Workplace Issues
| *Co-employment |
| *General Guidelines for Dealing with Employees |
| *Independent Contractor or Employee? |
| *Interview Questions for Managers |
| *Peace at Work in these Turbulent Times |
| *Seven Tips for Effective Employee Conversations |
| *Seven Tips for Managing without the Legal Hassle |
| *Toxic Bosses |
| Return to Articles |
*Unless noted in article that it originated from The Consultant's Legal Guide, those articles designated by a "*" can be reprinted with the following tag line:
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| © 2007 Linda Swindling All Rights Reserved |
CO-EMPLOYMENT
Joint Legal Responsibility brings Opportunities to Partner with Human Resources
You have just been served with a lawsuit. A former employee has named your client and your clients manager in a discrimination suit. Your name is on the suit for failure to provide a safe work place, and it is alleged you knew or should have known about the discrimination but did nothing about it. WELCOME TO CO-EMPLOYMENT.
What is co-employment?Joint Legal Responsibility brings Opportunities to Partner with Human Resources
The shared employment relationship of staffing firms and their clients with respect to employees has many legal terms such as borrowed servant, joint employment, general and special employers, primary and secondary employers. In the staffing industry, the shared employment relationship has been described as "co-employment". The National Association of Temporary and Staffing Services defines co-employment as "A relationship between two or more employers in which each has actual or potential legal rights and duties with respect to the same employee or group of employees." Both a staffing firm and a client perform the same employment roles that a traditional employer would with a traditional employee. A staffing company typically interviews, hires, sets pay rates and has the ability to reassign and terminate the employee. In addition, staffing companies resolve complaints, attendance issues and administer discipline. Clients direct the employee's day-to-day work, control the working conditions at the worksite and determine the length of the assignment. In what areas of the law does co-employment place liability on both employers?
With shared responsibility comes shared risks. The general rules of co-employment are that one employer is usually not held liable for wrongful acts or omissions caused by the other employer. However, employment laws are designed to protect workers. If a sufficient connection exists between an employer and a worker, the law will impose legal duties on that employer. The following are areas to consider: Texas Unemployment Compensation Act
The Texas act provides that a temporary employee generally is considered an employee of the staffing firm, not the client, for unemployment compensation. Federal Employment Tax
Generally, a staffing firm is viewed as the sole employer responsible for paying an employee's wages and the employer's share of employment taxes including FICA and FUTA. A staffing firm which attempts to classify its employees as "independent contractors" to avoid paying employment taxes, worker's compensation and unemployment insurance risks exposure to I.R.S. and other governmental liability both for itself and possibly for its clients. Retirement Plan Benefits
One of the most confusing aspects of co-employment relates to the retirement plan reporting obligations of the client. In some instances, leased employees may be counted in a client's headcount for determining if a retirement plan is qualified under Sec. 414(n) of the Tax Code. Adding employees to the headcount can influence contribution amounts, participation and tax consequences, including determining if the plan retains the benefits of a qualified status. It is extremely important to review the laws with an accountant and an employee benefits/tax attorney. Family Medical Leave Act of 1993 ("FMLA")
The FMLA applies to employers with 50 employees or more and provides up to twelve weeks unpaid, job protected leave to eligible employees. Just as the staffing company, a client cannot interfere with an employee's rights under FMLA and must not discriminate against an employee for taking FMLA leave. Also, if the use of temporary workers results in more than 50 employees a day for 20 or more weeks in a calendar year at the client's business, an otherwise excluded client now may be subject to FMLA. Civil Rights Laws
A client cannot shield itself or avoid complying with the civil rights laws including Title VII, the Americans with Disabilities Act and the Age Discrimination in Employment Act through the use of a staffing firm. Title VII of the Civil Rights Protection Act of 1964 allows suits against a joint employer. Worker's Compensation
Under worker's compensation, employees are provided benefits when accidentally injured on the job and cannot sue their employer for further damages. In Texas, this "exclusive remedy", which protects employers from lawsuits under worker's compensation, is usually extended to the client of a staffing firm. However, the exclusive remedy is not available if the client intentionally causes an injury to the employee or if the staffing relationship is a true "managed services" arrangement with no client control over the worker's daily activities. National Labor Relations Act (NLRA)
If a sufficient relationship between a staffing company's employees and the client is established, a temporary employee may be included in the collective bargaining unit for NLRA purposes. Occupational Safety and Hazard Act ("OSHA")
A staffing company may be held liable for a client's violation of OSHA if placed on notice of an unsafe work condition either by other employees, by the affected employee or from any other source. How can both clients and staffing companies avoid litigation? Avoiding or minimizing the risk of litigation is possible. Below are some suggestions which protect not only the client, but also the staffing company:
- A written agreement which clearly describes the relationship between the staffing firm and the client is a necessity. The agreement must describe the parties' mutual expectations and obligations and any indemnity language. In addition, the agreement must spell out services, treatment of employees and all aspects of the employment relationship including ending the relationship.
