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What To Do Before and When the Department Of Labor Comes Calling

What To Do Before and When the Department Of Labor Comes Calling . Daniel D. Pipitone Chairman – Energy & Maritime Section. Does anyone work for the United States Department of Labor?. Employees Vs. Independent Contractors. Prevalent Use of Independent Contractors. Independent Contractors.

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What To Do Before and When the Department Of Labor Comes Calling

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  1. What To Do Before and When the Department Of Labor Comes Calling Daniel D. Pipitone Chairman – Energy & Maritime Section

  2. Does anyone work for the United States Department of Labor?

  3. Employees Vs. Independent Contractors Prevalent Use of Independent Contractors

  4. Independent Contractors • Company Men • Directional Drillers • Field Consultants • Gate Attendants • Land Men • Pipeline Managers • Pumpers

  5. Other Industries • Cable Companies • Commercial Trucking • Janitorial/Cleaning Services • Overnight Mail Deliveries • Postal Deliveries • Taxis • Telephone Line/Tower • Repair Services

  6. Reasons for use of independent contractors • Personal Preference of Independent Contractor • Specialized Skills • Periodic/Sporadic Engagement • Specialized/Expensive Equipment • Relinquishment of Control - Liability • Business Model Patient Protection and Affordable Care Act/Obamacare

  7. 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)

  8. United states department of labor

  9. 2009 announcement of initiative Conversion of independent contractors to employees Inter-agency cooperation

  10. Misclassification is pervasive “Used intentionally by employers to…avoid various laws designed to create protections in the workplace.”

  11. The might of the government

  12. Avoid investigation and prosecution vulnerability Protective measures to ensure compliance Business distraction Avoid back pay and penalties Avoid application of other laws

  13. five factor analysis • Control and Supervision Exerted over an Individual • Comparison of the Relative Investments of the Individual and Business • Opportunity for Profit or Loss by the Individual • Skill and Initiative Required by the Individual • Permanency of the Relationship

  14. No one factor is determinative Status is dependent upon the totality of circumstances

  15. Control and supervision exerted over an individual • Independent Contractor Agreement • Avoid Uniforms and Company Colors/Logos • Avoid Job Descriptions • Exercise Care with Respect to Directives • Quality Control and Safety • Alter the Source of Directives • Termination of Relationship • Relevant Licensing or Other Laws • Website/Advertisement Terminology

  16. Manage Business Utilizing Independent Contractors Scrutinize independent contractors before retaining Communicate with clients

  17. Comparison of the Relative Investments of the Individual and Business • Conduct an Analysis • Include 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

  18. 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

  19. Skill and Initiative Required by the Individual • Education and Vocational Training • Vocational/Professional Licensing • Extent of Work Experience • Work Ethic • Afford Discretion to Execute and Initiate • Allow Innovation

  20. 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

  21. Enforcement tactics • Inexperienced Investigators • Unannounced/Early Appearances • Demands for Documents without Subpoena • Personal Documents • Predisposition of Liability – Rush to Judgment • Investigators Calculate Damages Prior to Conclusion of Investigation • Investigators Conduct no Background Check of Whistleblowers/Witnesses

  22. Enforcement tactics • Inexperienced Investigators • Unannounced/Early Appearances • Demands for Documents without Subpoena • Personal Documents • Predisposition of Liability – Rush to Judgment • Investigators Calculate Damages Prior to Conclusion of Investigation • Investigators Conduct no Background Check of Whistleblowers/Witnesses • Investigators Selectively Utilize Evidence • Investigators Motivated by Bonus System

  23. 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.

  24. Exercise Care • Incorrect Analysis • Unintentional Admissions • Both shall provide evidentiary value in subsequent enforcement action • Focus should be upon Five Factor Analysis • Create Favorable Evidence • Utilize Well-Versed Professionals

  25. 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 Judiciary • Financial and Emotional Wherewithal Required – Might of the Government • Proactive vs. Reactive – “The best defense is a good offense” • United Stated Department of Labor Appearance of Invincibility has been Eroded

  26. 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, KKK Investigator without Experience and Rushed to Judgment – Bar Acquaintance United States Army Corps of Engineers Independent Contractor Agreements – Preference

  27. Gate Guard Services, L.P. vs. The United States Department of Labor (Cont.) • IRS Returns • Statements of Clients • Statements of Independent Contractors • Emails, Memos and Letters of Direction to Independent Contractors • Analysis of Relative Investments • Independent Contractors formed Corporations • Subcontractors of Independent Contractors • Relief • “Snow birds”

  28. Aura of Invincibility of United States Department of Labor Eroded Court Costs and Attorneys’ Fees Sought

  29. “Winning Takes care of Everything.” - Nike / Tiger Woods

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