WHAT TO
DO BEFORE
AND WHEN TH
E
DEPARTMENT O
F
LABOR COMES
CALLING
Daniel D. PipitoneChairman – Energy & Maritime Section
DOES ANYONE WORK FOR THE UNITED
STATES DEPARTMENT OF LABOR?
EMPLOYEES VS. INDEPENDENT CONTRACTORS
PREVALENT USE OF INDEPENDENT CONTRACTORS
INDEPENDENT CONTRACTORS
Company MenDirectional DrillersField ConsultantsGate AttendantsLand MenPipeline ManagersPumpers
OTHER INDUSTRIESCable CompaniesCommercial TruckingJanitorial/Cleaning ServicesOvernight Mail DeliveriesPostal DeliveriesTaxisTelephone Line/Tower
Repair Services
REASONS FOR USE OF INDEPENDENT CONTRACTORSPersonal Preference of Independent
ContractorSpecialized SkillsPeriodic/Sporadic EngagementSpecialized/Expensive EquipmentRelinquishment of Control - LiabilityBusiness Model
PATIENT PROTECTION AND AFFORDABLE CARE ACT/OBAMACARE
FAIR LABOR STANDARDS ACT ENACTED IN 1938
Differentiates between Employees and Independent Contractors
Mandates Wage Rates and Overtime Wages for Employees
Provides Penalties for Noncompliance (Misclassification)
UNITED STATES DEPARTMENT OF LABOR
2009 ANNOUNCEMENT OF INITIATIVE
CONVERSION OF INDEPENDENT CONTRACTORS TO EMPLOYEESINTER-AGENCY COOPERATION
“Used intentionally by employers to…avoid various laws designed to create protections in the workplace.”
MISCLASSIFICATION IS PERVASIVE
THE MIGHT OF THE GOVERNMENT
AVOID INVESTIGATION AND PROSECUTION
PROTECTIVE MEASURES TO ENSURE COMPLIANCE
VULNERABILITY
BUSINESS DISTRACTION
AVOID BACK PAY AND PENALTIES
AVOID APPLICATION OF OTHER LAWS
FIVE FACTOR ANALYSISControl and Supervision Exerted over an
IndividualComparison of the Relative Investments of
the Individual and BusinessOpportunity for Profit or Loss by the
IndividualSkill and Initiative Required by the
IndividualPermanency of the Relationship
NO ONE FACTOR IS DETERMINATIVE
STATUS IS DEPENDENT UPON THE TOTALITY OF CIRCUMSTANCES
CONTROL AND SUPERVISION EXERTED OVER AN INDIVIDUAL
Independent Contractor AgreementAvoid Uniforms and Company Colors/LogosAvoid Job DescriptionsExercise Care with Respect to DirectivesQuality Control and SafetyAlter the Source of DirectivesTermination of RelationshipRelevant Licensing or Other LawsWebsite/Advertisement Terminology
MANAGE BUSINESS UTILIZING INDEPENDENT
CONTRACTORSSCRUTINIZE INDEPENDENT CONTRACTORS BEFORE
RETAININGCOMMUNICATE WITH
CLIENTS
COMPARISON OF THE RELATIVE INVESTMENTS OF THE INDIVIDUAL AND
BUSINESSConduct an AnalysisInclude Expenses Related to the Provision of a
Service?Marketing and Administrative Expenses?Factor in Depreciation – Depreciation not
Applicable to All Assets
Shift Burdens to Alter Analysis
OPPORTUNITY FOR PROFIT OR LOSS BY THE INDIVIDUAL
Amount of Compensation Should be Negotiable
Volume/Frequency of Work by Independent Contractor
Management of Expenses is Responsibility of Independent Contractor
Availability of Tax Deductions to Independent Contractor
Side Businesses of Independent Contractor
Subcontractors of Independent Contractor
SKILL AND INITIATIVE REQUIRED BY THE INDIVIDUAL
Education and Vocational TrainingVocational/Professional LicensingExtent of Work ExperienceWork EthicAfford Discretion to Execute and InitiateAllow Innovation
PERMANENCY OF THE RELATIONSHIP
Independent Contractors have Freedom to Work for Others
Independent Contractors are Empowered to Renegotiate Terms of the Relationship
No Retaliation if Independent Contractor Terminates the Relationship or Declines an Assignment
Duration of Relationship Varies between Independent Contractors
1099s vs. W-2s
ENFORCEMENT TACTICSInexperienced InvestigatorsUnannounced/Early AppearancesDemands for Documents without SubpoenaPersonal DocumentsPredisposition of Liability – Rush to JudgmentInvestigators Calculate Damages Prior to
Conclusion of Investigation Investigators Conduct no Background Check of
Whistleblowers/Witnesses
ENFORCEMENT TACTICSInexperienced InvestigatorsUnannounced/Early AppearancesDemands for Documents without SubpoenaPersonal DocumentsPredisposition of Liability – Rush to JudgmentInvestigators Calculate Damages Prior to Conclusion of
Investigation Investigators Conduct no Background Check of
Whistleblowers/WitnessesInvestigators Selectively Utilize EvidenceInvestigators Motivated by Bonus System
THE RIGHT-TO-KNOW RULE
Company Reporting Requirement to United States Department of Labor
Enumerate Employees and Independent Contractors
Explain/Justify Characterization as Independent Contractor
United States Department of Labor Analyzes and Determines Whether to Pursue Enforcement
First considered by Secretary Hilda Solis - implementation delayed for Presidential Election – Nominee Thomas Perez strong advocate.
Incorrect AnalysisUnintentional AdmissionsBoth shall provide evidentiary value in subsequent
enforcement action
Focus should be upon Five Factor AnalysisCreate Favorable EvidenceUtilize Well-Versed Professionals
EXERCISE CARE
DON’T LAY DOWN!!!!
Negotiation approach of the United States Department of Labor is to first require admission of misclassification before discussing back pay and overtime wage amounts, as well as penalties
Availability of the JudiciaryFinancial and Emotional Wherewithal Required –
Might of the GovernmentProactive vs. Reactive – “The best defense is a
good offense”United Stated Department of Labor Appearance of
Invincibility has been Eroded
GATE GUARD SERVICES, L.P. VS. THE UNITED STATES DEPARTMENT OF LABOR
First United States Department of Labor Misclassification Loss in Seventy-Five Years
Wall Street Journal, Forbes Magazine, Fox News, Houston Business Journal, Trade Journals, Newspapers
Initiate Litigation for Advantages as Plaintiff
Whistleblower/Witness Investigation – Pedophile, KKKInvestigator without Experience and Rushed to Judgment – Bar
Acquaintance
United States Army Corps of EngineersIndependent Contractor Agreements – Preference
GATE GUARD SERVICES, L.P. VS. THE UNITED STATES DEPARTMENT OF LABOR
(CONT.)IRS ReturnsStatements of ClientsStatements of Independent ContractorsEmails, Memos and Letters of Direction to Independent
ContractorsAnalysis of Relative InvestmentsIndependent Contractors formed CorporationsSubcontractors of Independent ContractorsRelief“Snow birds”
AURA OF INVINCIBILITY OF UNITED STATES DEPARTMENT OF LABOR ERODED
COURT COSTS AND ATTORNEYS’ FEES SOUGHT
“WINNING TAKES CARE OF EVERYTHING.”
- NIKE / TIGER WOODS