- Some companies are now using an alternative dispute resolution provision in their agreements. Staffing firms and their clients are determining beforehand how to resolve disputes and putting in place procedures to ensure continued communication between clients and staffing companies when problems arise.
- Because most workers work offsite at a client's facilities, communication and early investigation and resolution of employee's disputes or complaints will decrease the likelihood that an employee will feel compelled to go to a state or federal agency for help.
- Clients and their managers should clearly understand that the staffing firm controls pay rates, time off, interviewing, counseling, performance reviews, attendance and overtime issues.
- Temporary workers need to be trained and reminded that the staffing firm is their employer and that workers should notify the staffing firm regarding working conditions, problems and employment questions.
- Marketing materials should reference the staffing firm's role and its commitment to adhere to employment laws and to the fair treatment of employees.
- All clients should be provided with the staffing company's sexual harassment and discrimination policy. In addition, the staffing company should have a copy of the client's policies and should review them.
Currently, human resource professionals are placed under a great deal of scrutiny. In a time of downsizing, right sizing and restructuring, human resource professionals are witnessing their job responsibilities being delegated to line managers, being replaced by computer technology and being outsourced to staffing companies. Like many professions, human resource professionals are being asked to do more with less and invent solutions which add to the efficiency and profits of their organizations. Many staffing firms are placing a new emphasis on partnering. As demands increase, clients expect staffing companies to show exactly how temporary workers are adding to companies' profitability. In addition, staffing firms must be able to thoroughly educate human resource professionals about the staffing relationship. This education includes providing support to clients and discussing potential areas of concern inherit to staffing and co-employment. Acknowledging responsibilities and aiding in avoidance of lawsuits are additional ways to quantify the staffing company's value and to increase the benefits of a partnering relationship. Conclusion The nature of a staffing relationship lends itself to co-employment. Careful attention should be given to those areas where liability is shared. Staffing companies can reduce both the litigation risk for themselves and their clients by partnering through education, sharing of information and maintaining open communication with clients and their shared employees. Author's Note: The author thanks the National Association of Temporary and Staffing Services and Edward A. Lenz, author of Co-employment Employer Liability Issues in Third-Party Staffing Arrangements (Third Edition). Much of the legal portion of this article was obtained through a review of Mr. Lenz's work. The phone number for ordering the publication is (703) 549-6287. However, please note that the cites to the Texas statutes regarding staffing have been changed since that publication was edited. The Staff Leasing Services Act is located in the Texas Labor Code Ann. 91.001 et. seq. and the Temporary Common Worker Employers Act is found in the Texas Labor Code Ann. 92.000 et. seq. The information presented in this article constitutes general information for educational purposes only. Laws may have changed since this article was first written. Any specific legal question or the application of employment law should be addressed with a qualified attorney. Tax issues should be addressed with a tax attorney or an accountant.
