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The Employer's Legal Resource
2009 Workshop
Topics Include:
- Union Avoidance in 2009 and Beyond
- ADA Amendments Act of 2008
- Drug and Alcohol Testing in the Workplace
- FMLA - How to survive the new regulations
Cost: $100 which includes a continental breakfast and lunch.
Click here for the registration form.
Registration begins at 8:00 AM.
Workshop begins at 8:30 AM and runs until 4:00 PM
Full agenda can be found here.
Tulsa - March 26, 2009
Spirit Bank Event Center
105th & South Memorial
Tulsa, OK 74133
Oklahoma City - April 2, 2009
Clarion Meridian Hotel & Convention Center
737 South Meridian
Oklahoma City, OK 73108
"The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute’s criteria to be pre-approved for recertification credit."
Independent Contractor or Employee
SHE WORKS HARD FOR THE MONEY, SO YOU BETTER PAY HER RIGHT
We keep talking about this, but the cases keep coming up, which means it is still an issue...whether a worker is an “employee” or an “independent contractor.” First, let us talk about why so many businesses want to classify certain workers as independent contractors rather than employees. Simply put, they think it will save them money—they will not have to pay for benefits, they will not have to pay various payroll and unemployment taxes, they will not have to worry about overtime, and the list goes on. While those things are generally true, they only apply if you actually employ independent contractors. Just because you call them independent contractors does not make them independent contractors. The truth of the matter is, if you are wrong you may owe a lot of money in unpaid taxes, etc.
This very thing came true once again when, on September 4, 2008, the Oklahoma Court of Civil Appeals upheld a decision that a gentleman’s club should have been paying unemployment taxes for its exotic dancers. Club Paradise, Inc. v. Okla. Employment Security Comm’n., 2008 OK CIV APP 110. Club Paradise operated a gentleman’s club in Tulsa. The club classified the dancers as independent contractors, and thus did not pay unemployment taxes on the dancers. But, the Oklahoma Employment Security Commission showed up, determined the dancers were really employees, and assessed the club back unemployment taxes.
In determining the status of the dancers, the Court reviewed the various aspects of the employment relationship. The dancers all signed agreements saying they were independent contractors, but the club did not sign it. The dancers were paid a percentage of the money earned on the drinks sold at the club, but the club controlled the prices of the drinks. The dancers could create their own performances and use their own music, but the club enforced rules on non-intoxication and covering certain body parts, and regularly asked dancers to leave if it felt they were acting inappropriately.
The Court focused on whether the club maintained control over the dancers’ work. A major consideration was whether either party could terminate the relationship without any liability. According to the Court, “[i]t is the power of control, not the fact of control.” In other words, if an employer can discharge the employee without any liability, chances are they “control” the relationship.
The Court also considered whether the dancers could operate their “business” without the club, or some similar employer. In other words, could they “put up a shingle” and conduct business, or were they dependent on the club’s place of business to make money from their skills. According to the Court, “Their endeavor exist[s] only by reason of their employment by [Club Paradise], and subject to [its] willingness to retain them and constantly subject to discharge, at which time they were out of employment.” The fact that the dancers could dance at other clubs did not change the Court’s mind.
The moral of the story is, as Janet Jackson would say, “Control”—if the dancer looks like an employee, acts like an employee, and you can fire her like an (at will) employee, then she is an employee and not an independent contractor. Be careful to understand the difference now, and save your money later.
By Sharolyn C. Whiting-Ralston, swhiting@dsda.com.
COBRA
THE STIMULUS ACT – A SIGNIFICANT CHANGE TO COBRA
On February 17, President Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 (“Act”). One of the many provisions in the Act is made to COBRA. COBRA allows employees who leave employment to continue to be covered by their ex-employer’s health insurance plan, though the employees pay the full monthly premium. However, as outlined below, the Federal government will pay 65% of the COBRA monthly premium under specific circumstances. This subsidy is available for a period of 9 months to employees who are involuntarily terminated from employment between September 1, 2008 and December 31, 2009.
