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<b style="color: blue">Human Resource Associates</b>
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<span class="heading">HR - On The Job</span>
<p class="issue">Independent Contractors</p>
<p>We get many questions on the association's HR Hot-Line every month. Although these calls have covered every imaginable (and some unimaginable) HR, personnel and employment issues, one that employers seem to consistently have trouble dealing with is the issue of independent contractors. Their business logic and entrepreneurial spirit tells them it's the right thing to do, but not everyone agrees with them.</p>
<p>Often a company will determine that if employee John Smith, earns $10 an hour, it would be better for them both if the company sets him up in business and contracts with him to do the same work for $600 a week. That's more than John made as an employee and the company has good cause to be happy too.</p>
<p>The company won't have to pay his FICA, worker's compensation or health benefits and there will be no vacations or employee law suits. Those are just some of the advantages. Although this sounds like good business logic, and many years ago it worked pretty well, such arrangements are today, seldom legally workable.</p>
<p>Several institutions have a vested interest in this issue and all of them, except you, are opposed to it. The Department Of Labor doesn't like to see any work performed without all the labor regulations in place to protect the workers. The Social Security folks want you to pay your part of the FICA. The Internal Revenue Service wants you to collect those payroll taxes for them. Then there's the National Labor Relations Board, workers compensation people and the unions. Collectively they make the independent contractor option a lot tougher to set up.</p>
<p class="section">What Is An Independent Contractor?</p>
<p>An independent contractor is basically someone who operates his or her own business just as you do, providing goods and services to clients for fees. So why can't your ex-employee do that? Because those institutions above want see to it that the worker is not being exploited and that you are not avoiding those regulatory obligations. They want to make sure that the individual is really operating a legitimate business and not just contracting for his regular work.</p>
<p class="section">Separating Employees from Independent Contactors</p>
<p>One of the key issues is control. Who is really in control of the work? Who is controlling the how and when of this work? But there are several other standards used to determine whether or not this is a legitimate business.</p>
<ul>
<li>Does he/she own the equipment?</li>
<li>Does he purchase the supplies?</li>
<li>Does the worker have other clients?</li>
<li>Does he have a contract for services as opposed to an Independent Contractor Agreement?</li>
<li>Does he/she have any employees?</li>
<li>Does he bill you regularly on his own letterhead?</li>
<li>Is he/she incorporated or registered as a business?</li>
<li>Does he update you on the contract's progress as opposed to giving you daily oral or written reports on the work?</li>
<li>Does he control how he does the work?</li>
<li>Does he control his own schedule?</li>
<li>Does he work unsupervised?</li>
<li>Is the work he/she is doing merely supportive to your business as opposed to being a vital, central part or department of your company's operations?</li>
<li>Does he have a realistic chance of profit or loss doing this work?</li>
</ul>
<p>Although those named institutions each use their own slightly different standards, it's always a case of judgment, but they're the ones who make the judgments. So if you answered ‘no” to several of these questions, you may want to contact a labor attorney before you change employee John Smith to The John Smith Company.</p>
<p>(For more information on Independent Contractors and how to appeal your case, see the Personnel Notebook “Independent Contractor or Employee. Who's In Charge Here?” on the association's website under HR University.)</p>
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<p align="center"><b><i>Have an employment question?</i></b></p>
<p align="center">Send it to <a href="mailto:[email protected]?subject=From HR On The Job">[email protected]</a>.</p>
<p align="center">Please include Company Name and Association in your e-mail. Company identification will be kept confidential.</p>
<hr />
<p class="heading">Hitchhiking on the Information Highway</p>
<p><b>Dateline:</b> November 2011</p>
<p><i>(Note: Although we attempt to provide the HRU update on the first of each month, we are normally delayed awaiting the release of several monthly government statistical reports. We will hereafter update the information as each report becomes available without waiting for all of them to be released.)</i></p>
<p class="section">Prisoners Are In Demand</p>
<p>A company called UNICOR has been winning so many federal contracts for manufacturing products that unsuccessful bidders were suspicious about their low bids. After investigating they discovered that UNICOR uses prison labor under a special arrangement with the state. Prison labor is significantly cheaper partly because their room and board (the prison) is considered part of their wages. Wages therefore are below minimum wage. That's a pretty good advantage and pretty hard to beat!</p>
<p>And these aren't the old 1930s contracts for government office furniture and license plates. These contracts are for night vision goggles and navigation systems. A new law is being proposed that will allow other bidders to factor in those costs advantages in their bids. I wonder if the employers have to pay unemployment compensation on these folks?</p>