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Independent Contractor or Employee?
Increasingly, employers are turning to independent contractors. This trend may be perceived as a solution to employees' increased knowledge of employment laws and a way to avoid the federal and state taxes associated with employees. However, many employers are not aware of the true definition of an independent contractor or the penalties that accompany an incorrect classification.
Failure to pay taxes on an individual is costly. If an employer is found to have misclassified employees as independent contractors, the employer can be held responsible to the state's unemployment commission and the IRS for back wages, taxes, penalties, fines and interest.
An employer's classification of a worker as temporary, permanent, probationary, part-time, full-time or seasonal will not change the employee status. The law does not distinguish between types of employment. Even an agreement by both parties that the arrangement is an independent contractor relationship provides no insurance that the state or federal government will view it as such.
Instead, for example in Texas, the Texas Unemployment Compensation Act presumes employment if there is "...any service...performed for wages or under any contract of hire, written or oral, expressed or implied...by an individual". Such a presumption of employment will continue "until it is shown to the satisfaction of the Commission that such individual has been and will continue to be free from control or direction over the performance of such services both under his contract of service and in fact". (emphasis added)
The test to determine if someone actually is an independent contractor is not clear. In determining whether an employer owed Social Security taxes on its workers, the Supreme Court created the "economic reality" test. The Supreme Court found the following factors important: 1) the degree of control which is exercised by the employer; 2) the extent of the relative investments of the "employee" and employer; 3) the degree to which the "employee's" opportunity for profit or loss is determined by the employer; 4) the skill and initiative required in performing the job; and 5) the permanency of the relationship. United States v. Silk, 331 U.S. 704 (1947).
An employer who directs, instructs, supervises and/or controls a worker is probably dealing with an employee. Also, a non-competition agreement or a long-term, continuous relationship is indicative of an employment relationship. If the services provided by the individual are an essential or integral part of the primary services an employer provides to the public, the individual is more likely an employee.
If the individual provides his/her own materials, sets his/her own schedule, advertises services to the public at large and has more than the employer as a client, the individual is more likely an independent contractor. One should also examine the compensation arrangement. An independent contractor is usually paid by the job, has negotiated the contract, is responsible for correcting mistakes at no additional compensation and receives no employment benefits.
Instead of using options such as staff leasing or employment agencies for short-term needs, many employers continue to gamble by improperly classifying employees as independent contractors. Many times a terminated worker files for unemployment compensation. The agency administering unemployment checks on the employee's ability to draw benefits. When a company has not paid unemployment taxes on an individual the agency questions whether the worker was properly classified as an independent contractor or should have been an employee. If a misclassification is found, the employer may then be subjected to a state audit that in turn can lead to an IRS audit. In addition to former workers filing unemployment claims, unemployment compensation agencies are notified of misclassifications by a company's competitors or a third party and when a random audit or audit of a specific geographical area or industry is completed. An audit regarding the failure to pay taxes on an employee is many times the state's employment tax department's highest priority.
As the fines and penalties resulting from misclassification has become a large revenue generator with the IRS and state agencies, such investigations are likely to increase in the future.
The author thanks the Texas Workforce Commission for providing much of the information contained in this article.
The version of this original article appeared in a publication addressing the needs of people in the legal profession. Please review the following chart for differences between independent contractors and employees.
Nothing contained herein should be considered legal advice.