Involuntary termination is as the name suggests – the termination of an employee who is willing to remain employed but is still terminated (an “eligible employee”). Examples include employees terminated in a reduction in force, layoff or termination for cause (except for gross negligence). Neither employees who voluntarily leave employment nor those who lose health coverage because of a reduction in hours are eligible for the subsidy (though both groups are still entitled to regular COBRA coverage). An employee who is involuntarily terminated will not be eligible for the subsidy if the employee has an adjusted gross income of $125,000 (or $250,000, if married).
This COBRA provision covers all employers who are required to offer COBRA continuation health coverage, as well as any employer covered by a state-mandated continuation coverage law. Any eligible employee may make any election he or she could make when electing COBRA coverage regardless of the subsidy, such as choosing single or family coverage. The subsidy will terminate early only if the employee becomes eligible for Medicare or for coverage under another group health plan, whether or not the eligible employee elects the coverage.
On its face, this governmental subsidy appears straightforward. In reality, employers are highly involved in the provision of this subsidy. If an eligible employee elects COBRA coverage, the employer collects 35% of the premium from the employee and the employer pays the other 65%. The employer then will recoup the amount it paid as a credit against its employment taxes. If for some reason the employer does not recover the full amount owed by the government through the credit, the employer will receive a direct payment from the government.
The Act recognizes that putting the mechanics into place for the collection of the premium and acquiring the tax credit may take a few weeks. If any eligible individual pays the full COBRA premium during this period, the employer must either refund the overpayment or use it to offset future premiums. The employer has until April 30 to have its systems modified to accommodate the new COBRA subsidy.
Maybe the most difficult part of this Act is the retroactive impact. Any eligible employee who was terminated from employment since September 1, 2008 is eligible for the subsidy. For eligible employees that elected COBRA, the subsidy would begin March 1, 2009. However, for eligible employees who did not elect continuation coverage, the employer must locate these individuals and provide them a second opportunity to enroll in COBRA. This notice of election must be provided by April 18, 2009, and individuals have 60 days after the notice is provided to elect COBRA. However, this special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (which is generally 18 months from the employee’s involuntary termination).
The Act requires the Department of Labor (along with other agencies) to issue draft model notices by March 17. While that date is soon, employers must provide to any eligible employee revised COBRA notices of the subsidy’s availability until the draft notices are actually issued.
Because of the complexities of the COBRA provision in the Act, further guidance will likely be issued from the agencies overseeing these provisions, especially the Department of Labor and the Internal Revenue Service.
By Anita K. Chancey, achancey@dsda.com
Comp Time
COMPENSATORY TIME OFF: SOME QUESTIONS AND ANSWERS
The Fair Labor Standards Act (“FLSA”) permits States, political subdivisions of a State, or an interstate governmental agency to compensate their employees for overtime work by granting them compensatory time off in lieu of cash payment. 29 U.S.C. § 207(o). A public employer can grant compensatory time off pursuant to a collective bargaining agreement, a memorandum of understanding, or any other agreement between the public agency and representatives of such employees. If there is no collective bargaining agreement or other memorandum of understanding, then compensatory time off may be granted pursuant to an agreement or understanding between the employer and the employee before the time the work is performed. When public employers grant compensatory time off in lieu of cash payment, it must allow at least one and one-half hours of compensatory time off for each hour of overtime worked. For purposes of the FLSA, overtime is all time in excess of 40 hours per week. If the employee’s normal work week is 37.5 hours, then the employee accrues comp time at the rate of one hour for each of the next 2.5 hours and at the rate of one and one-half hours for all hours in excess of 40.
Does the FLSA permit private employers to use compensatory time in lieu of payment of overtime wages? Despite popular belief, NO! There is some confusion on this topic because of the definition of “overtime”. Under the FLSA, “overtime” is defined as all hours worked in excess of 40 hours per work week. Private employers may not award true compensatory time off in lieu of payment for hours worked more than 40 hours per week.
How much time can an eligible public employee accumulate? If the employee works in a public safety activity, an emergency response activity, or a seasonal activity, the employee may accrue up to 480 hours of compensatory time off. If the employee performs other types of work, the employee may accrue up to 240 hours of compensatory time off. Any employee who has accumulated the maximum amount of compensatory time must be paid overtime compensation for all hours over the maximum. 29 U.S.C. § 207(o)(3)(A). If an employee transfers from a job category that permits up to 480 hours to a job that only allows 240 hours, the employee will be allowed to keep those hours in excess of 240.
