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
www.kandf.com
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
www.kandf.com
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
www.kandf.com
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
www.kandf.com
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).
www.kandf.com
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)
www.kandf.com
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.
www.kandf.com
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
www.kandf.com
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
www.kandf.com
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
www.kandf.com
Status & Developments• CDLE “Misclassification Working
Group”– Legislative considerations– Regulatory considerations– Audit considerations
• Colorado case authorities
• National case authorities
www.kandf.com
EMPLOYEE
Congratulations, it’s an ….
A MOTOR CARRIER EMPLOYEE
www.kandf.com
The Fair Labor Standards Act
The Colorado Wage Act
Colorado Wage Order No. ____
Employees and their money…
29
www.kandf.com
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
www.kandf.com
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
www.kandf.com
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
www.kandf.com
FLSA: Motor Carrier Exemption• Engaged in activities that directly affect the operational safety of commercial motor vehicles– Drivers, driver’s helpers, loaders, or
mechanics
www.kandf.com
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
www.kandf.com
FLSA: Motor Carrier ExemptionBUT still due minimum wage for all hours worked
www.kandf.com
FLSA: Motor Carrier ExemptionINTERSTATE vs intrastate carriers
www.kandf.com
• [fill in recent cases]
Motor Carriers in Court
www.kandf.com
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
www.kandf.com
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
www.kandf.com
• 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)
www.kandf.com
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
www.kandf.com
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: [email protected]: (303) 320-6100
Paul D. GodecEmail: [email protected]: (303) 320-6100
Questions?