<p class="quote">“There are three kinds of men.<br />
The ones that learn by reading.<br />
The few who learn by observation.<br />
The rest have to pee on the electric fence themselves.”<br />
– Will Rogers </p>
<p class="section">This is the HR Police, You're Under Arrest</p>
<p>Yes it's true, HR professionals as well as company executives can now be charged for actions considered by most to be part of their job. This can include government charges for violations for Equal Employment Opportunity Commission (EEOC), Department of Labor (DOL) and Occupational Safety and Health Administration and (OSHA) regulations as well as damages from personal law suits. The charges are not so much related to the advisory role most HR professionals provide, but to those cases where the HR is the decider or one of the key deciders who violates specific regulations knowing their actions to be unlawful.</p>
<p>Most cases have been related to terminations where the decision to terminate was knowingly and purposefully discriminatory, sexual discrimination under the same conditions, OSHA violations wherein injuries were caused by purposeful negligence knowing the decisions to be hazardous to employees and Affirmative Acton Programs (AAPs). AAPs are unique in that the liability has long been known and is spelled out in the AAP.</p>
<p>When a company is required to provide an AAP it's usually because they are performing a government contract or are required to do so as a result of EEOC charges. The owner or CEO is identified as the person officially and legally responsible for the success of the program. However, knowing that the owner will be too busy to administer the AAP process an employee must also be designated as the EEO Officer for the program. That EEO Officer is almost always the HR professional. Specific duties are assigned to him/her. Chief among them is the mandate that they will assure that the owner/CEO will be proactively kept informed of all progress, activities and problems with the AAP. This is so that in the event of the failure of the AAP owners cannot claim that they weren't aware of the problems. If the EEO Officer (HR) does not keep the owner informed, they can also become personally liable.</p>
<p>Such charges have resulted in punitive financial costs, requirements to pay damages and jail time.</p>
<p class="quote">“Unfortunately, you're overqualified for this position.<br />
However, your résumé is so full of misspelled words and grammatical errors<br />
that it tips the scale back in your favor”<br />
– Anonymous HR Manager</p>
<p class="section">Millionaires</p>
<p>We tend to think of millionaires as people in mansions with servants and lots of leisure travel time, Wall Street financiers who've made a bundle or someone who inherited a fortune. But much depends on your definition of a millionaire. There are two types of millionaires.</p>
<p>Real millionaires are people who have a million dollars. What we mistakenly call millionaires are people who earn a million dollars annually. Most of those do not actually have one million dollars. These are the people we target with our tax laws, when we say that millionaires must pay their fair share we're talking about people who earn a million dollars annually.</p>
<p>But if we consider both groups to be millionaires, that means that we have 392,000 millionaires in the U.S. Of those, 300,000 earn their income from operating their own businesses.</p>
<p class="quote">”It is important to understand fully what you are rebelling against<br />
before you take too much pride in being a rebel.”<br />
– Walter Isaacson</p>
<p class="section">Want More Laws? Then You're Going To Love 2012</p>
<p>On the table waiting for final approval:</p>
<ul>
<li><b>Paycheck Fairness Act</b> – provides increased government authority over what and how you pay your employees. Companies would have to prove that any difference in pay between males and females is based on such things as education, training or experience. It makes it more difficult to reward employees on merit or productivity but instead focuses more on paper credentials. The law also makes it easier for employees to bring class action suits and includes not only back wages but unlimited compensatory and punitive damages.</li>
<li><b>Healthy Families Act</b> – Will require companies with 15 or more employees to provide them with 56 hours per year (7 days) of paid sick leave. All such time is accrued month to month and accumulates from year to year although the company may restrict use to 56 hours at one time. Employees must be allowed to begin using it after 60 days of being hired. If an employee leaves the company but returns within one year, the previously earned time must be reinstated.<br />The paid time off must be allowed for the employees own sickness, their family's or friends related by affinity or close relationship. This includes absences related to domestic violence, sexual assault, stalking or time seeking counseling, relocation or pursuing legal action. Companies may not count any of the time off as an absence.</li>
<li><b>FMLA Enhancement Act</b> – Expands the Family and Medical Leave Act (FMLA) to include companies with 25 employees (now only applies to companies with 50 employees). It increases the allowable time off from 12 weeks to 12 weeks and 24 hours to participate in children's (and now grandchildren's) school or community activities and nursing home visits. Employees may choose to substitute available paid leave.</li>
<li><b>Arbitration Fairness Act</b> – The AFA would forbid all mandatory arbitration agreements. Companies would no longer be allowed to required new employees to sign such agreements. Under this bill workers may only consent to arbitration after a dispute arises and only voluntarily. Mandatory arbitration would only be allowed between commercial entities of similar sophistication and bargaining power.</li>
