U.S. DOL and WI DWD Join Forces to Combat Employer Misclassification

By:  Alan E. Seneczko  

 

Wisconsin employers that utilize independent contractors take note: The federal and state governments are now partnering to address the improper "misclassification" of employees as independent contractors, a development that could have a significant impact on employers who utilize the services of contractors.

 With very little fanfare (I wonder why...), on December 23, 2014 (very interesting date), the U.S. Department of Labor and Wisconsin Department of Workforce Development entered into a formal "Partnership Agreement," under which they agreed to "share resources" for the purpose of "enhancing enforcement" by "conducting coordinated investigations and sharing information." According to the Department of Labor's January 20, 2015 press release, the goal of the Agreement is to "protect the rights of employees by preventing their misclassification as independent contractors." Their partnership "represents a new effort on the part of the agencies to work together to protect the rights of employees and level the playing field for responsible employers by reducing the practice of misclassification."

 What this means is that if you are audited by the Wisconsin Unemployment Compensation Division and it finds that you have misclassified employees as independent contractors, the folks at the UC Division will share their findings with the federal Wage and Hour Division, which will want to ensure that you also paid overtime and properly compensated these contractors under the wage and hour laws. Same thing with the Wisconsin Worker's Compensation and Equal Rights Divisions. And, it works both ways. If the DOL finds that you misclassified your employees as contractors, it will notify its "partners" at the DWD of this fact, so that their wages can be included in your UC taxes and WC insurance premiums.

 The tests for independent contractor status applied by the various agencies all differ somewhat, but share many common elements. If you use independent contractors, it is imperative, now more than ever, that you ensure they will meet these tests. More information on worker misclassification can be found at http://dwd.wisconsin.gov/worker_classification, or by contacting Attorney Alan E. Seneczko at (262) 560-9696 or alseneczko@wesselssherman.com .

When Can an Employer Make Deductions from an Employee’s Salary without Destroying the Employee’s Exempt Status?

January 2015

By: James B. Sherman, Esq.

We frequently are asked whether and under what circumstances an employer may make deductions from an employee’s salary without impacting the employee’s exempt status for purposes of overtime under wage and hour law.  HR professionals know that in order to be exempt from overtime, an employee must be paid on a salaried basis and making deductions from that salary can sometimes destroy the exemption.  At the same time salaried employees frequently do things (or fail to do things) that may cause their employers to want to make deductions from their pay.  Consequently, knowing which deductions are permissible and which would ruin the employee's exempt status, is extremely important to employers.

The following is a “cheat sheet” employers may use as a quick reference addressing some of the more common circumstances where deductions may legally be taken from an exempt employee’s salary and where deductions are not allowed.

            DEDUCTIONS ALLOWED

• Full day absences taken for personal reasons. Example: An exempt employee who misses 1 ½ days of work for personal reasons, such as golfing or helping a family member move, could be docked 1 full day of salary because the absence was for personal reasons, but could not deduct for the additional half day.
• Full day absences occasioned by sickness or disability, if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability. Example:  An employer that maintains a bona fide policy or practice which pays all or a portion of an employee’s salary during absences for sickness or disability, can deduct from an employee’s salary for any related absence occurring before, during and after such payments are exhausted, for any period of full day absences covered by this policy.
• Infractions imposed in good faith for violation of safety rules that are of major significance. Example: An employer may legally make a deduction from an exempt employee’s pay as a penalty for a serious safety rule violation such as smoking in a coal mine.
•  Disciplinary suspensions imposed in good faith for infractions of “workplace conduct rules” – must be pursuant to a written policy applicable to all employees.  Example: An employer may legally impose a three-day unpaid suspension for violating a written policy applicable to all employees prohibiting sexual harassment.
• Exempt employees who are on unpaid FMLA leave need not be paid under that law.

            DEDUCTIONS NOT ALLOWED

• Less than full day absences regardless of reason.
• Full day absences occasioned by sickness or disability, where there is no bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability.
• Infractions of safety rules that are not of major significance.
• Infractions of unwritten workplace conduct rules or rules that address things other than workplace conduct (e.g. attendance infractions for tardiness).

Another question we frequently hear from employers is how to discipline an exempt employee for not working enough hours as may be expected of them.  An example would be a salaried exempt employee who does not miss full days of work but shows up late, leaves early, or worse, comes late/leaves early.  Although this appears to present employers with a dilemma based on the above summary of Department of Labor (D.O.L.) regulations, the short list of answers is: (1) fire the employee; (2) demote the employee; or (3) if it is apparent the employee is never going to work a 40 hour week, much less a week exceeding 40 hours (i.e. where there is no risk of incurring overtime) change the employee’s method of pay from salary to hourly – this will make the individual non-exempt, regardless of their job duties, but if there is no risk of incurring overtime liability it is better to pay only for the work an employer is getting, right?

