Articles Posted in Department of Labor & Independent Contractors

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Limo.Driver.Drawing.Dollar.Photo.Club.11.29.15.jpgIn these difficult economic times, many businesses seek cost savings by calling certain workers independent contractors instead of employees. It is easy to understand why can be advantageous for a business to use an independent contractor instead of an employee. For example, among other things, there are no associated payroll taxes, the worker may not be eligible for overtime pay, the worker does not receive benefits (e.g., paid time off, health insurance, etc.), which are afforded to employees and the worker may not receive protections under certain employment laws. While these examples may be perceived as advantages, the business faces significant exposure if the worker is misclassified and should have been treated as an employee. The Department of Labor, other governmental agencies with similar enforcement oversight and attorneys have increased their efforts in scrutinizing the relationship of workers. You should consult an experienced employment lawyer before making a classification determination to understand the legal issues and related considerations.

This is not an issue that only affects small businesses – large companies are being affected as well. For example, in September 2015, Uber was named as a defendant in a class action lawsuit in New York State Supreme Court (Ogunmokun v. Uber Technologies Inc.) by drivers claiming they were misclassified as independent contractors. This is just one of cases where Uber is named as a defendant regarding misclassification issues – it also facing claims in California (where it received an initial adverse ruling during the early phase of a case) and Pennsylvania. Unlike individual employment discrimination cases, these types of cases can be devastating for a business because not only do they include a large group of alleged affected workers, they also strike at the heart of a company’s business model and affect their viability. These claims can also lead to investigations by the IRS and other government agencies.

Another industry that has been targeted is on-demand food services. In New York City and other large cities, many companies provide food delivery services and the delivery workers allege that they are misclassified as contractors. Some of companies which are facing claims include DoorDash, Sprig Inc. and GrubHub. As technology develops, new classes of workers are created. It is critical for businesses to evaluate how these new workers will be viewed under the law. These are just a few examples of industries affected – we have worked on matters involving the photography industry, media industry, service providers and many others.

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Thumbnail image for Misclassification.Image.bought.from.istock.jpgOur Award-Winning New York Employment Lawyer provides advice and counsel to many small businesses who are being investigated or audited by the New York State Department of Labor and other agencies with similar enforcement objectives. If you receive a Notice of Determination of Contributions Due in accordance with Section 571 of the New York State Unemployment Insurance Law, don’t be so quick to send in the payment. Many times the payment requested may be less than a hundred dollars and that may seem like a nominal amount but the payment may trigger a domino effect of government agency review and investigations.

In short, the payment for UI contributions are for unpaid state payroll taxes which means that the DOL has determined that your business had employees and the wages were not reported correctly. The notice typically comes from an UI Accounts Examiner in the Employer Accounts Adjustment Section in the Albany office. You should consult with an experienced employment lawyer to determine if you have any defenses to the DOL’s determination. For example, are they arguments to show that the workers at issue were truly independent contractors or should otherwise be exempt for UI coverage purposes. If there are colorable arguments, you may want to consider challenging the Department of Labor’s findings. Alternatively, if you pay the bill, it is possible you may get contacted by the IRS, the New York State Workers Compensation Board (which can assess significant penalty depending on the circumstances) and receive a follow-up notices from the Department of Labor for potential failure to file quarterly payroll returns.

This issue underscores the importance of implementing and developing best practices to ensure your record keeping and pay practices are compliant with the labor law.

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Intership.Bought.Dollar.Photo.Club.9.9.15.jpgOur Award-Winning New York Employment Law Attorney is often asked to discuss hot topics in the field. Recently, we were asked to discuss the use of unpaid interns by for-profit employers. This is another case where proactive steps can prove to be tremendously valuable for employers because an improperly classified intern can lead to payment of overtime wages, employee benefits, and tax considerations. A brief discussion of general information regarding unpaid internship programs follows. If you have any specific information, feel free to call our office to discuss your specific situation.

In recent years, class action lawsuits have been filed against companies including NBC Universal, Sirius XM, Viacom, The Charlie Rose Show on PBS, Conde Nast, Gawker and Atlantic Records regarding their unpaid internship programs. Many companies opted to settle and some of the cases resulted in multi-million dollar settlements. A few cases have started to make their way through the courts. On July 2, 2015, the Second Circuit issued a decision in Glatt et al. v. Fox Searchlight Pictures, Inc., Nos. 13-4478 & 13‐4481 (2d Cir. 2015), on a case of first impression and provided some insight to employers and interns. The case is discussed briefly below.

The Glatt Case – Background
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Audit.Magnifying.Glass.Dollar.Photo.Club.jpgOur Award-Winning New York Employment Lawyer has represented many small business who were facing an audit by the NY Department of Labor (DOL). This audit can be a significant moment for small businesses who use freelancers, independent contractors, consultants, and paid interns. It is prudent for companies to be represented by an experienced NY employment law attorney because not only are the payroll tax consequences, they could also be a domino effect of other unintended consequences. If you have received a letter from the New York Department of Labor regarding an upcoming audit contact our office to learn your options, potential legal exposure and determine best compliance practices. Unlike most employment discrimination, an intent to violate the law is not a factor in misclassification cases – even well meaning companies who were ignorant of the law can face exposure and penalties.

