James D Cockrum Frost Brown Todd LLC 3200 Aegon Center 400 West Market Street Louisville KY 402023363 Office 502 5895400 Direct 502 5680317 Fax 502 5811087 Email jcockrumfbtlawcom ID: 760373
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Slide1
m
Wage & Hour Update
James D. Cockrum
Frost Brown Todd LLC
3200 Aegon Center
400 West Market StreetLouisville, KY 40202-3363Office (502) 589-5400Direct (502) 568-0317Fax (502) 581-1087Email: jcockrum@fbtlaw.com
KYSHRM
31st
Annual
Conference
Slide2FINALLY
!
SOME
NEW NEWS!
Slide3MINIMUM WAGE CHANGES
Slide4Government Contractors and Subcontractors Already Pay New Minimum Wage
$10.10 per hour
Applies to post-January 15, 2015 contracts
Davis-Bacon construction
Service Contract Act
Concessions/Lands contractors
Slide5Other New Minimum Wages?
State/Local changes
Jury still out on impact
Seattle reports – dropped tips, paid wages, added “fee”, lost business and
employees
Less hiring?
Slide6Other New Minimum Wages?
State/Local changes
Jury still out on
authority of local changes
Louisville change is in Ky. App.
Related issue is in Federal court
Slide7General Kentucky Rule
"Wages" includes any compensation due to an employee by reason of his or her employment, including salaries, commissions, vested vacation pay, overtime pay, severance or dismissal pay, earned bonuses, and any other similar advantages
agreed upon
by the employer and the employee or provided to employees as an established policy.
Slide8Withholding
No employer shall withhold from any employee any part of the
wage agreed upon
.
But …OK to withhold “when the employer is authorized to do so by local, state, or federal law”
Slide9Withholding
OK “when a deduction is expressly authorized in writing by the employee to cover insurance premiums, hospital and medical dues, or other deductions not amounting to a
rebate
or deduction from the standard wage arrived at by collective bargaining or pursuant to wage agreement or statute…”
Slide10Withholding
OK to withhold union dues where “authorized by joint wage agreements or collective bargaining contracts negotiated between employers and employees or their representative.”
Slide11Withholding
No employer shall deduct:
Fines
Cash shortages in a common money till, cash box or register used by two (2) or more persons
Breakage;
Losses due to acceptance by an employee of checks which are subsequently dishonored if such employee is given discretion to accept or reject any check; or
Slide12Withholding
Losses due to defective or faulty workmanship, lost or stolen property, damage to property, default of customer credit, or nonpayment for goods or services received by the customer
if such losses are not attributable to employee's willful or intentional disregard of employer's interest
.
Slide13ENFORCEMENT
Wage and Hour Division, United States Department of Labor.
Division of Employment Standards, Kentucky Labor Cabinet.
Very broad enforcement authority – “as deemed necessary”
Slide14ENFORCEMENT
Investigator may show up unannounced
Investigator needs no reason to believe a violation has occurred.
Slide15ENFORCEMENT
Particular industries can be targeted.
Most investigations are result of complaints
.
Agency has no legal obligation to inform employer why investigation is occurring.
Don’t ask? “Retaliation?”
Slide16ENFORCEMENT
Investigators are entitled to inspect records, work place and interview employees at work place during work time.
Investigators will demand to see payroll and time records within 72 hours.
Investigator will rely upon employee accounts if proper records missing.
Slide17ENFORCEMENT
Agency has subpoena power - not required to obtain a search warrant
Employer may oppose subpoena
.
Tough to win
Slide18Example - Forever 21 Subpoenaed
Forever 21 ordered to produce records on its “chain of supply” after DOL finds violations in LA sewing factories
Forever 21 argued “it’s them – not us”
DOL – “1500 investigations – 93% violations”
“Whole supply chain is responsible”
Slide19ENFORCEMENT
Statute of limitations
FLSA is
two years
Kentucky is
five years
.
Slide20ENFORCEMENT
Investigator will conduct a postinvestigation conference.
