What’s in a Name?
How do you classify nontraditional workers in your clinic?
By Christine V. Walters, JD, MAS, SHRM-SCP, SPHR
The spring and summer months seem to revive the eternal questions about classifying certain nontraditional, contingent workers. Employers seek to provide learning opportunities for students in their home communities. Some do so with the hope that the student might return to seek regular employment postgraduation. Others do so simply based on their belief in corporate citizenship as a way to pay it back and forward to the local communities that support them. But take care. The best of intentions can go awry.
This year is no exception. On April 20, 2015, the U.S. General Accounting Office (GAO) sent to the U.S. Senate Health, Education, Labor and Pension (HELP) Committee a “Contingent Workforce” report.1 That report has also been shared with the Secretary of the Department of Commerce, the Secretary of the Department of Labor, and other “appropriate” Congressional committees.
The GAO reports with a +/-1.7 percent confidence rating that the core group of contingent workers, such as agency temps and on-call workers, comprised about 7.9 percent of the employed labor force in 2010. They found that compared to standard full-time workers, core contingent workers are more likely to be younger, Hispanic, have no high school degree, and have low family income. These contingent workers are also more likely than standard workers to experience job instability, and to be less satisfied with their benefits and employment arrangements than standard full-time workers. Because contingent work can be unstable, or may afford fewer worker protections depending on a worker’s particular employment arrangement, it tends to lead to lower earnings, fewer benefits, and a greater reliance on public assistance than standard work.
Knowing that myriad entities within the executive and legislative branches of our federal government are giving these relationships due consideration, employers need to be savvy when classifying workers whom they do not intend to be employees. These may include: temporary workers, direct hire, hire from an agency, independent contractors, volunteers, and unpaid interns. So, let’s take a quick look at some of the more common nontraditional worker relationships.
Today at least 22 states have signed a Memorandum of Understanding (MOU) with the United States (U.S.) Department of Labor (DOL) and Internal Revenue Service (IRS) agreeing to share payroll, tax, and other records for the purpose of identifying employers who have misclassified workers as independent contractors instead of employees.2 Modified from the former 20-factor test, today the IRS tends to use a three-factor test for assessing proper classification of a worker as an independent contractor. This is described in Publication 1779.3 The DOL uses a different test. It describes its factors in Fact Sheet 13.4 In 2007, I had the honor of testifying during a joint U.S. Congressional subcommittee on this very topic. In addition to the federal guidance, which varies as described above, many states have statutory definitions that may vary such as in the state’s unemployment insurance or workers’ compensation codes as well as in state administrative agencies, which use factors that are different from the IRS’s factors. With so many different rules, tests, and factors it can be extremely difficult for employers to get this right.
Just because an employer partners with a local academic institution to find and use unpaid interns does not insulate the employer or guarantee that the use of such unpaid interns is legal or proper. The DOL applies a six-factor test that must be checked to properly classify an intern as unpaid.5 Unlike many multifactor tests this is an all-or-none assessment. If the employer cannot “pass” each factor of the test then the worker must be classified as an employee and paid. To date at least four states (Illinois, Maryland, New York, and Oregon) plus the District of Columbia and several local jurisdictions have enacted laws providing fair employment practice protections for unpaid interns, protecting them from unlawful harassment.
Similar to but different from unpaid interns, the DOL applies a three-factor test to employers’ use of volunteers. Private sector employers should note that the status of volunteers in the public sector is more readily recognized than in the private sector. The three-factor test is described in guidance published by the DOL.6
In today’s labor market some employers seek to save costs by sharing workers. If you are sharing workers with another corporate entity, be cognizant of whether a joint-employment relationship might be created. There are advantages and disadvantages to this; be sure whatever you create is the relationship you want. Whether it is a temporary agency or some other entity who will be the employer of the worker will be in question. Ensure your contract addresses the intended relationship and any liability that might arise from that designation. For example, imagine a physical therapist works as a full-time employee of a physical therapy clinic. She also works part-time with an agency that just happens to place the physical therapist in a temporary assignment at the same clinic, but at different facility or location. Who is the employer while the physical therapist is working at the clinic on the temporary assignment, the temp agency or the clinic? What difference does it make? Who is responsible for overtime pay when the physical therapist works 40 hours for the clinic and an additional 15 hours through the agency at the clinic in the same workweek? What about workplace accidents and Occupational Safety and Health Administration (OSHA)? Or providing reasonable accommodation under the Americans with Disabilities Act (ADA)?
And for those workers you do intend to employ as employees, be sure they are legally authorized to work in the United States. The U.S. DOL, Equal Employment Opportunity Commission (EEOC), and more have ruled on more than one occasion that U.S. employment laws that provide for a minimum wage, overtime, and nondiscrimination protections apply to workers in the U.S. (as compared to U.S. workers) regardless of citizenship or work authorization. While federal law prohibits employers from employing individuals who are not legally authorized to work in the U.S., employers who nonetheless employ undocumented workers are prohibited from discriminating against them.7
1. http://gao.gov/assets/670/669766.pdf Accessed June 2015.
2. www.dol.gov/whd/workers/misclassification/ Accessed June 2015.
3. www.irs.gov/pub/irs-pdf/p1779.pdf Accessed 2015.
4. www.dol.gov/whd/regs/compliance/whdfs13.htm Accessed June 2015.
5. Fact Sheet 71, www.dol.gov/whd/regs/compliance/whdfs71.htm Accessed June 2015.
6. www.dol.gov/elaws/esa/flsa/docs/volunteers.asp Accessed June 2015.
7. www.eeoc.gov/policy/docs/qanda-undoc.html Accessed June 2015.This article does not constitute the rendering of legal advice. You should consult with your practice’s legal counsel for advice on employment-related matters.
Christine V. Walters, JD, MAS, SHRM-SCP, SPHR, is an independent human resources, and employment law consultant for DBA FiveL Company out of Westminster, Maryland. She can be reached at info@FiveL.net.