Why Is the State Doing an Audit & Why Was My Company Selected?

Misclassification of workers is a significant issue for the state because, among other reasons, it deprives the state of employment-related payroll taxes and deprives workers of employee rights and protections. Your company could have been selected for several reasons which include but are not limited to an random audit or an due to an individual’s complaint. Regardless of the reason for the audit, you should take immediate steps to prepare yourself for the audit and protect your business. The audit willl include a fact specific analysis of whether your workers are employees or contractors. It is advisable for you to do your own internal audit or review with experienced counsel early in the process. Below are some of the factors from the start regarding the classification of a worker.

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Photo.Studio.Dollar.Club.5.1.15.jpgIn recent years, an increasing number of photographers and photo studios have been the subject of a government audit, investigation or lawsuit regarding their use of photo assistants (sometimes also referred to as freelance lighting technicians). While it may be commonplace in the industry for photographers to treat photo assistants as independent contractors and issue 1099 tax forms – generally, that alone is not a sufficient defense. The specific nature of the working relationship will be scrutinized. In general, the NY Department of Labor defines “employment” as “any service or contract of employment for hire, express or implied, written or oral” and “any service by a person for an employer.”

The DOL has issued guidelines on factors that it considers in determining whether a worker (including a photo assistant) is an independent contractor or employee. In general, in order to be considered an independent contractor, the worker should be free from supervision, direction and control in the performance of their duties. Some incidental control over the results will not necessarily dictate an employee-employer relationship. The following factors typically exist if the worker is an contractor: (i) has an established business with a separate employer identification number; (ii) has a business card with their own business or trade name; (iii) has a website for its business and it advertises to the general public; (iv) pays own expenses; (v) assumes risk of a profit or loss; (vi) negotiates a fee (ideally not an hourly rate); (vii) sets own schedule; (viii) offers services to others in the industry including competitors; (ix) can assign work to another individual and the project is person specific; and (x) can refuse an assignment. This is not an exhaustive list but should give you some things to consider. In the photo studio context, the following issues, among others, specifically should be considered:

  • How did the photo studio find the photo assistant? Did the client pick the assistant or did the photo studio?
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Thumbnail image for Car.Driver.For.Uber.Misclassification.Bought.Dollar.Photo.Club.4.20.15.jpgOur New York Employment Lawyer has seen in a rise in the number of misclassification cases and that tide may continue to increase as two recent federal judges in California ruled that a jury should decide whether Uber drivers and Lyft drivers are employees or independent contractors. In both cases, the drivers are claiming that they are employees and thereby entitled to employee protections such as minimum wage, overtime pay, employee benefits, and statutory protection from discrimination and harassment. Uber and Lyft claimed in their motions that the drivers are properly treated as independent contractors. The judges in both cases stated that there are factual disputes about the classification analysis and the ultimate classification question should be decided by a jury. This was a big win for the drivers.

Both of these cases or a Department of Labor audit can have a significant impact on a company’s business model. Here, if Uber and Lyft do not prevail at trial, they will have to reclassify its workforce and that can be expensive and alter their profit computations. One of the stated policy reasons why misclassification of workers is wrong is because it can put companies on unequal playing fields. If one company is treating its workers as employees and complying with the law while its competitor is misclassifying its workers as independent contractors – well, the competitor could have unfair advantage because its costs will be lower and it may be able to win more consumers as the lowest cost provider. Let’s look at the some of the factors Judge Chen in the Uber case found important.

Some Factors in Judge Chen’s opinion
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Freelancer.Image.Dollar.Photo.Club.3.9.15.jpgWait, before you check that box in the picture to the left, are you confident that all of your workers are properly classified as independent contractors or employees? This is an area where proactive steps are crucial for all businesses to ensure that best practices are being followed before any governmental audit or lawsuit is commenced. Litigation by former employees and government audits and investigations are on the rise. Indeed, the New York State Department of Labor (DOL) and related states agencies conducted over 12,000 audits and investigations in 2014 and found over 133,000 workers were misclassified and there were $316 million dollars in unreported wages. Misclassification audits generally focus on cases where businesses improperly label an employee as an independent contractor, pay a worker off the books and otherwise misrepresent payroll. Many people incorrectly believe that this issue only affects manual labor workers who receive cash payments – that incorrect belief can lead to costly and time consuming errors. Below are the list of jobs with highest risk of misclassification cases according to New York State’s Joint Enforcement Task Force.