If violations, investigator will describe what is necessary for compliance
Investigator will attempt to obtain an agreement
Slide21ENFORCEMENT
If employee accepts agency approved settlement, waives right to recover other damages
December 2013 – employees reject DOL calculation/court says OK
Settlement prevents litigation and saves attorney fees
Slide22ENFORCEMENT
If no settlement :
US DOL may seek enforcement in court
Individual can sue under FLSA unless/until DOL
sues
FLSA Collective actions require written consent of each employee/plaintiff
Slide23ENFORCEMENT
Enforcement in Kentucky is a MESS
“Dual scheme” – administrative agency AND court? Which first? Who first? What’s on second?
Getting clarified s-l-o-w-l-y
Slide24Damages
Actual unpaid wages
“Liquidated damages”
State – “equal amount”
Federal – extra year
for “
wilful
l
” violations
Attorneys’ fees
State - questionable in administrative hearing
Slide25Arbitration?
Most federal courts of appeal now say “arbitration agreement that waives right to FLSA class/collective action is valid”
Prior SCOTUS case had said arbitration agreements waiving class/collective rights are OK in consumer cases, but withheld ruling on employment
cases
But …..
Slide26Hilltop – March 2014 – Class Actions – “Our” Circuit – Be Careful!
Employment Agreement required arbitration of FLSA claims
Not listed in “survival clause”
Other clauses not
listed n
“survival clause” clearly intended to survive
“On the whole” no evidence arbitration intended to become void
Slide276th Circuit - Right Hand – Left Hand
July 2014
6
th
Circuit
Severance Agreement contains waiver of collective actions, but no arbitration agreement
Collective action waiver ruled invalid
Slide28Class actions under Kentucky law?
Toyota v. Kelley – 11 years in the
making – “don’t need to say, but just saying….”
Sullivan University – “need to say – we’re saying NO!”
Kentucky Supreme Court - mum is the word so far
Slide29Class actions under Kentucky law?
KRS - Kentucky employee can “assign” claim to commissioner and they can “join various claimants” against same employer
KAR - Can file a claim with Labor Cabinet - they “shall investigate” – “make findings
of fact”
– “party
suffering
adversely” can have a hearing, which can be appealed to court
Slide30Interns – “Black Swan” Starts The Ball Rolling
6 Part Test
1. Similar to training given in an educational environment
2. Internship experience is for the benefit of the intern
3. Intern works under supervision of staff - does not displace regular employees
Slide31Interns
4. Employer derives no immediate advantage from intern activities; “on occasion” operations may actually be impeded
5. Intern not necessarily entitled to a job
6. Employer and intern understand intern is not entitled to wages
Slide32Interns
“More structured” around a classroom or academic experience as opposed to “actual operations” (i.e. college or university exercises oversight; provides educational credit).
Provides skills that can be used in multiple employment settings, not just one employer’s operation
Slide33Interns
Does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent on the work of the intern.
If interns perform productive work (example, filing, performing other clerical work, assisting customers), i.e. “the employer benefits from the interns’ work,” intern must be paid
Slide34Interns
If used as substitute for regular workers, or to augment existing workforce during specific time periods, interns must be paid.
If employer would have hired additional employees or required existing staff to work additional hours, interns must be paid
If intern receives same level of supervision as regular workforce, intern must be paid
Slide35Interns
If employer is providing “job shadowing” opportunities that allow intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience.
Slide36Interns
Internship should be of a fixed duration, established prior to the outset of the internship.
Internships generally should not be used by the employer as a trial period for individuals seeking employment – an expectation that intern will be hired on a permanent basis generally requires intern to be paid
Slide37Interns
Starting to get cases
May 2014 – nurse anesthetists working” at health care facility = “trainees”
Academic credit – national accreditation of program – low level duties related to actual duties
Replaced employees, but company loses money on the program
Slide38OVERTIME EXEMPTIONS
Not all employees are entitled to receive overtime pay.
Under both the FLSA and state wage and hour law, some employees are exempt, either as a result of the industry in which they work, or due to the nature of their job duties.
Slide39Industry Exemptions
Long
list (certain employees in agriculture, retail/service, domestic service, tobacco, trolley car, amusement parks, recreational camps, religious camps, certain activities at sea, newspaper, switchboard operators, criminal investigators, border patrol)
Slide40Industry Exemptions
Some are “strange” because they were created in 1930’s
Country elevator workers (rural) - OT
Home workers making wreaths – MW & OT
House parents in non-profit educational institutions- OT
Slide41Fair Labor Standards Act - Overtime:
. . . no employer shall employ any of his employees for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.