When can a public employee use compensatory time off? A public employee who has requested to use his or her accrued compensatory time off must be permitted to do so within a reasonable period of time of having made the request if the use of the compensatory time does not unduly disrupt the employer’s operations. 29 U.S.C. § 207(o)(5).
Can a public employee cash in the accrued compensatory time? A public employee who has accrued compensatory time off must be paid for the unused time upon the termination of employment. The compensatory time must be paid at a rate of compensation not less than (A) the average regular rate of the last 3 years, or (B) the final regular rate – whichever is higher. 29 U.S.C. § 207(o)(4).
Can a public employer force an employee to use accrued compensatory time off? Yes. Nothing in the FLSA prohibits a public employer from compelling the use of accrued compensatory time. Furthermore, a public employer can “cash out” accrued compensatory time whenever it wishes and in its sole discretion.
There are some things a private employer can do to help control wage costs, but failing to pay overtime for hours worked in excess of 40 per week is simply not one of them.
By Michael C. Redman, mredman@dsda.com
Garnishment
WHAT DO YOU DO WITH A CONTINUING POSTJUDGMENT EARNINGS GARNISHMENT SUMMONS? – PART II
Before getting into specifics of what to do with a garnishment summons, it is important to note: if you do nothing with the garnishment summons, under Oklahoma law you may become responsible for your employee’s debt! This harsh result prescribed by the Oklahoma statutes ensures that employers respond to continuing postjudgment earnings garnishment summons.
Back to what you must do with a continuing postjudgment earnings garnishment summons . . . in short, you must answer the garnishment summons. Depending on the factual circumstances surrounding your employee’s status, that answer will vary. It may be that this person is no longer employed by you. If that is the case you must let the court and the creditor seeking garnishment know. Again, even if the person is no longer employed by you, if you do nothing with the garnishment summons, under Oklahoma law you may become responsible for your ex-employees debt!
The Documents You Need to Know About.
When you get a continuing postjudgment earnings garnishment summons, you will also receive:
1) A Continuing Garnishee’s Answer/Affidavit and
2) A Notice of Garnishment & Exemptions and Application for Hearing.
Continuing Garnishee’s Answer/Affidavit.
The Continuing Garnishee’s Answer/Affidavit is a form that must be filled out by you, the employer. After it is completed, you must send it to all the parties and to the Court.
The form first requires that you identify yourself as either an individual, a partnership or a corporation. Next, the answer/affidavit requires you (or one of your employees on your behalf) to state the date the garnishment summons was served on you. This is the date that your registered service agent received the garnishment.
For your actual substantive response to the garnishment summons, the answer/affidavit supplies several “ready made” responses ranging from, “at the time of service of the garnishment summons the individual named in the action was not employed by me,” to “nothing is being withheld due to a prior continuing garnishment on this employee’s wages.” Again, the answer/affidavit is a form that allows you to select various options that may fit your factual circumstances. Review the answer/affidavit and determine which response best matches your situation.
Item two (2) is the option you will choose if the employee’s wages will be garnished. Item two (2) provides:
2. At the time of service of the garnishment summons or upon the date it became effective, the garnishee was indebted to the judgment debtor or had possession or control of the following property, money, goods, chattels, credits, negotiable instruments or effects belonging to the judgment debtor as follows: (Please check appropriate response)
_____ Earnings as shown on the attached Calculation for Garnishment of Earnings form which is incorporated by reference into this answer;
_____ Other; specify:
The Calculation for Garnishment of Earnings is the third page of the answer/affidavit and sets forth the necessary items needed to calculate the amount of an employee’s wages that should be garnished each pay period. Use this sheet to determine how much to withhold from each paycheck.
Item four (4) of the answer/affidavit is very important, because it is the area on the form where you acknowledge to the court that you have given the employee/judgment debtor notice that a garnishment proceeding has been instituted against them. This section requires you to acknowledge that you have mailed or hand delivered to the judgment debtor/employee, a copy of the Notice of Garnishment & Exemptions and Application for Hearing.