<p class="quote">“Democrats fall in love.<br />
Republicans fall in line.”<br />
– Mary Matalin</p>
<p class="section">Long-Term Unemployment Has Life-Long Implications</p>
<p>Unemployment is now at 9.0% for October 2011. For 28 of the last 30 months the unemployment rate has been at 9.0% or higher. Washington economists now say the average unemployment rate for 2011 will 9.1%. The stimulus program didn't work and the unemployment rate is expected to remain at 8% or more for the next year.</p>
<p>The average person on unemployment right now has been on it for 9¾ months compared to 8 ½ months at this time last year. Industrial psychologists are reporting on a labor market phenomenon called “Deteriorating Human Capital (DHC). One observation of DHC is the effect on the work-life or career of an individual who has been unemployed for a long period of time. Those professionals are saying that an individual who has been unemployed for one year or more will experience deteriorating skills and productivity, will lose his/her connection to the workforce including the networking connections and will not likely ever recover them fully.</p>
<p class="quote">“2,000 years from now this country will be known and remembered for three things;<br />
The Constitution, jazz music and baseball.”<br />
– Gerald Early</p>
</ul>
<hr />
<p style="text-align: center"><sub>© William J. Cook</sub></p>
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<span class="heading">Labor Stats</span>
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<b>Federal Minimum Wage</b>
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<b>$7.25</b>/hour<br />
</p>
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<b>Average Income</b>
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<table>
<tr><td /><td class="u">November 2011</td><td class="u">November 2010<td></tr>
<tr><td class="i">Hourly</td><td class="b">$23.19</td><td class="b">$22.17</td></tr>
<tr><td class="i">Weekly</td><td class="b">$795.42</td><td class="b">$781.01</td></tr>
</table>
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<b>Federal Povery Level</b>
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<table>
<tr><td class="i">one person</td><td class="b">$10,956</td></tr>
<tr><td class="i">family of four</td><td class="b">$21,954</td></tr>
</table>
<hr />
<b>IRS Mileage Allowance</b>
<hr />
<p>July 1, 2011 through December 31, 2011</p>
<table>
<tr><td class="i">business</td><td><b>55.5</b> cents/mile</td></tr>
<tr><td class="i">medical or moving</td><td class="b">23.5</b></td></tr>
<tr><td class="i">charitable</td><td class="b">14.0</td></tr>
</table>
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<b>Postage</b>
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<table>
<tr><td class="i">1 oz</td><td><b>44</b> cents</td></tr>
<tr><td class="i">postcard</td><td class="b">29</td></tr>
</table>
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<b>Population</b>
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<table>
<tr><td class="i">world</td><td class="b">7 billion</td></tr>
<tr><td class="i">U.S.</td><td class="b">312.5 million</td></tr>
</table>
<p align="center">
<i>one birth every </i><b>8</b><i> seconds;</i><br />
<i>one death every </i><b>11</b><i> seconds;</i><br />
<i>one new immigrant every </i><b>45</b><i> seconds;</i><br />
<i>net gain of one person every </i><b>15</b><i> seconds.</i>
</p>
<hr />
<b>U.S. Civilian Workforce</b>
<hr />
<table>
<tr><td /><td class="u">November 2011</td><td class="u">November 2010</td></tr>
<tr><td class="i">Total</td><td class="b">154,198,000</td><td class="b">153,960,000</td></tr>
<tr><td class="i">Employed</td><td class="b">140,025,000</td><td class="b">139,084,000</td></tr>
<tr><td class="i">Unemployed</td><td class="b">13,897,000</td><td class="b">14,876,000</td></tr>
<tr><td class="i">Want A Job</td><td class="b">6,403,000</td><td class="b">6,279,000</td></tr>
<tr><td class="i">Unemployment Rate</td><td class="b">9.0%</td><td class="b">9.7%</td></tr>
</table>
<br /><hr />
<b>U.S. Workforce Productivity</b><br />
<sub><i>(The amount of goods produced, divided by the number of work hours it took to produce it)</i></sub>
<hr />
<table>
<tr><td class="i">1992</td><td class="b">3.7%</td></tr>
<tr><td class="i">1993</td><td class="b">0.5%</td></tr>
<tr><td class="i">1994</td><td class="b">1.3%</td></tr>
<tr><td class="i">1995</td><td class="b">0.9%</td></tr>
<tr><td class="i">1996</td><td class="b">2.5%</td></tr>
<tr><td class="i">1997</td><td class="b">2.0%</td></tr>
<tr><td class="i">1998</td><td class="b">2.6%</td></tr>
<tr><td class="i">1999</td><td class="b">3.3%</td></tr>
<tr><td class="i">2000</td><td class="b">3.4%</td></tr>
<tr><td class="i">2001</td><td class="b">2.9%</td></tr>
<tr><td class="i">2002</td><td class="b">4.6%</td></tr>
<tr><td class="i">2003</td><td class="b">3.7%</td></tr>
<tr><td class="i">2004</td><td class="b">2.8%</td></tr>
<tr><td class="i">2005</td><td class="b">1.7%</td></tr>
<tr><td class="i">2006</td><td class="b">0.9%</td></tr>
<tr><td class="i">2007</td><td class="b">1.9%</td></tr>
<tr><td class="i">2008</td><td class="b">1.8%</td></tr>
<tr><td class="i">2009</td><td class="b">+5.8%</td></tr>
<tr><td class="i">2010</td><td class="b">+3.6%</td></tr>
<tr><td class="i">2011 1<sup>st</sup> quarter</td><td class="b">+1.8%</td></tr>
<tr><td class="i">2011 2<sup>nd</sup> quarter</td><td class="b">(-0.7%)</td></tr>
<tr><td class="i">2011 3<sup>rd</sup> quarter</td><td class="b">+3.1%</td></tr>
</table>
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