FLSA, 29 U.S.C. §207(a)(1).
Slide42KRS 337.285 - Overtime:
No employer shall employ any of his employees for a workweek longer than forty (40) hours, unless such employee receives compensation for his employment in excess of forty (40) hours in a workweek at a rate not less than one and one-half (1-1/2) times the hourly wage at which he is employed... .
Slide43FLSA – “White Collar” Exemptions
The provisions of ...section 207 of [the Fair Labor Standards Act] shall not apply with respect to-
(1) any employee employed in a bona fide
executive
,
administrative
, or
professional
capacity...or in the capacity of
outside salesman
(
as such terms are defined and delimited from time to time by regulations of the [Secretary of Labor]
... .
FLSA, 29 U.S.C. §213(a)(1).
Slide44KRS 337.010(2)(a) – “White Collar Exemptions”
As used in [KRS 337.285]...
(a) "Employee"...shall not include:
* * * *
2. Any individual employed in a bona fide
executive
,
administrative
,
supervisory
or
professional
capacity, or in the capacity of
outside salesman
...
as the terms are defined by administrative regulations of the commissioner
.
Slide45WHITE-COLLAR EXEMPTIONS
Generally, an employee must meet
three
separate tests in order to qualify for one of the “white-collar exemptions.”
Slide46MINIMUM EARNINGS TEST
Old rule -
employees must receive a salary of at least $455 weekly ($23,660 annual), or its equivalent.
Computer employees must receive either the $455 weekly salary, or an hourly wage of at least $27.63 ($1105.20/40 hours).
Current DOL
proposal is $921 per week ($47,892 annual).
Slide47MINIMUM EARNINGS TEST
New Rule – automatic annual increases announced 60 days in advance
New numbers are tied to studies/40
th
percentile wages
Slide48Safe Harbor
Old rule - “Total
annual compensation” of $100,000 qualifies as exempt
New rule -
$122,148
“Total
annual compensation” must include at least
$921
per week paid on a salary or fee basis.
.
Slide49Safe Harbor
“Total annual compensation may also include commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during a 52-week period
“Total annual compensation” does not include board, lodging and other facilities
Slide50Safe Harbor
“Total annual compensation” does not include payments for medical insurance, life insurance, contributions to retirement plans or cost of other fringe benefits.
May, during the last pay period or within one month after the end of the 52-week period, make one final payment sufficient to achieve the required level.
Slide51SALARY BASIS
The employee must be paid a predetermined salary
which does not vary based upon the quality or quantity of the work performed
.
Slide52PERMISSIBLE DEDUCTIONS FROM SALARY
An employer may make
only “whole day increment”
deductions from an exempt employee’s salary when an employee is absent from work for a day or more for “personal” reasons (i.e. reasons other than sickness or disability).
Ice storm? Wind storm? Blizzard?
Slide53PERMISSIBLE DEDUCTIONS FROM SALARY
It also is acceptable to make
“whole day increment”
deductions for absences due to sickness, disability, or work-related accidents if the deduction is made pursuant to a bona fide plan, policy, or practice of providing compensation for loss of salary occasioned by sickness and disability.
Slide54PERMISSIBLE DEDUCTIONS FROM SALARY
The “sick day” deduction is permissible even if the employee has not yet qualified under the plan or if the employee has exhausted his or her leave allowance.
Slide55PERMISSIBLE DEDUCTIONS FROM SALARY
An employer may impose penalties of
any amount
for infractions of safety rules of major significance, i.e., rules relating to the prevention of serious danger to the plant or other employees (such as smoking in an explosives plant).
Slide56PERMISSIBLE DEDUCTIONS FROM SALARY
An employer may also make good faith
“full day increment”
deductions from exempt employees for disciplinary suspensions, if the suspension was pursuant to a
written policy applicable and communicated to all employees
.
Slide57PRIMARY DUTY TEST
The employee’s primary duty” (i.e. the principal, main, major or most important job duty) must meet regulatory definitions.
