Marijuana in the workplace: Balancing competing obligations

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California Supreme Court Ruling Latest Blow to Independent Contractor Model

The California Supreme Court’s ruling in a case exploring how workers should be classified—either as independent contractors or as employees—means California businesses will have a tougher time justifying independent contractor classifications.

The court ruled on April 30 in the appeal of Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County.Dynamex, a package and document delivery company, had classified drivers as contractors instead of employees, meaning the company was relieved of its obligations under California Industrial Welfare Commission wage orders related to the wages, hours, and other working conditions of the drivers.

The court’s ruling significantly toughens the test used to determine whether a worker can be classified as a contractor. The change is expected to have a big impact on gig economy workers.

“The big takeaway is that even if you exercise no control over a worker, and even if that worker has other clients in an independent business, [she is] still an employee if [she] perform[s] work that is part of your usual business,” says Mark Schickman, the editor of California Employment Law Letter and an attorney with Freeland Cooper & Foreman LLPin San Francisco. “I don’t see how driving businesses like Uber or Lyft could designate a driver as anything but an employee.”

Schickman says other businesses also will be affected, such as retail stores hiring gig workers to sell merchandise and law and accountancy firms that hire independent contract lawyers and accountants. “Independent contract arrangements were always tough to justify and now it is even tougher,” he says.

ABC Test

Todd R. Wulffson, an attorney in the Irvine office of Carothers DiSante & Freudenberger LLP, explains that the Dynamex ruling is significant for California employers because it adopts the “ABC test” to make the determination. Previously, the state used a multifactor test focusing on the level of control the hiring entity had over the worker’s performance of the work.

The ABC test presumes a worker is an employee unless the hiring entity proves the following:

(A)       The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B)       The worker performs work that is outside the usual course of the hiring entity’s business; and

(C)       The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

“Under this new test, the majority, if not the vast majority, of current independent contractors should be reclassified as employees—particularly people driving in the gig economy,” Wulffson says, adding that if a California employer has more than a few independent contractors, it should conduct an audit—with the assistance of counsel to keep it privileged—to determine liability.

Misclassifying independent contractors is a common class action issue, Wulffson says, “and those are very expensive, time-consuming, and painful lawsuits that are almost never covered by insurance.”

In its decision, the court noted that the ABC test is used in other jurisdictions to determine worker status, but Wulffson says it isn’t very prevalent, “most likely because it is so strict.” Thus, the ruling will be a blow to both businesses and contractors.

“California, unfortunately, has proven yet again that but for the weather, no one would want to start a business here,” Wulffson says.

Impact Beyond California

Wulffson doesn’t expect the ruling to have a major impact beyond California since most states don’t follow California’s example on employment laws. He points out that California is one of just three states with daily overtime, plus the state “has a panoply of employment regulations and laws found almost nowhere else.”

The independent contractor test used at the federal level also differs from California’s new test. Wulffson says the U.S. Department of Labor (DOL) uses the economic reality test, which looks primarily at seven factors focused on the level of control the hiring entity has over the contractor.

Wulffson says the DOL also has focused on misclassification in recent years because of concern that businesses are wrongfully avoiding payroll taxes. “It has not, however, gone anywhere near the ABC test,” he says.

5 Critical Components Every Job Description Must Contain

A job description need not account for every task that might ever be done. Here are the most critical components of a good job description.

  • Heading information.This should include job title, pay grade or range, reporting relationship (by position, not individual), hours or shifts, and the likelihood of overtime or weekend work.
  • Summary objective of the job.List the general responsibilities and descriptions of key tasks and their purpose, relationships with customers, coworkers, and others, and the results expected of incumbent employees.
  • Qualifications.State the education, experience, training, and technical skills necessary for entry into this job.
  • Special demands.This should include any extraordinary conditions applicable to the job (for example, heavy lifting, exposure to temperature extremes, prolonged standing, or travel).
  • Job duties and responsibilities.Only two features of job responsibility are important: identifying tasks that comprise about 90 to 95 percent of the work done and listing tasks in order of the time consumed (or, sometimes, in order of importance).
    • The first task listed should be the most important or time-consuming one, and so on.
    • Employers can cover 90 to 95 percent or more of most tasks and responsibilities in a few statements.
    • It’s more important to list what must be performed and accomplished than how, if there is more than one way to do it. Being too specific on how to accomplish a duty could lead to ADA issues when an employee asks for an accommodation.

Bottom Line

Creating and maintaining job descriptions isn’t difficult. In fact, sometimes businesses use the development of job descriptions as a means of opening new lines of communication with employees. Employees want to be heard, and the development of job descriptions is a perfect opportunity to increase employee involvement.

If employers approach the process correctly, it can even be fun! The reward for management is a useful tool that helps guide many critical employment decisions and serves as an important consideration in the defense of administrative actions and lawsuits.

What Is an Employee Benefits Broker?

When you hear the word “broker,” what comes to mind? Insurance? Real estate? Brokers are typically people who have access to several options (in whatever their specialty is) and can help you narrow down your choices. Employee benefits brokers are exactly that: people who have access to (and information about) various employee benefit options who can help you narrow down your offerings by providing their input and expertise on the matter.

It’s important to note, however, that not all employee benefits brokers are the same. Some may work for one organization, such as a large health insurance provider, and therefore steer you only through choices from that provider. Others may not be tied to only one provider but may only specialize in one type of benefit. Still others may have a larger base of benefit options to consider but may or may not have as much depth of knowledge across all of the choices. There are a lot of things to consider.

What Can an Employee Benefits Broker Do?

When selecting an employee benefits broker, be sure to know which of these topics (below) are most important to you, and confirm that the broker you select can assist with those specific concerns. Not all brokers will perform every item on the list.

