The 1099 Time Bomb

The 1099 Time Bomb

The IRS Is Targetting 1099's

We’ve been advising HR That Works Members to get their independent contractor act together. This is an exploding risk exposure driven in large part by the need of federal and state agencies to make sure that they collect all their taxes. The IRS estimates that the 1099 misclassification problem, due primarily to poor controls, has led to more than $8 billion in unpaid taxes.

As we advise members, “If it walks like a duck and talks like a duck — it’s a duck, no matter what you call it”. If you have any independent contractors and you’re an HR That Works Member, look at the new Independent Contractor Training Module, which includes a video, IC agreement, analysis worksheet, and a guide to many state and federal resources in this area.

Don’t take this lightly! In November of 2009, the IRS launched an audit of 6,000 companies, essentially to prove the value of hiring more auditors to collect more money. I can tell you what their conclusion will be: That they should hire more auditors because there will be a greater return on investment given the amount of unpaid taxes out there. This exposure is significant, not just from a taxation perspective, but as a liability and risk management issue. Bottom line: It’s far better to pay the additional taxes, workers comp premiums, and medical expenses than to run afoul of the misclassification analysis.

For more information, call us!

We’ll set you up with the Independent Contractor Training Module.

You’ll be able to get your company compliant in under an hour!

EMPLOYER MAKES A MILLION-DOLLAR FMLA MISTAKE

Don Phinn, Employment Lawyer, Founder of HR That Works,

In Dotson vs. Pfizer, decided by the Fourth Circuit Court of Appeals, a company was found to have violated the FMLA when they fired an employee who was, at the time, on intermittent leave for an adoption. The court acknowledged that under the FMLA an employee cannot take intermittent leave for adoption unless the employer agrees. However, if the employer, as in this case, allowed the employee to take intermittent leave without objection, this is all the agreement that’s needed. Pfizer claimed that the employee was fired for malfeasance discovered while he was on leave.

This case offers two valuable lessons:

1. If you don’t follow FMLA procedures, you can’t argue that FMLA leave is unwarranted. We encourage you to get proper medical certifications and other documentation before granting any leave. The courts have made it difficult for employers to change their minds afterward – a legal doctrine that’s known as “estoppel.”
2. Many employers only “discover” just how bad an employee is during their leave. This presents a dangerous trap. Sound management practices should identify employee shortcomings without the person having to go on leave for them to surface. The company would have done better to warn Dotson about his malfeasance, put him on a performance plan, and allowed him to finish his leave.

Click here to read the case.

The wage and hour trap — administrative exemption

Don Phinn, Our Employement Law Expert, creator of HR That Works

WAGE AND HOUR TRAP

The administrative exemption creates one of the most difficult distinctions in the wage and hour area.

Whether somebody works in an “administrative capacity” has a lot to do with whether they work “in the business” or “on the business.” A telling case was recently decided in the Northern District of West Virginia, Desmond v. PNGI Charles Town Gaming (08-1216). In this case, racing officials at the Charles Town Gaming racetrack were treated as exempt employees. After extensive analysis, the appellate court overturned the previous court, ruling that the employees were not exempt and overtime was owed.

Healthy Halo clients have us as their external benefits department. We’ll fit right in with what HR is doing, and build on their accomplishments

Remember, an employer bears the burden of proving, by clear and convincing evidence, that an employee’s job falls within the administrative exemption. These exemptions are “narrowly construed against the employee seeking to assert them.” In viewing the dichotomy, the court made these points to keep in mind:

1. 1. The indispensability of an employee’s position within the business cannot be the determining factor of whether the position is directly related to the employer’s general business operations.

2. Regulations generally exclude “run of the mill” jobs with administrative classification. So although secretaries and clerks might be “indispensable,” they are not exempt under the FLSA. In the same way, just because an employee is required under state law (i.e., posting a flagman around highway work), it does not mean that they are indispensable for purposes of exemption analysis.

3. The employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from being a secretary, working on a manufacturing production line, or selling a product in a retail or service establishment.

According to the DOL, administrative exempt work includes — but is not limited to– functional areas such as

• tax,
• finance,
• accounting,
• budgeting,
• auditing,
• insurance,
• quality control,
• purchasing,
• procuring,
• advertising,
• marketing,
• research,
• safety and health,
• personnel management,
• human resources,
• employee benefits,
• labor relations,
• public relations,
• government relations,
• computer network,
• internet and database administration,
• legal and regulatory compliance, and similar activities.

Not included would be work consisting of tasks similar to those performed on a manufacturing production line or selling of a product in a retail or service establishment. (See 29 C.F.R. § 541.241)

To learn more, please click here, or call us at Healthy Halo.

This article first appeared in the HR That Works newsletter, which is provided to all Healthy Halo clients.

ARRA – What is involuntary termination?

Don Phinn, Employment Lawyer, Founder of HR That Works,

COBRA INVOLUNTARY TERMINATION DEFINED

Many employers have grappled with defining “involuntary termination” under COBRA.

According to a recent IRS bulletin, here are the standards. Note: These questions apply solely for purposes of determining whether there is an involuntary termination under section 3001 of ARRA (including new Code sections added by section 3001 of ARRA — but not for any other purposes under the Code or any other law).

Question 1. What circumstances constitute an involuntary termination for purposes of the definition of an assistance-eligible individual?

