1. 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

2. www.kandf.com EE v. IC Employees 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

3. 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

4. www.kandf.com Independent Contractors Avoid 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

5. 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).

6. www.kandf.com Legislators Want Employment CDLE 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)

7. www.kandf.com CAUTION: no single rule or test controls EE vs IC: Dept. of Labors Test DOLs 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.

8. www.kandf.com EE v. IC: Dept. of Labors Test Immaterial factors: – Where work is performed – Absence of a formal employment agreement – Licensing by State/local government – Time or mode of pay

9. 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 –A–Assesses the level of control over the worker –B–Behavioral Control Degree of instruction Amount of training

10. www.kandf.com EE v. IC: IRS Test IRS 11 Main Test continued… – Financial Control Unreimbursed business expenses; workers financial investment services available to the market pay (salary/hourly vs flat fee) workers 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 companys business

11. www.kandf.com Status & Developments CDLE Misclassification Working Group – Legislative considerations – Regulatory considerations – Audit considerations Colorado case authorities National case authorities

12. www.kandf.com EMPLOYEE Congratulations, its an …. A MOTOR CARRIER EMPLOYEE

13. www.kandf.com The Fair Labor Standards Act The Colorado Wage Act Colorado Wage Order No. ____ Employees and their money… 29

14. 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

15. www.kandf.com The Fair Labor Standards Act Numerous exemptions and exceptions from the FLSAs 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

16. www.kandf.com FLSA: Motor Carrier Exemption 29 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

17. www.kandf.com FLSA: Motor Carrier Exemption Engaged in activities that directly affect the operational safety of commercial motor vehicles – Drivers, drivers helpers, loaders, or mechanics

18. 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

19. www.kandf.com FLSA: Motor Carrier Exemption BUT still due minimum wage for all hours worked

20. www.kandf.com FLSA: Motor Carrier Exemption INTERSTATE vs intrastate carriers

21. www.kandf.com [fill in recent cases] Motor Carriers in Court

22. 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 shouldnt? Pay the employee for the time work, including any overtime Discipline the employee for the violation

23. 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

24. 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)

25. 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

26. 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)

27. Nancy C. Rodgers Email: nancy@kandf.com Phone: (303) 320-6100 Paul D. Godec Email: paul@kandf.com Phone: (303) 320-6100 Questions?