Nancy C. Rodgers, Esq. Paul D. Godec, Esq.

Presented by

INDEPENDENT CONTRACTORS & OVERTIME ISSUES:

How to meet the requirements of the Department of Transportation and

the Department of Labor

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EE v. ICEmployees vs. Independent Contractors

Independent contractors • Individuals engaged in an independent

business • Offer their services to the general

public• Have control over when and how to

perform tasks and to arrive at the end product for a customer

Employees • Individuals who perform services for

an employer • Employer controls what will be done

and how it will be done • Employer controls the details of how

the work is performed

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Independent Contractors

What is the attraction?• No required “wages”• No expectations of benefits or

employee perks• Short-term relationship• Typically less cost to the company • No employment taxes such as FICA,

FUTA, unemployment, and workers’ compensation

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Independent ContractorsAvoid whole host of employment laws:• Occupational Safety & Health Act (OSHA)• National Labor Relations Act (NLRA)• Fair Labor Standards Act (FLSA)• Age Discrimination in Employment Act (ADEA)• Pregnancy Discrimination Act (PDA)• Family & Medical Leave Act (FMLA)• Title VII (race, gender, national origin, religion, etc.)• Equal Pay Act (EPA)• Colorado Anti-Discrimination Act (CADA)• Other Colorado and Federal Laws

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Legislators Want Employment"Misclassification of employees" means erroneously classifying a person as an

independent contractor, free from control and direction of the

employer in the performance of service for the employer, when the employer cannot show an exception … to the

general rule that service being performed for the employer

is presumed to be employment… .Colo. Rev. Stat. § 8-72-114(2)(f) (2009).

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Legislators Want EmploymentCDLE may impose fines & penalties:• $5,000 “per misclassified employee for the

first misclassification with willful disregard”• $25,000 per misclassified employee “for a

second or subsequent misclassification with willful disregard”

• “[P]rohibit[ ] the employer from contracting with, or receiving any funds … from, the state for up to two years … .”

Colo. Rev. Stat. §§ 8-72-114(3)(e)(III)(A) & (B)

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CAUTION: no single rule or test controls

EE vs IC: Dept. of Labor’s “Test”• DOL’s “Test”– The extent to which the services remain an integral

part of the principal's business.– The permanency of the relationship.– The amount of the contractor's investment in

facilities and equipment.– The nature and degree of control by the principal. – The contractor's opportunities for profit and loss.– The amount of initiative, judgment, or foresight in

open market competition with others required for the success of the independent contractor.

– The degree of independent business organization and operation.

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EE v. IC: Dept. of Labor’s “Test”• Immaterial factors:–Where work is performed–Absence of a formal employment agreement –Licensing by State/local government–Time or mode of pay

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EE v. IC: IRS “Test”CAUTION: no single rule or test

controls• IRS “Twenty Factor Test” has been retired• IRS “11 Main Test”– Assesses the level of control over the

worker

– Behavioral Control• Degree of instruction• Amount of training

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EE v. IC: IRS “Test”• IRS “11 Main Test” continued…– Financial Control

• Unreimbursed business expenses; worker’s financial investment

• services available to the market• pay (salary/hourly vs flat fee)• worker’s realization of profit or loss

– Type of Relationship• Written contract; benefits and “perks” • permanency of the relationship • extent to which worker provides key

aspect of the company’s business

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Status & Developments• CDLE “Misclassification Working

Group”– Legislative considerations– Regulatory considerations– Audit considerations

• Colorado case authorities

• National case authorities

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EMPLOYEE

Congratulations, it’s an ….

A MOTOR CARRIER EMPLOYEE

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The Fair Labor Standards Act

The Colorado Wage Act

Colorado Wage Order No. ____

Employees and their money…

29

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The Fair Labor Standards Act• Applies to employees• 40 hour work week• Minimum Wage (currently $7.78/hour)

for all hours worked• Overtime• Record keeping• Youth employment

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The Fair Labor Standards Act• Numerous exemptions and exceptions from the FLSA’s requirements– Executive, admin., professional, outside

sales

• Exempt Employees– No overtime due; set salary for each week

• Non-Exempt Employees–Must be paid for all hours worked; must be

paid overtime

• Motor Carrier Exemption

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FLSA: Motor Carrier Exemption29 U.S.C. § Section 13(b)(1)• Provides an exemption from overtime• Employees must be• Employed by a motor carrier subject

to the power of the Secretary of Transportation

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FLSA: Motor Carrier Exemption• Engaged in activities that directly affect the operational safety of commercial motor vehicles– Drivers, driver’s helpers, loaders, or

mechanics

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FLSA: Motor Carrier Exemption• The vehicles the employee works on must transport property or passengers on public highways in interstate or foreign commerce

BUT still due minimum wage for all hours worked

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FLSA: Motor Carrier ExemptionBUT still due minimum wage for all hours worked

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FLSA: Motor Carrier ExemptionINTERSTATE vs intrastate carriers

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• [fill in recent cases]

Motor Carriers in Court

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FLSA: Pay for all hours worked• “Suffered or Permitted to Work”– If an employee works for you, the employee

must be paid for that time– Volunteers

• Employee works when he shouldn’t?

• Pay the employee for the time work, including any overtime

• Discipline the employee for the violation

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FLSA: Pay for all hours worked• Waiting time– Time is controlled by employer

• On-Call time– Employee has little of no control over time

• Meal periods/Rest Periods– Not relieved of all duties; less than 30 minutes

• Training– Mandatory training; – benefiting employer

• Travel– Control and direction of

employer; not a commute

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• Requirements on when to pay employees – final pay, pay periods and paydays, and pay

statements

• Deductions from wages– Loans, advances, goods – pursuant to a

written agreement – Money or value of property employee

did not return

• Defines “wages” to include vacation, commissions, bonuses

Colorado Wage Act (8-4-101)

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Calculating Overtime• No matter how you pay, if

an employee is non-exempt, overtime must be paid– Hourly rate, piece-rate, salary,

commission, day rate, mileage rate

• Overtime pay is computed on the basis of the regular rate.– Includes all payments made by the employer to

the employee – Does not include: expenses, premium pay,

discretionary bonuses, gifts, vacation/ holidays/sick pay

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Misclassification: How to Fix It• Change the classification immediately and adjust the pay as needed

• Financial consequences– Failure to classify as an employee– Failure to classify non-exempt

• Any overtime due?

– Risk / benefits of paying monies due

• Communicate with the employee– Explain any policy changes (no more overtime)– Explain and change in pay (hourly vs salary)

Nancy C. RodgersEmail: nancy@kandf.comPhone: (303) 320-6100

Paul D. GodecEmail: paul@kandf.comPhone: (303) 320-6100

Questions?