.00 per week ($23,660.00 per year), to $970.00 per week, ($50,440.00 per year).  Also being proposed is to increase the total annual compensation for highly compensated employees from $100,000.00 per year to $122,148.00 per year. Both new rates would be updated annually.

With only 2 days left to submit comments, the Department of Labor form is simple and fast to use, even though I believe it is a foregone conclusion the proposal will be passed and implemented in 2016.   The wage threshold has not been increased since 1975 and there is no doubt it needs to be fixed.  However, incremental increases over the years would have been easier to tolerate for employers.

The rules won’t be finalized until 2016, but employers are already looking for ways to comply with the law while keeping a lid on labor costs. A few basic ideas to accomplish this is:

  1. for employers to review their time clocks and time tracking software systems to help avoid workers running up overtime;
  2. carefully review job descriptions and where appropriate consider switching salaried employees to hourly employees; and
  3. one last idea is for employers to review their policies and insist employees not check email or return phone calls while they are off work.

While tracking employee work time has always been important, it is now even a bigger concern for employers.  Get ready, I predict big changes in overtime coming your way.  

This week, the National Labor Relations Board (NLRB) exercised its discretion to decline jurisdiction in a case involving Northwestern University scholarship football players.  The union representation petition filed by the College Athletes Players Association was dismissed.

Over 25 amici briefs were filed with the NLRB for consideration in this case.  Clearly, the potential unionization of scholarship college athletes is a big deal and could have ramifications throughout the country.  Northwestern University, as well as several of the amici briefs argued the NLRB should exercise its discretion to decline jurisdiction over college athletics, because it would not accomplish the basic purposes of the National Labor Relations Act (Act).

In its analysis of the facts, the NLRB indicated although Northwestern University is an “employer” as defined by the Act, the other 13 colleges included in the Big Ten Conference are all state-run institutions over which the NLRB has no authority because they are not considered “employers” under the Act.  Additionally, the NLRB stated, “…the scholarship players do not fit into any analytical framework that the Board has used in cases involving other types of students or athletes…”  Therefore, the NLRB concluded asserting jurisdiction in this case would not serve to promote stability in labor relations.

The NLRB was very clear its decision to decline jurisdiction was strictly based on the facts before them, and any changes in the treatment of scholarship football players could outweigh the factors applicable to the current decision, and the issue could be reconsidered in the future.  Nice to see some common sense from the NLRB.

MnUI-seal-header-sharpMore news on the Unemployment front:  In Fish v. YMCA, A14-728 (Minn. App. 12/15/2014), Mr. Fish was discharged for misconduct from employment with the YMCA.  Minn. Stat. § 268.095, Subd. 4 indicates an employee who is discharged for misconduct is ineligible for unemployment benefits.  Employment misconduct is defined as ‘intentional, negligent or indifferent conduct. . .that displays (1) a serious violation of the standards of behavior the employer has a right to reasonably expect of the employee or (2) a substantial lack of concern for the employment.’

In December 2013, Mr. Fish punched in for work and then proceeded to go lie down because he wasn’t feeling well.  He was found 30 minutes later by a coworker.  Going as far back as 2008, Mr. Fish had received other warnings for unsatisfactory performance.  The Minnesota Court of Appeals has previously held that employee’s behavior as a whole may be considered in determining the appropriateness of a discharge and qualification for unemployment benefits.

Recently, the Court of Appeals affirmed the decision of the ULJ who determined Mr. Fish’s past work record negatively impacted the YMCA, and he could not be trusted to perform his job duties in the future.  His misconduct could not be deemed a good-faith error in judgment.

Employers should consider an employee’s past work record and document it in a termination notice, in support of the decision to discharge the employee.  A sufficiently documented termination decision can support the denial of Unemployment benefits based on misconduct.   

NBC_News_Rockefeller_CenterThe recent Brian Williams debacle is the third major employee melt-down for NBC in the last 18 months.  NBC’s talent trouble started with the 2013 Today Show debacle and the bullying of Ann Curry by her fellow Today Show producers and hosts.  Curry left the show in tears amidst allegations of taunting and what she termed “professional torture.”