Here are some of the things an employee benefits broker may be able to provide to an employer:

  • Information and assistance in choosing various forms of insurance, including health, life, disability, dental, vision, and more. Note that not all brokers offer the full range of insurance options, but a large majority of benefits brokers specialize in insurance in some capacity.
  • Compliance information, helping the employer to ensure it stays compliant with the Affordable Care Act (ACA), the Employee Retirement Income Security Act (ERISA), and any other regulations that are relevant for the benefits on offer.
  • Advice on how to minimize total costs, such as how to reduce total premiums.
  • Assistance with employee communications related to benefit enrollment.
  • Contract review and negotiation (leverage) with the benefit providers to get a good deal. They may be able to create a customized insurance package for your organization.
  • Assistance in resolving problems. A broker may be able to act as a go-between for the employer to help resolve any problems with claims or administration of the benefits.
  • Analysis of your existing benefits and claims to provide advice on changes and potential cost savings.
  • Advice on changes to benefit packages based on your employee demographics, as well as analysis of previous utilization rates.
  • Direct assistance to employees who have benefit, coverage, or claims questions or need help with claims.
  • Education for employees about their options during open enrollment.

Remember, not all brokers provide all of the above services. It pays to ask in advance which of these items will be provided. The more services a broker provides, the greater he or she assists the organization and the employees. But there are also costs to consider.

Once you know what functions you’d like from an employee benefits broker, that’s not the end of the story. Here are some other considerations:

  • Any broker who is providing insurance will likely have to be licensed to provide this. Consider whether this individual will need licenses across multiple states to help serve your business or whether you may need multiple brokers who are licensed in different geographic areas. If you do, this may be solved by utilizing a firm with expertise across more than one location.
  • While some people may use the terms interchangeably, an employee benefits broker is not necessarily the same thing as an employee benefits consultant. Some would argue that an employee benefits consultant goes beyond what a broker does by providing even more in-depth consulting and decision-making assistance to the employer and the employees. A benefits consultant may be more likely to be able to assist with multiple types of benefits beyond just insurance. Consider which option you need. Note that fee structures may also differ for consultants versus brokers.
  • Brokers may work for or have contracts with specific insurers. The employer should ask what carriers the broker evaluates before making recommendations. It’s not necessarily a problem if the broker works with a specific insurer—it may mean you get greater discounts. But know what you’re getting and what trade-offs you’re making.
  • Brokers have fees, of course. These fees are typically bundled into the coverage provided. Ask about this up front and whether there are any additional fees. Some brokers instead operate on a flat fee based on your specific needs.
ICE Planning Surge of I-9 Audits This Summer

Derek Benner, acting executive associate director for ICE’s Homeland Security Investigations (HSI) told The Associated Press that in addition to the plans for this summer, the agency will continue to focus on criminal cases against employers and deporting employees who are in the country illegally.

ICE has already opened more worksite investigations seven months into fiscal year (FY) 2018 than the agency completed in all of FY 2017. The federal fiscal year runs from Oct. 1 to Sept. 30. Enforcement investigations in FY 2018 have doubled last year’s total, and arrests related to worksite enforcement have nearly quadrupled.

Since October 2017, HSI has opened 3,510 worksite investigations, initiated 2,282 I-9 audits, and made 594 criminal and 610 administrative worksite-related arrests. That’s up from 1,716 investigations, 1,360 I-9 audits, 139 criminal arrests and 172 administrative arrests the previous fiscal year.

If anyone was wondering if the Trump administration was more bark than bite, these numbers indicate a significant increase in enforcement action, noted Muzaffar Chishti, an attorney and director of the Migration Policy Institute’s office at New York University School of Law. “What is not clear is whether any employers are included in the arrests,” he said. “Arrests—both criminal and civil—are almost always workers. For example, no one from management was charged in the high-profile Tennessee raid in April. That seems to be an imbalance.”

The ICE Toolkit

ICE said it uses a three-pronged approach to worksite enforcement:

  • Compliance, via Form I-9 audits, civil fines and debarment from federal contracts.
  • Enforcement, through the criminal arrests of employers and administrative arrests of unauthorized workers.
  • Outreach, by participating in the ICE Mutual Agreement between Government and Employers program, in which ICE certifies organizations for complying with the law. As part of the program, ICE and U.S. Citizenship and Immigration Services provide education and training on proper hiring procedures, fraudulent document detection and use of the E-Verify employment eligibility verification system.

Chishti believes pushing employers to enroll in E-Verify may be the aim of ICE’s more aggressive enforcement actions. “That strategy may work, but it only works for people who are on payroll,” he said.

E-Verify doesn’t enforce compliance for people paid as independent contractors, outsourced workers or those paid off the books, he said, adding that there’s a tendency for employers to explore these alternative hiring methods in response to increased enforcement.

Be Prepared for a New Normal.

Soon, ICE intends to conduct up to 15,000 Form I-9 audits per year, to be completed by electronically scanning documents in a not-yet-created national inspection center, Benner said.

“Investigations most often start with a notice of inspection alerting employers that ICE is going to audit their employment records for compliance with existing law,” said Michael H. Neifach, an attorney in the Washington, D.C., region office of Jackson Lewis. Enforcement actions can begin from a law enforcement tip or from an investigation into another type of violation, such as labor standards violations, and could result in civil penalties and/or criminal charges for employers.

ICE recently changed the way it calculates civil penalties to increase the fines imposed for I-9 violations. In FY 2017, employers were ordered to pay $97.6 million in judicial forfeitures, fines and restitution, and $7.8 million in civil fines.

“Unauthorized employees who are not legally in the U.S. may be detained and, ultimately, deported,” Neifach said. “Given the government’s focus on worksite inspections, preparing for possible inspections by auditing your employment verification processes and records is an essential precaution.”

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