Employment Law
Problem-Prevention for Employers
Attorney Ruth-Ellen Post
Office: 56 Stiles Road, Suite 103
Salem, NH 03079
Phone: 603-212-9004
Email: postlawoffice@comcast.net
Home: 15 Stonehedge Road
Windham, NH 03087
Cell: 603-557-5395
Professional Background
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Attorney for 35 years
Rutgers Law School
Licensed in NH, MA, and NJ
Practice mainly serves local businesses
Former law and legal studies professor
Community Service:
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Windham Planning Board, currently Chairman
Founding Member, Windham Economic Development Committee
SCORE Volunteer Small Business Mentor
Greater Salem Chamber of Commerce
Windham Women’s Club
Outline
1.
Introductions
2.
The Dangers of Employee Misclassification: 1099Independent Contractor vs. W-4 Employee
3.
Discrimination Traps for the Unwary
4.
Using Interns: New Government Rules
5.
When to Put In in Writing
6.
Open Q & A Session*
* The “Fine Print”: To protect your interests, please avoid disclosing
confidential information , whether personal or business, in this public
setting
More Fine Print
• This presentation and accompanying materials
are NOT a substitute for personal legal advice,
which may vary considerably depending the
particular circumstances of your business
situation.
• For accurate legal advice on your own
business decisions, it is important to consult a
professional in a confidential setting.
1. Employee
vs.
Independent Contractor
Federal (IRS) Implications:
• Who is responsible for tax withholding, Social Security, etc.
– you or your new hire?
• Require new hire to complete a W-4, or not?
• What to file at the end of the year: 1099 or W-2?
State (NH) Implications:
• Is your new hire eligible unemployment compensation?
• Is your new hire eligible for workers compensation ?
NH Cracking Down on
Employee Misclassification
• NH Unemployment Comp. Fund overwhelmed and
almost depleted after 2008-09 recession
• Law-abiding businesses suffer financial disadvantage
• Misclassified workers left unprotected if injured or laid
off
• Stepped-up investigations and enforcement
• New NH penalties on employers: up to $2,500 fine
plus $100 per day, per employee (2010)
• IRS pay-back and penalties imposed separately for noncompliance
NH Guidelines on Employee Misclassification
• Looks at 12 factors to justify “Independent
Contractor” status (see NH DOL website)
• Mainly: Is your new hire actually an
independent business? For example:
– Serves clients other than your business (or is free to do so)
– Bills you per job, per hour, or per project
– Structures own time, determines own work methods, and is judged by
the product (not by work methods you regularly oversee)
– May work off-premises
– Pays own expenses, assumes all his/her own liabilities including taxes,
Social Security, and insurance
– Written employment contract not necessarily the deciding factor
IRS Guidelines on Employee Misclassification
IRS has a three-pronged test (see article at
irs.gov website):
1. Behavioral: Who controls how job is done?
2. Financial: New hire pays own costs, own
insurance, own tools or supplies, etc.
3. Nature of relationship: Indefinite vs. projectspecific; expectation of benefits or not
2. Discrimination Traps for the Unwary
Trends beyond the “usual” categories:
• EEOC complaints at a record high in 2010 (99,922)
• Top category: employer retaliation, so care is
needed in handling internal complaints objectively
and fairly
• Grounds for complaint may go beyond race, color,
gender, age, religion, national origin, marital
status – may also include sexual orientation,
physical disability, medical conditions including
pregnancy and obesity
Avoiding Discrimination Claims
General Rules for Job Interviews:
• Ask only about matters clearly related to
potential job performance
• Example: Don’t ask “Are you pregnant?” Ask
“Barring unforeseen circumstances, can you
assure uninterrupted availability for this position
for the next 2 to 3 years?” (and only if that is an
important factor for the position involved).
Avoiding Discrimination Claims
Another Interviewing Example (marital status):
Don’t ask, “Is your husband/wife also employed
locally?” Say “Because we will invest ten
weeks of training in whoever is hired for this
position, we hope, in return for that training,
for a reasonably firm commitment to
remaining at this location, preferably for at
least two years; are you able to make such a
commitment if hired?”
Avoiding Discrimination Claims
• Another Interviewing Example:
Don’t say, “You look a little young (old, etc.)
to be applying for this kind of position.”
Instead, say, “we are seeking someone with at
least 5 years of experience in XYZ” or
“knowledge of the latest applications … ” etc.
MAKE ALL QUESTION EXPLICITLY JOB-RELATED
OR DON’T ASK THEM
Avoiding Discrimination Traps in Firing
Have a regular performance-evaluation process
in place for all employees.
– Appraisals must be candid – not just “kind”
– Appraisals should allow a chance for improvement
plus clear instructions on what that requires.
– The consequences of failure to improve must also
be clear.
– Create a “paper trail” of legitimate reasons for
firing.
New Rules About Using Interns
• The US Department of Labor (DOL) noticed
that unpaid interns were displacing paid
workers at an alarming rate.
• Unable to find paying work but eager for
resume-boosting experience, interns were
often an easy target for financial exploitation.
• Many college-related internship experiences
were reported to have no genuine educational
component, benefitting only the employer.
New DOL Rules for Unpaid Internships
in For-Profit Settings
• Internship similar to training in an educational
environment
• The experience is for the intern’s benefit
• Regular employees are not displaced
• Employer derives no immediate advantage from the
intern’s activities
• Internship does not necessarily lead to a job offer
• Both intern and employer understand there are no
wages for the intern’s time
Protecting Your Business if Using Interns
• Have close collaborative relationship with
appropriate office of a reputable college or
university; follow their guidelines closely.
• Alternatively, pay your intern! Often, the
minimum wage or something close to that is
sufficient. This buys you the freedom to
assign whatever work your business needs.
• These rules only apply to for-profit businesses.
When to “Put It in Writing”
• All key events beg for a written agreement
• Written agreement signed by both parties is your
best protection.
– Hiring (employee OR independent contractor)
– Arrangements requiring trade secrets, confidentiality, or noncompetition
– Agreed services for a client
– Purchasing, leasing, licensing, storage – any arrangement with a
third party
– Pre-agreement offers often give rise to conflicting expectations
if not in writing
– A letter of confirmation or even email can serve as a “writing”
where recipient’s signature is not an issue
Questions and Answers