Everything Is On Demand; What About Employees?

Attorney Deanna Brinkerhoff suggests that like so many other things today, employees should be on demand.

Deanna Brinkerhoff, an associate in the Las Vegas office of law firm Holland & Hart LLP, offered her tips at BLR’s Advanced Employment Issues Symposium, held recently in Las Vegas.

Why Recruiters Are Looking for More On-Demand Talent

Brinkerhoff notes that organizations look toward on-demand talent to:

  • Gain flexibility
  • Meet varying production needs
  • Fill in talent gaps
  • Try out the fit (temporary to permanent, or temp to perm)
  • Manage seasonal fluctuations
  • Hire “as needed” to fill in for workers on leave or on vacation, for example

Some of the other benefits of on-demand talent often cited include:

  • The staffing company is responsible for payroll, taxes, and benefits.
  • Recruiting effort is reduced.
  • Time to fill is minimal.

Types of Alternative Work

What sorts of arrangements are typical? Brinkerhoff identifies the following:

  • Agency temps: The person works for an agency that assigns him or her to work for other companies.
  • Direct-hire temps: Persons hired directly by a company work for a specified period of time, usually for holidays or other special-demand times.
  • Temp-to-perm: The company uses the expertise of the staffing company in the recruiting, screening, and of testing qualified candidates who are “tried out” as an agency temp worker but may later be hired directly. (Note: There is typically a fee charged when a temp goes to perm; be sure this is clearly spelled out in your contract with the agency.)
  • Long-term and contract staffing: The staffing company provides workers for long-term assignments of indefinite duration (e.g., cleaning, security, lawn care).
  • Professional employer organization (PEO) or employee leasing: Workers are employed by the PEO but work for a company through a contractual arrangement between the PEO and the company.
  • Day laborers: Workers are picked up by employers to work for the day.
  • On-call workers: Workers are called on an as needed basis.
  • Independent contractor: An individual has his or her own business to provide services or a product to others.
  • Freelancer: A type of independent contractor; a self-employed individual who provides services to multiple companies (e.g., writers, web design, graphic artists, translators).
  • Consultant: An expert or professional in a specific field engaged to provide expertise.

Practical Concerns When Employing On-Demand Workers

  • Integrating contingent workers with regular employees. (“It’s us versus them,” or “They are screwing me out of overtime.”)
  • Controlling quality of work. One-day people will not be as efficient as regular employees.
  • Ensuring proper training on equipment and processes. It’s very important to address this, Brinkerhoff says, especially in dangerous manufacturing situations.
  • Motivating and engaging workers.
  • Maintaining desired corporate culture.
  • Maintaining confidentiality. A best practice is not to let temps have access to confidential company information, says Brinkerhoff.

Legal Concerns

In the simplest of terms, says Brinkerhoff, there are three questions to determine whether a worker is an employee:

  • Is the worker your employee?
  • Do employment laws apply to this worker?
  • Are you liable if something goes wrong?

Employee or Not: Why It Matters

Determining who is and who is not an “employee” is essential. Documents are helpful, says Brinkerhoff, but they don’t necessarily convince government agencies.

  • Employees are covered by federal, state, and local labor and employment laws.
  • With employees, there are additional implications for:
    • Taxes
    • Benefits
    • Lawsuits

Independent Contractor vs. Employee

The independent contractor vs. employee question is also important. The Department of Labor (DOL) uses an economic realities test that asks, Is worker truly in business for him- or herself or is he or she economically dependent on employer for work?

The Internal Revenue Service (IRS) has its own 20-Point Test, which evaluates:

  • Behavioral control,
  • Financial control, and
  • Relationship of the parties.

There also may be state law tests relating to workers’ compensation, unemployment insurance, and state wage-and hour-classifications.

Signs that a worker is an independent contractor:

  • Hired for a project;
  • Paid lump sum and not by hour;
  • Hires own employees/assistants;
  • Sets own hours;
  • Bears the risk on profit or loss of project; and
  • Is not terminable at will.

Signs that a worker is not an independent contractor:

  • Performs work that is essential to the company;
  • Performs duties that employees perform;
  • Is paid hourly;
  • Pay is directed to the individual rather than to the contractor’s business entity;
  • Works exclusively for the company for a long time;
  • Offered company benefits (e.g., vacation, 401(k), health insurance);
  • Does not make his or her services available to others;
  • Is required to submit regular reports;
  • The company provides all tools, equipment, supplies, etc.;
  • Hours, location, training, policies, etc., are dictated by company; and
  • The company provides performance evaluation.

Consequences of Misclassification

  • Overtime liability
    • Back pay and liquidated (double) damages.
    • Criminal penalties—fines up to $10,000. These are rare, Brinkerhoff says, but might be levied, for example, in cases of falsification of records.
    • Willful penalty—$1,000 violation and imprisonment.
  • Payroll taxes, withholding, penalties, interest
  • IRS and DOL audits
  • Liability for medical expenses for work-related injury
  • Attorneys’ fees and costs
  • And, other consequences

In tomorrow’s Advisor, Brinkerhoff clarifies the status of workers from staffing agencies—the employer may be the agency, the company, or both. Plus, an introduction to BLR’s premier recruiting event: RecruitCon 2016.

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