Top Job Categories With The Highest Risk of Misclassification

Professional, Technical and Scientific Services Construction of Buildings Food Services and Drinking Places Publishing Industries (except internet)

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Payroll.Picture.Bought.From.Dollar.Photo.Club.Feb.2015.jpgOur Award Winning New York Employment Lawyer has been asked to discuss amendments to the New York Wage Theft Prevention Act (WTPA) which will go into effect later this week on February 27, 2015. It is important for employees and employers to understand the changes and how they impact their workplaces. In general, the WTPA was created to protect workers and prevent employers from failing to paying wages. The WTPA required employers to provide written notices to each employee every year between January and February and at the time of hire or upon certain changes in an employment role. Under the WTPA, employers could be sued by employees or face enforcement actions by the State Department of Labor. If you have any questions about your obligations as an employer or your rights as an employee, contact our office at (800) 893-9645 for a confidential consultation.

CERTAIN AMENDMENTS TO THE WTPA

IMPACTING EMPLOYEES AND EMPLOYERS

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Doctor.Image.Purchased.From.IStock.V&S.jpgOur lead New York Employment Law Attorney is often asked if a worker should be classified as an independent contractor or employee. As readers of our blog will know, this can be a tricky and fact specific question. Not one size fits all here and it does really depend on the circumstances. This post will discuss a medical related’s practice of identifying a psychiatrist as an independent contractor and the court’s decision. If you have any questions on how to classify a worker or if you were improperly classified, contact our Award Winning New York Employment Lawyer at (800) 893-9645 for a confidential consultation.

Factual Background of the Psychiatrist’s Working Relationship

Samuel Lustgarten, a psychiatrist, performed services for clients of New York Psychotherapy and Counseling Center for approximately a decade. During this time, he was issued a 1099 tax form and treated as an independent contractor by the Counseling Center. After his working relationship with the Counseling Center ended, he applied for unemployment insurance benefits. The Department of Labor did not have any records of employment with the Counseling Center for Dr. Lustgarten so it conducted its own analysis of his working relationship. After considering information regarding the parties’ relationship, the DOL made a determination that Dr. Lustgarten was indeed an employee and entitled to unemployment insurance benefits. The DOL also determined that other similarly situated workers at the Counseling Center were employees. As a result, the Counseling Center was required to make certain payroll contributions based on Dr. Lustgarten’s compensation. This determination presumably affected the Counseling Center’s business model in material way. The Counseling Center filed an appeal and argued that Dr. Lustgarten was an independent contractor. An Administrative Law Judge affirmed the DOL’s decision that Dr. Lustgarten was an employee and that decision was also affirmed by the Unemployment Insurance Appeal Board.

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In recent years, the number of misclassified workers has increased tremendously. In fact, a study found that over 700,000 workers were misclassified over a three year period in New York State alone. Misclassification affects workers in many industries – trucking, entertainment, graphic, video production, computer consultants, etc. You are not considered an “independent contractor” under the law just because the business you work for says you are, because you signed an independent contractor agreement or because you are issued an 1099 tax form. Some businesses will misclassify workers in an effort to (i) avoid providing employee benefits (including health insurance, vacation pay, stock options), (ii) avoid making contributions to payroll taxes and incurring liability for unemployment insurance benefits; and (iii) try and escape statutory protections afforded to employees including some anti-discrimination laws and minimum wage and overtime pay. If you believe you or someone you know has been misclassified in the workplace, contact our Award Winning Employment Lawyer at (800) 893-9645 to learn your rights and options on a confidential basis.

Determining if a worker is an employee or an independent contractor can vary by state and the jurisdiction. For example, the IRS and Department of Labor (State of Federal) may have differing standards. For example, the Fair Labor Standards Act, the federal law covering overtime pay and enforced, in part, by the US Department of Labor, defines “employ” as including to “suffer or permit to work.” In general, while there is not a single factor that definitively determines a worker’s proper legal classification, there are several guidelines the courts and administrative agencies use to determine if a worker should be treated as an independent contractor. Generally speaking, an independent contractor (i) is free from the company’s direct supervision; and (ii) does not receive directions and control while performing work functions. The following facts could fall in favor of a finding that a worker might be an independent contractor is if he or she owns his or her own business. The worker may advertise in print or digital media to promote his or her business services. The person – the worker has his or her own business cards, determines his or her own schedule, invests in his or her own supplies and equipment, he or she provides services to other companies that are your competitors. The determination of an independent contractor status is fact specific and can vary by situation. Because a company’s intent is not a factor in certain violations, an innocent and well intentioned business may still be penalized and subject to exposure. It is in the worker’s benefit and the company’s benefit to best understand the proper legal relationship. Remember that a signed agreement will not be controlling — the actual factors of the working relationship will determine the correct status. The issue may be raised if the working relationship is terminated and you want to file for unemployment insurance benefits — your eligibility will depend on your employment relationship and could be the subject of a Department of Labor inquiry.

Contact our New York and Westchester Employment Lawyer at (800) 893-9645 to discuss your specific case.