AIA - Small Firms Seminar 7/20/18 AIA|LA : Small Firms 101 HUM AN RESOURCES M ANAGEM ENT EMPLOYEE VS. INDEPENDENT CONTRACTOR P re se n te d b y M a g g ie H a tta n , H R C o n su lta n t 7/20/18 TODAY’S TOPICS • Human Resources M anagement – Foundation for best business practices – Your business partner • Employee vs. Independent Contractor – Definitions – Classifications (Exempt vs. Non-exempt) – ABC Test 7/20/18 AIA|LA : Small Firms 101 HUM AN RESOURCES M ANAGEM ENT OVERVIEW 7/20/18 1
AIA - Small Firms Seminar 7/20/18 HUMAN RESOURCES MANAGEMENT W hat is Human Resources M anagement? HRM is the process of employing people, training them, compensating them, developing policies and procedures that relate to them while building strategies that will retain them. 7/20/18 HUMAN RESOURCES MANAGEMENT How will Human Resources M anagement support YOU to build and/or grow a successful architectural design practice? HRM builds a strong foundation making your practice compliant with federal and state regulations, protects your business from employment-related complaints or potential lawsuits and promotes a productive, team-based workforce. 7/20/18 AIA|LA : Small Firms 101 EMPLOYEE VS. INDEPENDENT CONTRACTOR 7/20/18 2
AIA - Small Firms Seminar 7/20/18 EMPLOYEE VS. INDEPENDENT CONTRACTOR W ho is an employee? An employee is someone who works for a company or organization on a part-time or full-time basis, who is under the control of his employer, has a schedule, assigned duties and receives compensation for the hours worked and labor/services provided. 7/20/18 EMPLOYEE CLASSIFICATIONS • Exempt – An employee who is paid a salary and is exempt from overtime pay • Non-exempt – An employee who is paid hourly or salary and is paid overtime in California for any hours worked over 8 hours or 40 hours in a workweek How you pay employees does NOT determine their classification 7/20/18 EMPLOYEE vs. INDEPENDENT CONTRACTOR W ho is an independent contractor? An independent contractor is an individual who is self-employed, controls the manner and means of accomplishing the desired result/task and customarily performs the work outside the usual course of the hiring entity’s business. 7/20/18 3
AIA - Small Firms Seminar 7/20/18 IN THE PAST…THE MULTIFACTOR TEST • For the past few decades, courts have applied the same test to determine whether a worker is properly classified as an independent contractor. • The primary factor is control: “whether the person to whom services were rendered had the right to control the manner and means of accomplishing the result desired.” 7/20/18 THE MULTIFACTOR TEST – Additional Factors • W hether the principal can discharge at will • W hether the worker is engaged in a distinct occupation or business • W hether the work is usually done under direction of the principal, or by a specialist without supervision • The skill required for the job • W hether the principal provides the instrum entalities, tools, and work place to the worker • Length of tim e services are perform ed • M ethod of paym ent (by tim e or by the job) • W hether the work is part of the regular business of the principal • W hether the parties believe they are creating an em ploym ent relationship 7/20/18 CRITICISMS OF THE MULTIFACTOR TEST • Many subjective elements • Too many things to consider • Potential for hiring entities to manipulate a relationship to fit within the independent contractor classification because many of the factors are subject to the control of the hiring entity; or at least make it debatable by ensuring multiple factors point towards independent contractor 7/20/18 4
AIA - Small Firms Seminar 7/20/18 OVERVIEW D y n a m e x O p e r a t io n s W e s t , In c . v. S u p e r io r C o u r t , p u b lis h e d o n A p r il 3 0 , 2 0 1 8 • Class action was for wage and hour violations. • The drivers were classified as independent contractors. • The Court was required to rule on whether the drivers were properly classified as independent contractors. • The Court upheld the certification of a class of delivery drivers. In so doing, the Court rejected Dynamex’s argument that its drivers were properly classified as independent contractors under the multifactor test; • And it established a new test. 7/20/18 ABC TEST – Dynamex vs CA Supreme Court A. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work; AND B. The worker performs work that is not the hiring entity’s usual business; AND C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. 7/20/18 ABC TEST – Dynamex vs CA Supreme Court (C o n tin u e d ) • The worker must satisfy all three tests (A, B, and C) to qualify as an independent contractor. • Workers in California are fundamentally employees until the hiring entity proves otherwise through each prong of the “ABC test.” 7/20/18 5
AIA - Small Firms Seminar 7/20/18 AIA|LA : Small Firms 101 WHAT SHOULD EMPLOYERS DO? 7/20/18 EMPLOYER RECOMMENDATIONS Factor A Review independent contractor agreements to ensure they do everything possible to reflect that the contractor is not subject to the control of the business. 7/20/18 EMPLOYER RECOMMENDATIONS Factor B Evaluate whether your independent contractors perform work that is fundamental to the core of your business. 7/20/18 6
AIA - Small Firms Seminar 7/20/18 EMPLOYER RECOMMENDATIONS Factor C Consider requiring independent contractors to sign a certification: • acknowledges s/he is engaged in an independently established trade, occupation, or business of the same natureastheworktheyperformfor your business; • understands s/heis expressly performingsuchworkfor other entities; • affirms s/heis availabletoperformsuchwork for other entities; and [if applicable] affirms that as a contractor does, infact, performsuchworkfor other entities. 7/20/18 FEDERAL vs STATE • The Federal common law definition of “employee (not CA law) generally applies for federal (tax and ERISA) benefit plan purposes Before taking action: • Review all plan documents – well-drafted plan documents will contain language excluding misclassified employees (even if reclassified). • Consider the impact of excluded “employees” on required plan nondiscrimination tests, ACA, COBRA and other benefits law requirements. 7/20/18 GOVERNMENT AGENCIES • Employment Development Department (EDD) – Em ploym ent-related taxes • Division of Labor Standards Enforcement (DLSE) – W age, hour and workers' com pensation insurance laws • Franchise Tax Board (FTB) – Incom e taxes • Division of Workers' Compensation (DWC) – Insurance • Contractors State Licensing Board (CSLB) – Regulations for Independent Contractors 7/20/18 7
AIA - Small Firms Seminar 7/20/18 AIA|LA : Small Firms 101 QUESTIONS??? 7/20/18 AIA|LA : Small Firms 101 THANK YOU FOR COMING 7/20/18 8
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