1. EMPLOYMENT LAW FOR HUMAN RESOURCE PRACTICE, 5E David Walsh © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

2. The Employment Relationship Chapter 2 © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

3. Chapter Outline The Importance of Determining Whether an Employment Relationship Exists The Importance of Determining Whether an Employment Relationship Exists Who is an Employee? Who is an Employee? Who is the Employer? Who is the Employer? © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

4. Importance of Determining Whether an Employment Relationship Exists Compliance with tax laws ◦ Social Security and Medicare taxes ◦ Workers’ Compensation and Unemployment Insurance Compliance with most employment laws in this text apply only to employees, and not to independent contractors or other workers Employment status may also be required for contract benefits © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

5. Who is an Employee? Distinguish between employees, and contingent workers such as independent contractors, temps, interns, students, volunteers and partners Most employment laws define employee as: ◦ “An individual employed by an employer” But because both independent contractors and employees work for pay other factors must be considered © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

6. Who is an Employee? Independent Contractors (1 of 4) Economic Realities Test: ◦ 1. Who has the right to control how, when & where work is done? ◦ 2. Who provides materials needed for work? ◦ 3. Does the method of payment afford opportunity for profit or loss? ◦ 4. What is duration of working relationship? ◦ 5. Does work require some special skill? ◦ 6. How integral to the business is this work? ◦ 7. How dependent is worker on hiring party? © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

7. Who is an Employee? Independent Contractors (2 of 4) Common Law Test: ◦ 1. Extent of hiring party’s right to control the manner & means by which work is done ◦ 2. Level of skill required ◦ 3. Source of necessary tools & materials ◦ 4. Location of the work ◦ 5. Duration of the work ◦ 6. Extent of hiring party’s right to assign additional projects to hired party © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

8. Who is an Employee? Independent Contractors (3 of 4) Common Law test: (cont.) ◦ 7. Extent of hired party’s discretion over when & how long to work ◦ 8. Method of payment ◦ 9. Hired party’s role in hiring & paying assistants ◦ 10. Extent to which work is part of regular business of hiring party ◦ 11. Whether hiring party is in business ◦ 12. Whether benefits of any kind are provided ◦ 13. Tax treatment of the hired party © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

9. Who is an Employee? Independent Contractors (4 of 4) Considerable overlap between Economic Realities Test and Common Law Test, but Common Law Test emphasizes right-of- control ◦ Most relevant issue is whether hiring party has authority to control where, when, and how the work gets done, even if the hiring party does not fully exercise its authority. Some courts use a hybrid test, combining both tests © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

10. Who is an Employee? Using Independent Contractors (1 of 2) A firm cannot establish independent contractor status simply by labeling its workers as contractors or having them sign an independent contractor agreement. But if the hiring party is willing to give up most control, a well-drafted agreement can spell out the terms of engagement, clarify misunderstandings and document the parties’ intent © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

11. Who is an Employee? Using Independent Contractors (2 of 2) A valid agreement requires most of these: ◦ The independent contractor (IC) must provide tools, etc., and pays its own business expenses ◦ The IC must hire its own assistants ◦ The IC should be paid a flat fee for the work ◦ Review long-term ICs; don’t assign new projects without renewing the agreement ◦ Don’t have ICs doing same work as employees ◦ Don’t provide benefits, even time off ◦ ICs may offer services to others © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

12. Who is an Employee? Temporary Workers Legal problems arise when temporary workers kept on for a long time and doing the same work as employees challenge their exclusion from employment benefits Microsoft’s “permatemps” Rule: ◦ Employers must not arbitrarily exclude from the benefits of employment long-term temps, doing the same work as regular employees, who meet legal criteria of employees. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

13. Who is an Employee? Students and Interns (1 of 2) NLRB’s conflicting rulings: ◦ Graduate students & teaching assistants at private universities are primarily students, not workers ◦ Medical interns and residents are employees with the right to unionize ◦ Grant-in-aid scholarship football players at Northwestern University are employees with right to unionize; this decision on appeal © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