Characteristics of Employees vs. Contractors| Employee | Independent Contractor |
|---|---|
| Employer controls place of work. | Contractor controls place of work. |
| Employer sets hours of work. | Contractor sets hours of work. |
| Employer pays by the hour or through salary. | Contractor may charge by the job, although more and more contractors charge by the hour. |
| Employer furnishes tools and materials for job. | Contractor has all tools of trade. |
| Employer owns place of business. | Contractor owns or leases place of business. |
| Employee is paid regardless of job completion. | Contractor doesn't get paid if job isn't done. |
| Employer is only recipient of services. | Contractor offers services to public. |
| Employer controls how work is done. | Contractor controls methods of work. |
| Employee is subject to company policies and rules. | Contractor is subject to terms of contract. |
| Employer provides all training to do the job. | Contractor is trained expert. |
| Employee works full time for company. | Contractor has many jobs; time for different companies. |
| Employee can quit employer relationship without incurring liability. | Contractor that quits is responsible for damages, finding replacement, other contract duties. |
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Peace at Work in these Turbulent Times
How do you get your employees to focus on work when the terrorist attacks of September 11th have changed us forever? How do you encourage people to be productive when their emotions are vacillating between rage, dismay, sympathy, hopelessness and revenge? It is not an easy task. The major challenge is to control what you can. You can control your reactions to this tragedy. If you have management authority, people are looking to you for your response. Here are some ways to restore peace and productivity to your workplace.
Give people time. This is a shock. They may need more frequent breaks. There will be a lull in productivity. More sick time may be used. Expect it.
Encourage employees to get help. If you have an Employee’s Assistance Program (EAP) or counseling services, encourage people to use them. Some of your employees may suffer from post-traumatic stress disorder. Others may need to deal with co-workers, clients, patients or family members who are suffering from mental problems related to this trauma. Refer your employees to professionals that are trained to help them get through these types of situations. With the depression linked to graphic scenes, you may also want to consider limiting TV watching to lunch & break times.
To the extent possible stop the gossip and speculation. People will need to talk and there is a need for information. However, too much time spent talking about the need for revenge and retribution is not productive. Remind employees that there are top people in charge of making those difficult decisions who are working on the proper response.
Do not let employees bully others. You have a duty to keep the workplace safe and free from discrimination. Problems are only increased if you allow your workforce to treat others differently based on factors such as race, national origin or religion. This might be a good time to circulate your policy on treating others with respect and not discriminating against co-workers, suppliers or customers.
Consider bringing in outside help. If your work environment seems to be suffering, you may want to bring in a stress management counselor. If productivity is low, you may want to hire a facilitator to help people focus on what these acts of war means to your business right now and what you are going to need to think about for the future.
Have a cause that people can rally behind. Consider sponsoring a clothing drive, donating blood, raising money, write encouraging cards to workers. One hotel brought cookies to airline personnel stranded in the city. Another is making posters for their New York office.
There is good news. You just may have to listen and look harder for it. One radio station reported on the architectural abilities of the engineers of the World Trade Centers. Instead of concentrating on the lives that were lost during the collapses, the reporter marveled at the strength of the structures & the length of time they withstood the crashes to allow so many to be evacuated.
Sing the praises of your own hometown heroes. There are people who are doing amazing things around you to support both the areas affected by tragedy and to keep business going as usual. Notice and appreciate those folks. Those employees who continue doing a good job, even during this chaotic time, deserved to be recognized.
Try to turn the attention to the good that is being done. There is a renewed patriotism felt throughout our land. Our own leaders have put aside political differences to support the president’s efforts. Communities are pulling together and are helping people they have never met. There is a resurgence of faith and people of different religions are supporting the relief efforts. Countries are pledging their support to the United States.
Remember that ceasing business is what the enemy wants. Our nation received a wake up call. People do not want the United States to continue its economic success. Remind your employees that shutting down business is a form of retreat. One of the best ways to honor the victims, the medical providers, the rescue teams, and our supporters is to pull together and be productive. American workers have received the call. We need to answer that call by getting back to work.