Wage and hour law can be tricky and any of the above rules can be impacted by any number of nuances.  Accordingly, for questions regarding exempt employee status, salary deductions, or related issues please contact attorney James Sherman at 952-746-1700 or jasherman@wesselssherman.com. 

Minnesota Court Enforces Arbitration Provision that Gave Employee Only 90 Days to Bring Claims despite a 6-Year Statute of Limitations

January 2015

By: James B. Sherman, Esq.

The ability to resolve employment disputes quickly and without the legal expenses normally associated with court litigation, are just some of the reasons employers consider adopting arbitration agreements for their employees.  The Minnesota Court of Appeals recently added another reason for employers to use arbitration agreements.  The court upheld an employment agreement that contained an arbitration clause that required employees to pursue arbitration of any controversy or claim related to their employment, within just 90 days of the events giving rise to the claim.  The employee in this case failed to act within the 90-day period but argued the agreement was unenforceable because the employment claims at issue had a much longer, six-year statute of limitations period to sue in court.  The court disregarded this argument and enforced the much shorter 90-day limitation period provided for in the parties’ agreement.

Not every arbitration agreement can get away with shortening limitations periods provided by statute.  Whether and to what extent an arbitration agreement can shorten a limitations period will depend on what is “reasonable” in each case.  Many workplace laws allow employees to bring claims one full year or more after the events giving rise to the claim (such as a termination) leaving employers in limbo, waiting to see whether employees will bring legal claims.  An agreement that drastically shortens this length of uncertainty can be very beneficial to employers, but such an agreement must be carefully worded.  In this case, the court determined that the 90 days provided for in the agreement was not unreasonable, as there was no evidence that the employee would have had trouble pursuing arbitration within the 90 days had he wished to do so.

Arbitration has its drawbacks and does not necessarily make sense for every company or in every situation. For instance arbitrators sometimes issue unexpected decisions and unlike trial court decisions, it is much harder to challenge an arbitrator’s ruling on appeal.  Nevertheless, arbitration is becoming increasingly common, especially in the employment setting, as a means of resolving workplace disputes efficiently and expeditiously.  This latest decision also approved of the use of arbitration to ensure that workplace disputes are brought promptly, which can benefit all parties concerned. 

For a short, easy to read list of pros and cons of arbitration in the context of employment disputes, or for assistance in drafting an arbitration agreement, contact Ms. Julie Anna Summer at (952) 746-1700, or email jusummer@wesselssherman.com.

Attendance Still Matters – Even When Working At Home!

January 2015

By: Alan E. Seneczko, Esq.

The interaction between the duty to accommodate under the ADA, intermittent leave under the FMLA and an employee’s obligation to occasionally attend work has been a source of frustration for employers for many years. Just how much is too much? At what point does an employee’s continued intermittent unavailability for work render her unqualified for work? What about employees who work from home? Do they also have an obligation to “report for work” on a regular and reliable basis?  

The Seventh Circuit recently addressed this issue in Taylor-Novotny v. Health Alliance Med. Plans, Inc., Case No. 13-3652 (7^th Cir. 2014), where it examined an employer’s attendance expectations of an employee who worked out of her home as an accommodation of her multiple sclerosis. The employee had a long history of attendance problems for which she was repeatedly disciplined. Her condition eventually prevented her from reporting to work and her employer allowed her to work from home as an accommodation – but still required to log in to her computer and be available during an agreed-upon work schedule, and to notify her supervisor if she failed or was unable to do so. Not surprisingly, the employee’s “attendance” issues continued and eventually resulted in her termination. Not surprisingly, the employee then sued her employer alleging discrimination on the basis of her disability and failure to accommodate, among other alleged violations.

The Seventh Circuit dismissed her claim, finding, contrary to the employee’s assertion, that regular attendance and punctuality are essential job functions even for an individual who works out of her home, and that it was reasonable for her employer to have such expectations. As a result, since she was unable to meet them, she was not considered “qualified” for the position and therefore unable to pursue her claim under the ADA.

Although a large dose of tolerance is generally required before an employer can ever successfully argue that an employee’s continued, erratic unavailability for work has rendered him/her unqualified for the position; that option still remains. And . . . we have all dealt with a select few individuals who have gotten very close to, if not crossed, that line.

Questions? Please contact WS Attorney Alan E. Seneczko at (262) 560-9696, or email alseneczko@wesselssherman.com .