14. Who is an Employee? Students and Interns (2 of 2) NLRB’s conflicting rulings: (cont.) ◦ “Compelling reasons” to reconsider the employment status of university graduate assistants; NLRB granted review in 2 cases, but the parties settled Interns: ◦ College students seek internships to get a job, but many more internships are now unpaid ◦ DOL’s Wage & Hour Division issued factors for determining employment status of interns; most working for private employers should be paid © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

15. Who is an Employee? Volunteers Courts have not identified a test or set of factors to distinguish employees from volunteers, but consider: ◦ Whether benefits received by volunteers constitute “significant remuneration” or “inconsequential incidents of an otherwise gratuitous relationship” ◦ Some courts also consider other factors Harder to prove volunteer status on behalf of for-profit firm © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

16. Who is an Employee? Partners (1 of 2) Partners, officers, board members, major shareholders are generally not employees But law firm partners brought age discrimination suit; EEOC rejected firm’s argument that partners were not covered by Age Discrimination in Employment Act, since they had no influence over workings of firm, could not vote on partnerships, division of profits, etc. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

17. Who is an Employee? Partners (2 of 2) EEOC considers: ◦ Whether the firm can hire or fire the person or set rules controlling the persons’ work ◦ Whether organization supervises person’s work ◦ Whether person reports to someone higher ◦ Whether person is able to influence the firm ◦ Whether written contracts between the parties intend the person to be an employee or partner ◦ Whether the person shares in profits, losses, and liabilities © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

18. Who is an Employee? Other Issues re Employee Status Managers & supervisors are employees with same rights as other employees under most employment laws, but are often exempted from coverage under wage and hour laws Undocumented workers may pursue legal claims, but remedies (such as back pay) might be denied ◦ Payments due for unpaid wages or job injury must be paid, since allowing non-payment would encourage firm to hire undocumented workers © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

19. Who is the Employer? Employer status determines who will be held liable if an employee’s rights are violated. We consider: ◦ To what extent is an employer liable for the actions of its employees? ◦ What parts of far-flung corporate structures are sufficiently inter-related to constitute single employers? ◦ Under what circumstances are firms deemed joint employers of the same employees? © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

20. Who is the Employer? Agency (1 of 2) Rule: ◦ Generally, employers are legally responsible for the actions of their employees while they are acting within the scope of employment. Actions within the scope of employment: ◦ Relate to the work the employee was hired to perform; ◦ Take place substantially within the workplace and during working hours; and ◦ Serve, at least partially, the interests of the employer. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

21. Who is the Employer? Agency (2 of 2) Exception: ◦ Employers may also be liable for harmful actions of their employees that are outside the scope of employment if:  The employer intended the harm to occur;  The employer was negligent or reckless in allowing the harm to occur; or  The harmful actions were aided by actual or apparent authority conferred on the employee by the employer. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

22. Who is the Employer? Integrated Enterprise (1 of x) Organizational structures are often complex. To determine whether two or more ostensibly separate entities should be considered parts of an integrated enterprise, the EEOC considers the degree to which there is: ◦ An interrelation between the operations ◦ Common management of the entities ◦ A centralized control of HR and labor policies ◦ Common ownership or financial control of the entities © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

23. Who is the Employer? Joint Employers (1 of x) Joint Employers maintain employment relationships with some of the same employees; many arise in: ◦ Agriculture; farm labor contractors (FLCs) used extensively to provide farmers with seasonal labor (ex: both farm and FLC liable) ◦ Temporary staffing arrangement; where staffing firm handled all human resource functions, it was the employer, but when client company exerted control over temps, it was a joint employer © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

24. What Would You Do? Try your hand at drafting an independent contractor agreement that a company that sells carpeting might use for its installers. Don’t worry about making your agreement sound like “legalese.” Focus instead on what such an agreement should specify. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

25. Next: Chapter 3 – Overview of Employment Discrimination ◦ Has employment discrimination ended? ◦ How hard is it to prove discrimination? The answers to these and other questions are our next topic. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.