Top HR Best Practices Contractors Should Adopt to Avoid ... · Top HR Best Practices Contractors Should Adopt to Avoid Getting Sued Construction HR & Training Professionals Conference

©2019 The Associated General Contractors of America, Inc.

Jennifer H. KayOf CounselOgletree Deakins

October 11, 2019

Top HR Best Practices Contractors Should Adopt to Avoid Getting Sued

Construction HR & Training Professionals Conference

Employment Law Update and

Best Practices

.

Presented by

Jennifer H. Kay (Chicago, Illinois)

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C. ogletree.com

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Today’s Discussion

◼ FLSA Update: Part 541 Salary Test

⚫ Updating requirements for Overtime Pay

◼ Misclassification – the ongoing saga with Independent

Contractors

◼ Harassment Refresher




Changes to the “Salary Test” for Exempt Employees:

Employers Need to Review Classification

of Exempt Employees




Paid on a Salary Basis means:

◼ Employee must receive a predetermined amount

constituting all or part of the employee’s compensation

each pay period;

◼ The predetermined amount may not be reduced due to

variations in quality or quantity of work;

◼ Employee paid full salary regardless of hours worked

in the work week, but no pay if no hours worked.




New Minimum Salary Threshold◼ $684 per week (formerly $455 per week)

◼ $1,368 bi-weekly (formerly $910 bi-weekly)

◼ $1,482 semi-monthly (formerly $986 semi-monthly)

◼ $2,965 monthly (formally $1972 monthly)

◼ $35,568 annually (formally $23,660 annually)

Effective Date: January 1, 2020




Nondiscretionary Payments to Meet

Test◼ 10% of Minimum Salary level may be nondiscretionary

bonus, incentive, or commission payments.

◼ Nondiscretionary payments must be paid annually but

can be paid more frequently.

◼ “Catch-up” payment to meet minimum 10% is

permissible if made in first pay period of following year.




Highly Compensated Employees

◼ New regulations also change the threshold for a Highly

Compensated Employee (HCE)

⚫ New Standard Total Compensation: $107,432

◼ Other regulations for HCEs did not change.




Actions To Take Now

◼ Evaluate jobs impacted by the new salary threshold

⚫ Will currently exempt positions receiving less than the new

threshold receive a pay increase or will they be reclassified?

⚫ Confirm that exempt employees meet the “duties” test

◼ Confirm that highly compensated employees meet

other exemption criteria




The Independent Contractor Saga Continues:

Making Sure Your Independent Contractors

Are Not Employees




EE or IC: This is the questionContinues to be a challenge for employers because there

is no single applicable legal standard.

• Depends on the law, state, court, or agency

• But, there is a Common theme: Is the worker truly independently in business for himself or is he controlled by and reliant on your business?




FLSA Economic Realities Test1. The extent to which the services rendered are an integral part of the principle’s

business;

2. The permanency of the relationship;

3. The amount of the alleged contractor’s investment in facilities and equipment;

4. The nature and degree of control by the principal;

5. The alleged contractor’s opportunities for profit or loss;

6. The amount of initiative, judgment, or foresight in open market competition

with other required for the success of the claimed independent contractor;

7. The degree of independent business organization and operation.




IRS Three Category Test

◼ Behavioral control

◼ Financial control

◼ Relationship of the parties




“ABC” Test Used By Many StatesNo balancing test—the company must overcome the presumption of employees status by proving the following three requirements:

1. The worker is free from direction and control in the performance of the service, both under the contract of hire and in fact

2. The worker’s services must be performed either (i) outside the usual course of the employer’s business or (ii) outside all the employer’s places of business

3. The worker must be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the service being provided




Best Practices for IC status

• Enter into a written contract with ICs—not controlling but essential!

• Require ICs to be set up in a separate legal entity, and require proof of good standing for same

• Where applicable, ensure that ICs have multiple routes or territories, which would require them to employ helpers or employees

• Avoid permanent relationships—establish an expiration date in the contract not to exceed one year at the longest

• Avoid termination at will language in contract




Best Practices (continued)• Allow the IC to hire employees to assist him/her with the

services and/or to perform services in his/her place without prior company approval

• Allow the IC to negotiate contract terms (e.g., rates)

• Require payment by the job—not hourly—and avoid paying any set salary

• No exclusivity: allow IC to work for other customers, to advertise his/her services to others through his/her own business cards or other advertising materials




Best Practices (continued)

◼ Allow the IC to control the economic aspects of

his/her business by, for example:

⚫ Requiring significant investment in all equipment

necessary to perform the service

⚫ No reimbursement of business expenses




Best Practices (continued)⚫ No provision of subsidies, privileges, goods,

services, or facilities at a discount or free (e.g.,

providing an office or office equipment for IC use)

⚫ Provide an opportunity for profit or loss based on

managerial skill by allowing the IC to make his/her

services available to the market, accept or

refuse work for your Company (document)




Avoid Control◼ Avoid CONTROL over the manner and means in which services are

performed, such as

⚫ Specific work hours or mandated work at company offices

⚫ Designated break/lunch periods

⚫ Specific techniques

⚫ Employee handbooks or policy manuals

⚫ Training programs

⚫ Grooming provisions

⚫ Noncompetition provisions

⚫ Mandated dress code or uniforms




Different Treatment of ICs◼ No use of conventional discipline for ICs (say that

breach of contract may result in contract termination)

◼ Allow the IC to own or obtain an equity interest in the

business that can be sold to others without prior

company approval for profit or loss

◼ No benefits or vacation

◼ Do not include ICs in employee meetings or

employee training sessions




Worksite Harassment:

A Challenge When Multiple Employers

At The Same Place At the Same Time

Understand Your Obligations to Your Employees




Many Laws Protect Against

Discrimination

Protected Classes Include: Race, Color, National Origin,

Sex, National Origin, Age, Disability and other classes as

defined by state or local law (such as marital status and

parental status).




Discrimination in Employment

◼ Laws (federal, state, local) protect employees and

applicants from discrimination and retaliation because

of protected class status. This includes decisions

regarding hiring, discipline, termination, promotion,

compensation, training, and any other term or

condition of employment.




Multi-Employer Worksites

◼ Employers must provide a work environment free from

harassment for their employees.

⚫ Your employees cannot harass one another

⚫ Your employees cannot harass another employer’s

employees

⚫ Your employees are not required to tolerate harassment from

employees of other employers




What is Harassment?

◼ Unwelcomed Conduct

◼ Based on Protected Class status

◼ Sufficiently severe or pervasive to alter conditions of

employment and/or create an abusive work

environment




Practical Strategies

◼ When in doubt about the propriety of a remark, don’t

make it

⚫ How would you feel if it were made to one of your loved

ones?

⚫ Would you be uncomfortable if the whole company knew you

said it?




Practical Strategies

◼ Think proactively about how a remark or message

might be received, including:

⚫ Who is delivering it,

⚫ Who will receive it, and

⚫ The context




Best Practices

◼ Review/Update your Harassment Policy often (every

year is recommended)

⚫ Include statement of intolerance for harassment by

employees of other employers

◼ Train Supervisors to identify and report harassment

◼ Train Employees on your Company policy and how to

report any experienced or observed harassment




QUESTIONS

Documents

Top HR Best Practices Contractors Should Adopt to Avoid ... · Top HR Best Practices Contractors Should Adopt to Avoid Getting Sued Construction HR & Training Professionals Conference