Generally, if an employee spends
50%
of his or her time performing properly exempt duties, they will meet the standard.
Will we return to 80%?
WHEW!
Slide58PRIMARY DUTY TEST
It is the actual duties, not the job titles or job descriptions, which determine eligibility for exempt status.
Slide59EXECUTIVE EMPLOYEES
Must have the “primary duty” of management of the enterprise in which the employee is employed, or of a customarily recognized department or subdivision thereof
Must customarily and regularly direct the work of two or more employees;
Slide60EXECUTIVE EMPLOYEES
Must have the authority to hire or fire other employees, or be a person whose suggestions or recommendations regarding the hiring, firing, advancement, promotion, or change or status of employees are given particular weight;
May 2014 – 6
th
Circuit – HR overrulings create question of fact
Slide61THE FOLLOWING TASKS ARE CONSIDERED INDICATIVE OF “MANAGEMENT”:
Interviewing
Selecting or training employees
Setting/adjusting employee pay rates or hours or work
Directing work
Slide62THE FOLLOWING TASKS ARE CONSIDERED INDICATIVE OF “MANAGEMENT”:
Maintaining production or sales records for use in supervision or control
Appraising employee productivity or efficiency for purposes of recommending promotions or changes in status
Handling employee complaints and grievances.
Slide63THE FOLLOWING TASKS ARE CONSIDERED INDICATIVE OF “MANAGEMENT”:
Disciplining employees
Planning work
Apportioning work
Determining techniques of work, types of materials, supplies, machinery, or tools to be used or merchandise to be bought, stocked, or sold.
Slide64THE FOLLOWING TASKS ARE CONSIDERED INDICATIVE OF “MANAGEMENT”:
Controlling the flow or distribution of material or merchandise or supplies
Providing for the safety or security of employees
Planning or controlling a budget
Monitoring or implementing legal compliance.
Slide65ADMINISTRATIVE EMPLOYEES
Least clear/most litigated
Must have the “primary duty” of performing office or non-manual work “directly related” to the management or general business operations of the employer or the employers customers.
Primary duty must require the
exercise of discretion or independent judgment with respect to matters of significance
.
Slide66DISCRETION & INDEPENDENT JUDGMENT
The exercise of discretion and independent judgment requires the comparison and evaluation of possible courses of conduct, and acting or making a decision after various possibilities have been considered. An employee must have the authority or power to make an independent choice, free from immediate supervision in matters of significance.
Slide67DISCRETION & INDEPENDENT JUDGMENT
Need not have unlimited authority to qualify.
Do they have authority to formulate, affect, interpret or implement management policies or decisions?
Do they perform “major assignments” in conducting business operations?
Do they have authority to commit/bind the employer in significant financial matters?
Do they have authority to deviate from established policies or procedures?
Slide68What’s next? Hard to say!
2004 – Bush Administration
“Employees in the financial services industry” may qualify for “administrative”
But “primary duty” of selling financial products does
not
qualify
Slide692006 – Mortgage Bankers Association ask DOL for an opinion letter whether “mortgage loan officers” were exempt under the new regulation.
DOL said “yes.
Slide702010 – No request – but DOL withdraws 2006 Opinion Letter
No “notice of regulation change/comment period” rule-making process
Mortgage-loan officers “have a primary duty of making sales for their employers, and, therefore, do not qualify” for the administrative exemption.
Slide712010 – Mortgage Bankers Association sue
“You can’t do that in that way – must have rulemaking”
March 2015 – SCOTUS said “Yes they can.”
Slide72Sooooo….
If no rulemaking required to change this, what else can we change?
Slide73OUTSIDE SALESPERSONS
Must customarily and regularly (1)
make sales
or (2)
obtain orders or contracts
for services or the use of facilities for which a consideration will be paid.
Must perform these duties away from the employer's place or places of business.
There is no salary test for outside salespersons.
Slide74Agency Regulations – Last Word?
Not always
Pharmaceutical Reps
No “sales” or “contracts” = no sales exemption
“Administrative” exemption?
Yes! May 2012 – 7
th
Circuit
Slide75Agency Regulations – Last Word?
