Safari Professionals of the Americas Michael D. Billok, Esq. mbillok@bsk.com January 14, 2016

Are They Really Not an Employee? Independent Contractors Right to Control Test Determination rests upon whether employer exercises control over the results produced or over the means used to achieve the results An agreement between the parties is not determinative Analysis requires an examination of the actual course of conduct between the two parties (cont’d) *

Are They Really Not an Employee? Independent Contractors An independent contractor is a business that offers services to the public; this usually means media advertising, commercial telephone listing, business cards, insurance, own business establishment, etc. Evidence of independent contractor status: Significant investment in facilities (hand tools and personal transportation are not significant) Risk of profit or loss in providing services Freedom to work own hours and to schedule own activities No requirement to attend meetings or training sessions and does not provide oral or written reports Freedom to provide services for other businesses (competitive or non- competitive) (cont’d) *

Are They Really Not an Employee? Independent Contractors Evidence of employment status includes: Full-time work Setting work hours Attendance at meetings and / or training Requiring prior permission for absences Controlling when, where, and how to do the job Direct supervision Providing facilities, equipment, tools or supplies Setting rate of pay Reimbursement or allowance for business or travel expenses Fringe benefits (cont’d) *

Are They Really Not an Employee? Independent Contractors Evidence of employment status includes: Setting time, money or territorial limits Requiring services to be rendered personally (no subcontracting) Requiring oral or written reports Providing services that are integral part of the business, particularly when performed on a continuing basis Identification of the individual as a representative of the employer (e.g., office line or email address) Does not allow the individual to perform services for competitive businesses Reserves the right to end services on short notice Supervises unskilled labor (or is subject to supervision) (cont’d) *

Are They Really Not an Employee? Independent Contractors Ask yourself: Does the contractor advertise, have a website, have business cards, have stationery, advertise in yellow pages? Test the corporate structure Check with the Secretary of State whether the corporation is actually incorporated Ask for insurance; etc. Run an Internet search on entity; What’s turning up? For individuals, run LinkedIn search What does profile say? Self-employment? Lists other representative clients? Shows your company as an employer? (cont’d) *

FLSA & Independent Contractors USDOL recently issued new “Administrator’s Interpretation” (July 15, 2015) Addresses “problematic trend” of independent contactor “misclassification” Employees are wrongfully being denied workplace protections E.g., Minimum wage, overtime pay, unemployment insurance, and workers’ compensation protection Misclassification also results in lower tax revenues for government *

FLSA & Independent Contractors USDOL’s Position: “[M]ost workers are employees” under the FLSA Scope of “employment” under FLSA is very broad “Employ” = “to suffer or permit to work” USDOL continues to target independent contractor relationships (even when mutually- acceptable and advantageous) *

FLSA & Independent Contractors USDOL: Must use multi-factor “economic realities” test to determine if worker is an employee or independent contractor No one factor determinative Should not be “mechanically” applied Guided by notion that “scope of the employment relationship is very broad” Liberally construed to provide expansive coverage of workers under the FLSA *

FLSA & Independent Contractors Factors to assess “economic realities” of relationship under FLSA: Is work an integral part of employer’s business? Does worker’s opportunity for profit or loss depend on his or her managerial skill? What is worker’s investment compared to employer’s? *

FLSA & Independent Contractors Factors to assess “economic realities” of relationship under FLSA (Cont.): Does work performed require special business skills, judgment, and initiative? Is relationship permanent or indefinite? How much control is exercised by putative employer over the worker? *

FLSA & Independent Contractors According to USDOL, the fundamental issue is as follows: Is the worker “economically dependent” on the business? Or is the worker “in business” for herself/himself? *

Some “Actual Realities” About the USDOL’s Interpretation… USDOL will be predisposed to find an employment relationship exists (and will be inherently skeptical that an independent contractor relationship is bona fide) Application of the multi-factor “economic realities” tests leaves USDOL with extreme discretion Any “good” facts in your case – tending to show an independent contractor relationship – will be marginalized and discounted *

Some “Actual Realities” About the USDOL’s Interpretation… (Cont.) If you doubt our conclusions, consider some notable quotations from the guidance: “[I]nvesting in tools and equipment is not necessarily a business investment or capital expenditure that indicates a worker is an independent contractor.” “[A] lack of permanence [to the engagement] does not automatically suggest an independent contractor relationship.” *

Some “Actual Realities” About the USDOL’s Interpretation… (Cont.) If you doubt our conclusions, consider some notable quotations from the guidance (Cont.): “[W]orkers’ control over the hours when they work is not indicative of independent contractor status.” “[A]n employer’s lack of control . . . is not particularly telling if the workers work from home or offsite.” *

Some Actual “Realities” About the USDOL’s Interpretation… (Cont.) Now ask yourself: Is the “independent contractor” classification truly beneficial to your business or organization? (Even considering the hostile regulatory environment and potential risks?) Are you prepared to fully litigate the issue? (Because you will likely have a hard time convincing USDOL that you have properly classified someone as an independent contractor.) Are you prepared to incur the costs, damages and penalties resulting from worker misclassification? *

Review of Agreement *

Litigation v. Arbitration *

Arbitration can be less expensive than litigation.   Less time committed Less work effort However   Filing Fees Final Fees Hourly/Daily Compensation for the arbitrator(s) Room rental fees Other costs

Arbitration can be faster than litigation. Streamlined process No backlogged court dockets   However   No court scheduling order Time to select arbitrator(s)

C. Arbitration affords greater privacy to the parties. No publicly filed allegations No public trials or decisions Parties control of information   However   Leverage

D. Arbitration may allow the parties to avoid extensive and burdensome discovery. Discovery limitations   However   May have needed more discovery

E. Arbitration may allow the parties to avoid motion practice. Motions limited or eliminated   However   No early challenge of claims No provisional remedies

F. Arbitration may allow the parties to avoid the strictures of the rules of evidence. Relaxed standards   However   Lost advantage

G. Arbitration provides for greater finality. Difficult to challenge decision   However   Stuck with bad decision Arbitrators sometimes try to stick to the middle

H. Arbitration is a creature of contract. Draft what you want Flexible   However   Predictability of rules of civil procedure is lost

The information in this presentation is intended as general background information on labor and employment law. It is not to be considered as legal advice. Employment law changes often and information becomes rapidly outdated. All rights reserved. This presentation may not be reprinted or duplicated in any form, without the express written authorization of Michael D. Billok, Esq. *

Safari Professionals of the Americas Michael D. Billok, Esq. mbillok@bsk.com January 14, 2016