Anna Elento-Sneed June 13, 2018 Webinar Wednesdays HR TOOLKIT -- STAFFING Anna Elento-Sneed June 13, 2018

Please consult an attorney if you have specific legal issues. Disclaimer This presentation is provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult an attorney if you have specific legal issues. Copyright 2018 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

Staffing Options in a “Gig” Economy Factors to Consider: DISCUSSION TOPICS Staffing Options in a “Gig” Economy Factors to Consider: Control v. Cost Proprietary rights Confidential information Insurance coverage for workers’ actions Liability for workers’ conduct Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

STAFFING IN A “GIG” ECONOMY “Traditional” Options Employee Full time Part time Temporary contract workers Independent contractor Company Individual (“Consultant”) “Newer” Options Temporary staffing agencies Leasing companies PEOs Franchisees Web-based providers Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

BASICS: EMPLOYEE Definition Advantages Disadvantages Individual performing service for another Formal relationship not required Advantages Employer controls employee May dictate duties, performance standards, terms & conditions of employment Disadvantages Compliance with federal & state laws Increasing labor costs & limited methods for reducing costs Labor & employment laws do not adapt quickly Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

BASICS: INDEPENDENT CONTRACTOR Definition Individual meets criteria set forth in different labor & employment laws Advantages Frees company from employer obligations to IC IC responsible for meeting employment requirements of its employees Disadvantages Loss of control Failure to classify individual properly can result in significant damages, penalties & fines IC designation doesn’t shield your company from liability if your “agent” is injured or injures another Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

BASICS: TEMP/LEASED/PEO EMPLOYEE Definition Employees from one company (Company A) assigned to work for another company (Company B) Advantages May use employees to fill staffing needs (temporary, long term basis) Not directly employed by your company; temp/leasing agency/PEO is responsible employer Disadvantages Same disadvantages as independent contractors Joint employer liability – compensation, unions, etc. Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

Independent Contractor Temp/Leased /PEO Employees BASIC COMPARISON Employee Independent Contractor Temp/Leased /PEO Employees Definition Individual performing service for another Individual meets criteria set forth in different labor & employment laws None. Generally describes employees from one assigned to work for another company Advantages Employer controls employee Frees company from employer obligations to IC and IC’s employees May use temps to fill temporary vacancy Temp or leasing agency is responsible employer Disadvantages Compliance with federal & state laws Costs Loss of control Significant costs if misclassified Still liable for injuries Same disadvantages as ICs Joint employer liability Copyright 2018 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

COSTS v. CONTROL Costs of Staff Control Wages Benefits Taxes Company revenue & expenses Control Method Means Timing Quality Quantity Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

COMPARE: COST v. CONTROL Employee Independent Contractor Temp/Leased/PEO Employee Costs Wages Benefits FICA/FUTA/ SUTA Co. revenue & expenses Negotiated fee No benefits No FICA/FUTA/ SUTA IC’s expenses & profit Co’s expenses & profit Control Method Means Timing Quality Quantity Timing, limited Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

PROPRIETARY RIGHTS Right to ownership of a product or work depends upon the relationship between the company & the person helping on the project Three types of relationships: Employee Independent contractor (includes temp/leased/PEO) with “work for hire” agreement Independent contractor (includes temp/leased/PEO) without “work for hire” agreement Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

PROPRIETARY RIGHTS Employee If work is created in course & scope of employment, ownership belongs to employer Issue is whether individual meets test for employee status Courts look at variety of factors including: Control exercised by hiring party Skill required Compensation, benefits & tax treatment Right to assign work over time Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

PROPRIETARY RIGHTS Independent Contractor w/ Work for Hire Agreement Work commissioned from skilled, independent contractor & performed pursuant to written agreement Work must fall within nine categories of “work for hire” agreements Commissioned work owned by hiring party Contribution to collective work Instructional text Part of motion picture or audiovisual work Test Translation Answer material for test Supplementary work Atlas Compilation Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

PROPRIETARY RIGHTS Independent Contractor w/o “Work for Hire” Agreement If work falls out of “work for hire” categories, or hiring party fails to enter into written agreement designating product as “work for hire,” then ownership of commissioned work belongs to independent contractor Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

CONFIDENTIALITY Trade Secrets Refers to any information that is: Not publicly known Gives a competitive edge to owner Maintained as a secret Governed by state law Company at risk of losing trade secrets if employees lured away by competitor Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

CONFIDENTIALITY Steps to Protect Trade Secrets Develop internal trade secret policy & procedure Identify confidential information Restrict access Warn employees about unauthorized disclosure Consider using contracts to protect info. Confidentiality agreements Non-disclosure agreements Non-compete agreements Per HRS Sec. 480-4, non-compete and non-solicitation agreements not permitted for software & technology development companies Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

COMPARE: PROPRIETARY RIGHTS & CONFIDENTIALITY Employee IC Agreement w/ Work for Hire Agreement IC w/o Work for Hire Agreement Proprietary Rights If work done in course & scope of employment, work belongs to Employer Co owns if: (1) work commissioned; (2) per written contract; (3) work falls w/n 9 categories IC owns work if no valid, written work for hire agreement entered into Confidentiality Can use policy & procedure to protect info Contract provides better protection Written contract w/ confidentiality provisions required Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

INSURANCE COVERAGE FOR WORKER Worker seeking coverage under policy Type of Insurance Employee Independent Contractor Temp/Leased/PEO Employee Workers Comp Covers employee’s work-related injuries/illnesses Covered as claimant Not covered Would need coverage from Temp/Leasing/PEO TDI Covers employee’s non-work related injuries/illnesses Employment Practices Liability Covers claims against Co. & management filed by employees Covered as defendant if action was in course & scope of worker’s employment as supervisor or manager Would need coverage from Temp/Leasing/PEO; only covers acts in course & scope of employment for Temp/Leasing/PEO Directors & Officers Covers claims filed against Dir. & Officers Covered as defendant if action was good faith execution of worker’s duties as Dir. Or Officer May be covered as defendant if action was good faith execution of duties as Dir. Or Officer Generally not covered Commercial General Liability Covers claims against Co. Covered as defendant if action was in course & scope of worker’s employment Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

LIABILITY FOR WORKER’S CONDUCT Claims filed by others Situation Employee Independent Contractor Temp/Leased/PEO Employee Worker damages Co. property If done in course of employment, Co. liable Acting as Co. agent, Co. liable If not an agent, Co. not liable Acting as Co. agent, or joint employee, Co. liable If not at agent or joint employee, Co. not liable Worker injures co-worker Worker damages property of 3rd party Worker injures 3rd party Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

INSURANCE IF WORKER FILES CLAIM From Your Company’s Perspective… What Worker sues for If it applies, what insurance? Applies to Employees? Applies to ICs? Applies to Temp/Leased/PEO Worker Labor and employment law violations Applies? Yes No Possible (Joint Employer) Insurance EPLI, D&O n/a Injury to Worker Possible (Joint Employer EPLI, Worker’s Comp CGL Workers’ Comp or CGL * Note that insurance usually doesn’t cover contract related claims. Copyright 2018 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

TIPS FOR SORTING THROUGH ISSUES Assess your resources, needs and tolerance What can the company do (not do)? Budget and time Needs for control over the end product Liability tolerance Consider your options, carefully Know who you are working with Don’t be afraid to ask questions Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019

Questions? Copyright 2018 ES&A, Inc. All Rights Reserved Confidential and Proprietary June 2, 2019