Answer: An involuntary termination means a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services. An involuntary termination may include the employer’s failure to renew a contract at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services. In addition, an employee-initiated termination from employment constitutes an involuntary termination from employment for purposes of the premium reduction if the termination from employment constitutes a termination for good reason due to employer action that causes a material negative change in the employment relationship for the employee.

Involuntary termination is the involuntary termination of employment, not the involuntary termination of health coverage. Thus, qualifying events other than an involuntary termination, such as divorce or a dependent child ceasing to be a dependent child under the generally applicable requirements of the plan (for example, loss of dependent status due to aging out of eligibility), are not involuntary terminations qualifying an individual for the premium reduction. In addition, involuntary termination does not include the death of an employee or absence from work due to illness or disability.

The determination of whether a termination is involuntary is based on all the facts and circumstances. For example, if a termination is designated as voluntary or as a resignation, but the facts and circumstances indicate that, absent such voluntary termination, the employer would have terminated the employee’s services, and that the employee had knowledge that the employee would be terminated, the termination is involuntary.

Question 2. Does an involuntary termination include a lay-off period with a right of recall or a temporary furlough period?

Answer: Yes. An involuntary reduction to zero hours, such as a layoff, furlough, or other suspension of employment, resulting in a loss of health coverage is an involuntary termination for purposes of the premium reduction.

Question 3. Does an involuntary termination include a reduction in hours?

Answer: Generally no. If the reduction in hours is not a reduction to zero, the mere reduction in hours is not an involuntary termination. However, an employee’s voluntary termination in response to an employer-imposed reduction in hours may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.

Question 4. Does involuntary termination include an employer’s action to end an individual’s employment while the individual is absent from work due to illness or disability?

Answer: Yes. Involuntary termination occurs when the employer takes action to end the individual’s employment status (but mere absence from work due to illness or disability before the employer has taken action to end the individual’s employment status is not an involuntary termination).

Question 5. Does an involuntary termination include retirement?

Answer: If the facts and circumstances indicate that, absent retirement, the employer would have terminated the employee’s services, and the employee had knowledge that the employee would be terminated, the retirement is involuntary.

Question 6. Does involuntary termination include involuntary termination for cause?

Answer: Yes. However, for purposes of Federal COBRA, if the termination of employment is due to gross misconduct of the employee, the termination is not a qualifying event and the employee and other family members losing health coverage by reason of the employee’ termination of employment are not eligible for COBRA continuation coverage.

Question 7. Does an involuntary termination include a resignation as the result of a material change in the geographic location of employment for the employee?

Answer: Yes.

Question 8. Does an involuntary termination include a work stoppage as the result of a strike initiated by employees or their representatives?

Answer: No. However, a lockout initiated by the employer is an involuntary termination.

Question 9. Does an involuntary termination include a termination elected by the employee in return for a severance package (a buy-out) where the employer indicates that after the offer period for the severance package, a certain number of remaining employees in the employees group will be terminated?

Answer: Yes.

For more information call us at Healthy Halo.

AB1825 CA Mandatory Sexual Harassment Training – -7/01/2009

July 9, 2009
2:00-4:00 pm (PST)

Please note Advance Registration is required.

Don Phinn, Employment Lawyer, Founder of HR That Works,

California Employers – If you have more than 50 employees you are required by California law to have your supervisors and managers attend sexual harassment training for 2 hrs. Now that California has finally finished the training regulations we are ready to help you train! his is a two hour on preventing and managing sexual harassment claims.

We encourage all Healthy Halo clients to have all your managers and supervisors attend no matter how many employees you have.

 

 

Note: Credit can only be offered for “live” attendance. This webinar has been approved for 2 General CE credits. If you would like credit, please contact us for a Certificate of Completion AFTER you’ve attended the webinar.

REQUIREMENTS:

• Prerequisites: none
• Advanced prep: none
• Course level: Overview
• Delivery method: Group-Internet-Based 
• CE credit: 2 CPE credits awarded through NASBA; 2 California recertification credits awarded through HRCI

HIPAA — Back With A Vengeance – Webinar

July 1, 2009
2:00 pm (EDT)
11:00 am (PDT)
Please note Advance Registration is required

Now that the ultra-time-sensitive COBRA periods have passed, it’s time to turn your attention back to HIPAA…

ARRA   HIPAA.

No, we didn’t say, “Aarghhhhhhhhhhhhh! HIPAA!” (although we’ve felt it). It’s ARRA HIPAA. As in “The American Recovery and Reinvestment Act,” Pub. L. 11-5, which you’ve already heard a great deal about in changing your withholding tables and tweaking and re-tweaking your COBRA administration. Now that the ultra-time-sensitive COBRA periods have passed, it’s time to turn your attention back to HIPAA, a subject that caused great upheaval in the beginning years of this decade and is now back with a vengeance.

In this webinar, attorney Donna Brooks of Lehr Middlebrooks Vreeland, a Worklaw Network firm, will discuss how the American Recovery and Reinvestment Act of 2009 has changed compliance requirements for employers as plan sponsors of group health plans.

Note: Credit can only be offered for “live” attendance. This webinar has been approved for 1 General CE credit. If you would like credit, please contact healthy halo  for a Certificate of Completion AFTER you’ve attended the webinar.

These are approved for HRCI and NASBA credits.

REQUIREMENTS:

• Prerequisites: none
• Advanced prep: none
• Course level: Overview
• Delivery method: Group-Internet-Based 
• CE credit: 1 CPE credit awarded through NASBA; 1 general recertification credit awarded through HRCI