May 31, 2012 – Novartis - $99,000,000 Settlement Approved
June 18, 2012 - Christopher v. SmithKline Beecham Corp. – SCOTUS - “exempt” under “outside sales” exemption!
Slide76Agency Regulations
Not always enforced by courts
Good news?
For lawyers – yes.
For you – not so much.
Slide77Professional Exemptions
“Learned Professional”
Requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction
“Creative Professional”
Requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor
Slide78Learned Professional
Degree “customarily” required, not always, but almost
Certainly more than high school and OTJ
Another list of “examples”
Slide79Learned Professionals
Registered or certified medical technologists - yes, with three years of pre-professional study in an accredited college or university plus a fourth year of professional course work in a school of medical technology approved by the Council of Medical Education of the American Medical Association.
“Registered nurses” – yes, if registered by the appropriate State examining board.
Slide80Learned Professionals
“Dental hygienists” – yes, with four academic years of pre-professional and professional study in an accredited college or university approved by the Commission on Accreditation of Dental and Dental Auxiliary Educational Programs of the American Dental Association qualify.
“Licensed practical nurses” and “other similar health care employees” – No, because degree is not a standard prerequisite for entry into such occupations.”
Slide81Learned Professionals
“Physician assistants” – yes, with four academic years of pre-professional and professional study, including graduation from a physician assistant program accredited by the Accreditation Review Commission on Education for the Physician Assistant, and who are certified by the National Commission on Certification of Physician Assistants.
Slide82Learned Professionals
“Certified public accountants” qualify.
Other “accountants” who are not “certified public accountants” but perform similar job duties “may” qualify. However, accounting clerks, bookkeepers and other employees who normally perform a great deal of routine work generally will not qualify.
Slide83Learned Professionals
Chefs, such as executive chefs and sous chefs, who have attained a four-year specialized academic degree in a culinary arts program, qualify.
“Cooks” who perform predominantly routine mental, manual, mechanical or physical work do not.
Slide84Learned Professionals
“Athletic trainers” – yes, with four academic years of pre-professional and professional study in a specialized curriculum accredited by the Commission on Accreditation of Allied Health Education Programs, and who are certified by the Board of Certification of the National Athletic Trainers Association Board of Certification, qualify.
Slide85Learned Professionals
“Licensed funeral directors” and “embalmers” who are licensed by and working in a state that requires successful completion of four academic years of pre-professional and professional study, including graduation from a college of mortuary science accredited by the American Board of Funeral Service Education, qualify.
Slide86Creative Professionals
Music, writing, acting and the graphic arts
Case-by-case basis.
Actors, musicians, composers, conductors, and soloists;
Painters (who are given only the subject matter of their painting)
Slide87Creative Professionals
Cartoonists (who are told only the title or underlying concept of a cartoon)
Essayists, novelists, short-story writers and screen-play writers who choose their own subjects
Copyist/animator/retoucher – no
Reporters/Journalists – maybe. Depends on control.
Slide88Working Time
Employee must be compensated for all hours he/she is
suffered or permitted
to work.
If employer “knows or has reason to know”
Slide89Waiting to Work?
“Engaged to wait” or “waiting to be engaged”?
Completely relieved from duty
Capable and permitted to use the time effectively for own purposes.
Advance notice
Slide90“On-Call”
Required to remain on or close to employer’s premises
Cannot use time effectively for his own purposes.
Lady Gaga!
Personal assistant who sleeps in same bed to change CD’s, etc. may be entitled to LOTS of overtime
Slide91Lunch?
“Reasonable period” for lunch.
Middle of employee’s shift
No sooner than three (3) hours after shift commences
No more than five (5) hours after shift commences.
Not work time if
completely relieved
of job duties
Slide92Lunch?
New Kentucky Case
“Monitoring radio” = “pay me”
Court – “not enough – must show proof of daily circumstances”
Combined with 6
th
Circuit case – “must follow system for exceptions” = safer for employers
Slide93Breaks?
Ten (10) minute rest period during each four (4) hour work period.
Paid
Slide94Break-Lunch
Received one OK from one investigator to combine them
“Put it in writing”
Slide95Donning and DoffingStarting the Day
Arises from 3 rules
Congress
- Portal-to-Portal Act does not require pay for activities which are “
preliminary
” and “
post-liminary
” to the “
principal
” activity
DOL - regulations require payment for all
work “
after the employee commences to perform the first principal activity.”