In 2014, NBC medical correspondent Dr. Nancy Snyderman’s ignored an ebola quarantine to go get take-out food, which brings us to Brian Williams recent 6 month suspension over his exaggerating news stories.  It was uncovered that news anchor Brian Williams embellished his involvement in a news report from twelve years ago, where he claimed his helicopter took on gun and missile fire while he was reporting from Iraq.  The media frenzy surrounding this revelation was a lot like piranhas feeding on fresh meat, no doubt influencing NBC’s decision to suspend Williams from the anchor desk.

It goes to show employee misconduct is not restricted by employee education, income, or job visibility.  I was glad to hear NBC conducted an investigation into the Williams matter, before deciding to suspend him for six months.

My question for NBC is why did it take twelve years for the Williams story to surface, and then only because an issue was raised by military personnel who were present?  What about the NBC camera crew and support personnel who were with Williams during the embellished helicopter ride twelve years ago?  Is there a corporate culture at NBC that protects badly behaving talent that should be addressed here as well?

Spin doctors are trying to shift the focus off of troubled NBC, and onto Fox news journalist Bill O’Reilly, alleging he embellished news coverage over the Falkland war.  Unlike Williams however, O’Reilly is holding fast to his journalistic integrity.

The take-aways:  NBC, like any employer dealing with employee misconduct, needs to review its’ corporate culture to get at the heart of why well-educated, highly-paid talent are behaving badly.  That is the only way NBC can truly retool their image and regain market share. I know I am going to be checking out David Muir over on ABC for my evening news, while NBC figures this all out.  I might even tune in to Bill O’Reilly to see why he is viewed as such a threat.

file0001730089237 (1)The Minneapolis Star Tribune recently reported on an investigation it did into Minneapolis Public School employees’ use of district credit cards.  The Star Tribune reviewed six months of school expense records including credit card purchases totaling $1.5 million dollars.  The newspaper discovered many of the school district employees failed to follow proper expense reporting policies, including not providing receipts for purchases.  Some even made personal purchases with the school district credit cards.  The outgoing superintendent and current CEO have since repaid the school district for unauthorized purchases.

So, would this circumstance be considered employee fraud and theft?  Arguably, any time an employee is making purchases in violation of a policy it could potentially be considered theft.  The Minneapolis School District has indicated it has already made changes to its purchasing card system.  It also acknowledged other changes need to be made, such as revising the reimbursement policy regarding the amount employees who are traveling can spend on meals.  Depending on where an employee is traveling, the current amounts of $7 for breakfast, $11 for lunch and $23 for dinner may not be sufficient.

Employee fraud and theft is an important issue for all employers to be on the lookout.  My firm has found by the time fraud or theft is discovered, it has typically been happening for some time.  It is rare for an employer to discover fraud or theft on the first occurrence.  For more information on what to do if you suspect an employee is stealing from your business check, out some of our previous blog posts here and here.   

adrian-petersonYesterday, Minnesota Vikings running back Adrian Peterson reach a plea agreement with the Montgomery County, Texas prosecutor’s office over charges he abused his 4 year old son. Mr. Peterson has pled no contest to one misdemeanor count of reckless assault, fined $4,000, and required to complete 80 hours of community service. He is currently participating in parenting classes. He will be on probation and if he avoids any trouble his record will be expunged in two years.

Mr. Peterson has been nothing but forthcoming about this parenting techniques and has cooperated with the prosecutor’s office, as well as the NFL during this time. So, the question that remains is what is the NFL going to do? Currently, Mr. Peterson is on the Commissioner’s exempt list, which means he can’t play but he is still being paid.

Dan Wetzel with Yahoo Sports wrote an excellent blog yesterday indicating this is a golden opportunity for not only Adrian Peterson, but also for the NFL to speak out and educate fans about domestic violence. Mr. Wetzel suggests, “Peterson’s punishment (or opportunity) going forward should be to take what he has learned (and will continue to learn) about abuse, anger management, parenting, child development and everything else and impart it to the public at large. If the NFL wants to make an impact on America then it should utilize Peterson’s celebrity and credibility in hard-to-reach communities and require him to lead on the subject of child abuse.” I completely agree with Mr. Wetzel’s opinions on this issue and think the NFL needs to run with Mr. Wetzel’s suggestions and return Adrian Peterson to work.

The NFL has suffered a lot of negative publicity since the start of the season, and here is a prime opportunity to take a bad event and turn it around so something good can come out of it.