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Toxic Bosses
Most of the problems that people experience with those who lead them are because of miscommunication, differences in personality types or pressure that the organization is placing on individuals at work. Many times the problem does not lie with the boss, but the employee. There are many employees who don't take responsibility, create problems where none existed and who sabotage rather than support their leaders. This article is not about the great majority of folks who have been placed in the challenging role of supervising others. It is not about people who have flaws or are doing the best they can leading in situations that they have been given.Instead, this discussion is about a different breed who have a negative effect on everyone around them. There are some people who have been placed in supervisory roles that have no business being there. These people will never be happy with their subordinates' efforts no matter what is accomplished. With effort most of these toxic bosses can be managed or at the very least a defense can be raised against their tirades, ineptness or extreme mood swings. Here are some strategies to help you defend against toxic supervisors.
Accept that your boss won't change. Simply acknowledging that your response must change may help. People in charge have achieved their status by being who they are. Expecting them to change without a directive from above will most likely not occur.
Don't try to be a psychologist. You don't need to understand why your boss acts the way he or she does. It may be that throwing temper tantrums as a toddler or pouting as a teenager proved effective in gaining what your boss wanted. Now that your boss is grown, he or she doesn't have any adult skills to handle stress or gain results. Many times there are personal things going on at home. There may be a divorce pending or your boss experienced a past hardship that has not been healed. Your supervisor's children may be acting out or running away or into drugs. It doesn't matter. What matters is determining a course that makes you effective and steers you clear from the dark cloud hanging above your supervisor.
Discover when problems occur. Learn the triggers that set the harmful actions in motion. The fact that your boss is cranky after the weekend and doesn't like confrontations is valuable information. If deadlines approach and your boss starts name calling or slamming doors, take note. Determine those times that your boss locks the door and avoids others. If your boss grabs credit or blames you during committee meetings, be prepared. Learn to read the signs of trouble brewing so you can avoid situations or even put in correcting actions if needed.
Become a detective. Determine what type of problem boss you are dealing with. Some want you to do the work for them while they take the credit. Others want you to take all the risk. Some like to play politics. Others are cowards and wimps who won't make decisions or support you in any form. Some want to be left alone and not bothered. Others don't feel comfortable without knowing every detail. Some have a tendency to hide information and fail to share valuable knowledge. Others like to hear themselves talk or will overload with useless information to make them look like experts. Some like to have all the power. Others create emergencies so they can look like heroes. Bosses may have a number of these tendencies. It helps to identify the most prevalent so you can base your decisions on what is important to your supervisor.
Examine when you are most effective. Determine when you have had the most success or the least resistance. Some toxic bosses respond better to logic, others to strokes of the ego. Some won't listen to you until you stand toe to toe with them. Others want a written memo supporting your position. Consider your approach, the words you said and what was appealing to the boss. Discover your boss's hot buttons…what actions are chastised, tolerated and even praised.
Get some education. Read a book on dealing with difficult people. Invest in a course on negotiations or conflict resolution. Even if you have to finance the class without help from your company, the expenditure will net you an invaluable return. Don't just hope things will improve. Learn what the masters do to map out solutions in challenging situations. Consider hiring a business coach to guide your career and help you strategize your decisions.
You will have to be the adult. Rarely does mirroring the problem behavior result in a solution you want. You will have to remain cool, calm and in control if you expect to survive. Usually, people around you are experiencing the same immature behavior from your supervisor. Word does get out about who is mature and who is a jerk.
Get help. Some organizations have employee advocates or representatives who will give you guidance and may be able to help you achieve a transfer. The human resources department may be an oasis in your toxic work desert. See if others have found help with employee programs.
Decide when you should give up. There are some bosses and jobs that aren't worth your effort. There are the bosses who have a chemical dependency, a mental disorder or they are harassers or are violent. Usually, these same people have some sort of job security that is not promised to the average worker. For whatever reason, whether they are related to the owner, obtaining results that management thinks cannot be duplicated or even have some item of blackmail on the powers that be, these people are there to stay. In the case of a permanent fixture, especially with someone who is mentally ill, run don't walk to seek another position. No job is worth your safety or your mental well-being. Find another job and then leave.
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