Slide96“DONNING” and “DOFFING” TIME
SCOTUS -
Steiner v. Mitchell
, 350 US 247 (1956
)
Changing clothes and showering (required by use of corrosives and toxic materials in a battery plant) is “
integral and indispensable
” to the “principal activity” and, thus, is compensable work time
Slide97“DONNING” and “DOFFING” - “PRINCIPAL” ACTIVITIES
IBP, Inc. v. Alvarez
- 2005
Issues were whether “donning and doffing” of clothing was “integral and indispensable” to “principal activity” of work, and began/ended the compensable work day, and whether “walking time” which followed “donning” of clothing was “compensable work time”.
Some lower court rulings were not appealed
Slide98“DONNING” and “DOFFING” TIME
Supreme Court – No pay for “pre-donning” waiting time, BUT “…our analysis would be different if [employer]
required its employees to arrive at a particular time in order to begin waiting.
”
Supreme Court – Pay for post-donning waiting - “However, unlike the donning of certain types of protective
gear
, which is
always
essential
if the worker is to do his job…”
Slide99Donning & Doffing
Perez v. Mountaire Farms
Employees must wear and sanitize gloves, glasses, ear plugs, hair nets, smocks, and steel-toed rubber boots
Slide100Mountaire Farms
Case starts right after IBP in January 2006
Trial in 2009
4
th
Circuit Decision in 2011
Slide101Mountaire Farms
Gear was required by law
or
by company policy
or
“necessary” for chicken processing
“Integral and indispensable” to principal activity
No “meaningful” ability to don at home
Slide102Last Year’s News – This Year’s Supreme Court Case
U.S. Steel had union contract stating “changing clothes” time is not compensable
FLSA allows such a contract
re: “clothing”
Is donning/doffing “safety clothing” merely “changing clothes
”? Is it “gear” or “clothes”?
If “changing clothes” is not compensable, post-change “travel time” is not compensable
Slide103Are “Safety Clothes” Just Clothes?
October 2013 - SCOTUS drew a line between “clothing” and “equipment”
Clothes are disqualified as clothes because of inherent protective elements
Glasses, earplugs and respirator are “equipment”
Slide104Donning and Doffing
Non-union employers must navigate old rules, i.e. IBP/Mountaire
“Is it necessary to perform the job” or “required by regulations”?
Slide105“DONNING” and “DOFFING” TIME - STATE
No state version of the Portal-to-Portal Act exists.
No state regulation defines “work”, “working time,” “donning,” “doffing,” “principal activity” or “integral and indispensable.”
803 KAR 1:065, Section 9 indicates that wages may be due “in accordance with common sense and general concepts of work or employment.”
803 KAR 1:065, Section 3 defines “waiting time,” and Section 7 defines “travel time.”
No other regulation specifically advises Kentucky employers whether KRS Chapter 337 requires payment for activities preparatory to work.
Slide106TRAINING TIME
Employees must receive pay for training unless:
Attendances outside the regular working hours
Voluntary
Not directly related to job
No productive work performed
Slide107TRAVEL TIME
Federal “Portal to Portal Act” provides that compensation is
not
required for time spent “walking, riding, or traveling to and from the actual place of performance of the principal activity or activities” performed by the employee, or “activities which are preliminary to or postliminary to” the “principal activity or activities.”
Slide108TRAVEL TIME
Normal Home to Work Travel – not compensable
“Emergency” Home to Customer Travel – compensable
“Emergency” Home to Office – “no position”
“One day” travel away from “fixed location” – compensable, but “normal” “home to work” and “meal time” deductions permitted
Slide109TRAVEL TIME
Travel during regular work day (site to site, customer to customer) - compensable
Overnight – travel which “cuts across workday” is compensable (even on weekend) , but “time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus or automobile” is not considered “work time.”
Slide110TRAVEL TIME
If “offered” public transportation, but uses personal vehicle, employer may count same “work time” as if public transportation was used.
Slide111Employee v. Independent Contractor
“The USDOL
has entered into a three-year Memorandum of Understanding (MOU) with the Kentucky Labor Cabinet to help curb employee misclassification as independent contractors or other non-employee statuses. Kentucky is the latest state to come on board with an agreement that permits both agencies to share information and coordinate law enforcement
.”
Slide112Employee v. Independent Contractor
The FLSA and KRS Chapter 337 only apply to
employer-employee
relationships. Independent contractors, therefore, are not covered.
Slide113Employee v. Independent Contractor
Whether a worker is an employee or an independent contractor is difficult to determine. There is no
precise
formula for employers to apply.
Slide114Employee v. Independent Contractor
Wage and Hour Investigators, as well as the courts, will look to the “economic realities” of the relationship and make an independent determination as to whether an employee-employer relation exists.
Slide115Employee v. Independent Contractor
It is possible that a worker may be considered an "independent contractor" for certain purposes,
e.g.
, tax purposes, and an "employee" for purposes of the FLSA and KRS Chapter 337
.
KRS 341 vs. Title VII vs. KRS 344
Both in same week?
IRS – yes. DOL – “unrealistic”
Slide116Employee v. Independent Contractor
For an employer-employee relation to exist, there must be an employer, an employee, and the act or condition of employment.
Slide117Employee v. Independent Contractor
KRS 337.010(1)(e) defines “employee” as “any person employed by or suffered or permitted to work for an employer”
FLSA defines “employee” as “any individual employed by an employer.”
Slide118Employee v. Independent Contractor
KRS 337.010(1)(d) defines “employer” as “any person, either individual, corporation, partnership, agency, or firm who employs an employee and includes any person, either individual, corporation, partnership, agency, or firm acting directly or indirectly in the interest of an employer in relation to an employee.”
Slide119Employee v. Independent Contractor
FLSA defines “employer” as any person acting directly or indirectly in the interest of an employer in relation to an employer.”
Slide120Employer v. Independent Contractor
To determine whether a worker is an "employee," and therefore covered by the FLSA and KRS Chapter 337, or an "independent contractor," the enforcement agencies and courts consider numerous different tests with similar overlapping factors.
Almost always, multiple factors support either conclusion
Slide121Employer v. Independent Contractor
Matters because courts enforce agency decisions when evidence supports the agency’s fact conclusions and the law is properly applied to facts as found
Read “
everytime
they want to.”
Slide122Employee vs. Independent Contractor
The nature and degree of control of the potential employer over the worker;
The extent to which the services to be performed are an integral part of the potential employer's business.
Slide123Employee vs. Independent Contractor
The amount of the worker's investment in facilities and equipment;
The worker's opportunities for profit and loss;
Slide124Employee vs. Independent Contractor
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent enterprise.
Slide125Employee vs. Independent Contractor
Is the worker listed on the payroll of the potential employer with appropriate tax deductions?
Does the potential employer keep the books and prepare the payroll for the worker?
Slide126Employee vs. Independent Contractor
Must the employees of the alleged independent contractor be approved by the potential employer?
Is the worker assigned to a particular territory without freedom of movement outside that territory?
Slide127Employee vs. Independent Contractor
Does the worker have an independent economic or other interest in his or her work, other than increasing his or her pay?
How do the respective tax returns list the remuneration paid?
Slide128Employee vs. Independent Contractor
To determine the amount of control, the enforcement agencies and courts consider factors such as:
Whether there are restrictive provisions in the contract between the potential employer and the worker which require that the work must be satisfactory to the potential employer and detailing, or giving the worker the right to detail, how the work is to be performed;
Slide129Employee vs. Independent Contractor
Whether the potential employer may cancel the contract at his or her discretion, and on how much notice; and
Whether the services to be performed by the worker are the same or similar to those performed by admitted employees of the potential employer.
Slide130Employee vs. Independent Contractor
According to the Kentucky wage and hour regulations, the following factors are
immaterial
to the determination of whether the worker is an "employee" or an "independent contractor:”
The state or local government grants a license to the worker;
The measurement, method, or designation of compensation;
Slide131Employee vs. Independent Contractor
The fact that no compensation is paid and the worker must rely entirely on tips;
The place where the work is performed; and
The absence of a formal employment agreement.
Slide132QUESTIONS?