Item five (5) allows you the garnishee to set forth any other defenses or reasons why you are not obligated to garnish your employee’s wages. These will vary or may be wholly inapplicable depending on the circumstances.
Since this is an affidavit, or a written declaration made under oath before a notary public or other authorized officer, the answer/affidavit must be notarized.
Lastly, and importantly, you must send this affidavit/answer to several parties including, the court, the judgment debtor (the employee), or the attorney for the judgment debtor, and the creditor or creditor’s attorney. If this document is not received and filed by the court, there will be no official record that you the garnishee fulfilled your obligations to answer the garnishment summons. Again, there is a very harsh result for failure to answer a continuing postjudgment earnings garnishment.
While there is a “safe harbor,” or second chance provision in Oklahoma law, you do not want to rely upon that to get you out of trouble. Respond quickly and accurately if you receive a garnishment.
Notice of Garnishment & Exemptions and Application for Hearing.
After you complete this document, you will give a copy of it to your employee by mail or in person.
Final Words.
Perhaps the most important thing to remember when responding to a garnishment is to carefully read and follow all directions provided. Garnishment is not meant to be a trap, but can be for the unwary employer. Further, as a means of avoiding any pitfalls, all employers should make sure that garnishment summons are sent to a central location and handled by an individual who is familiar with the process. Even if your company has a separate designated registered service agent set up to receive all legal documents or lawsuits, you should have procedures in place to ensure all garnishment summons are delivered to the appropriate individual(s) who are knowledgeable and responsible for responding on your behalf. Lastly, when in doubt, it is a good idea to consult your attorney in order to avoid the harsh result of being held responsible for your employee’s debt.
By McLaine DeWitt Herndon, mherndon@dsda.com
What's New
ANNOUNCEMENTS
No More Handouts – Doerner Saunders keeps going Green
In an ongoing effort to go green, Doerner Saunders has resourcefully opted to “stop the press” on paper handouts at the upcoming The Employer’s Legal Resource 2009 Workshop. All materials will be loaded onto reusable USB drives and provided to workshop attendees.
Mediation Competition
Michon Hughes is coaching the University of Tulsa College of Law’s Mediation team in the upcoming American Bar Association's Mediation Competition. While in law school, Michon and her partner won First place in the Regional competition and placed second in the National Competition out of 220 teams.
Good luck!
Dates to Remember
CALENDAR OF NOTABLE EVENTS
March 1, 2009
As a result of the recently-enacted American Recovery and Reinvestment Act of 2009, new COBRA provisions apply to employees involuntarily terminated between September 1, 2008, and December 31, 2009. See article above entitled The Stimulus Act – A Significant Change to Cobra.
March 11, 2009
Kristen L. Brightmire will be presenting at The Oklahoma Association of Homes and Services for the Aging (OKAHSA) at its Long Term Care Administration Seminar in Midwest City. She will focus on Best Practices for Hiring and Firing in Today’s Complicated Legal Environment. For more information, contact OKAHSA at (405) 640-8040 or Kristen L. Brightmire at kbrightmire@dsda.com.
March 24, 2009
Elise Dunitz Brennan will speak on the Fundamentals of Healthcare Arbitration at a nationally broadcasted telephone conference sponsored by the American Health Lawyers Association. For further information, click here.
March 26, 2009
Doerner Saunders presents The Employer’s Legal Resource 2009 Workshop at the Spirit Bank Event Center in Tulsa from 8:30 a.m. through 4:00 p.m. Topics include union avoidance, ADA Amendments Act of 2008, drug and alcohol testing in the workplace, and the new FMLA regulations. To register call (918)582-1211, or click here for the registration form.
April 2, 2009
Doerner Saunders presents The Employer’s Legal Resource 2009 Workshop at the Clarion Meridian Hotel & Convention Center in Oklahoma City from 8:30 a.m. through 4:00 p.m. Topics include union avoidance, ADA Amendments Act of 2008, drug and alcohol testing in the workplace, and the new FMLA regulations. To register call (918)582-1211, or click here for the registration form.
April 3, 2009
New Form I-9 scheduled. However, the USCIS is still taking public comments. We will let you know if this date changes. For a more detailed discussion of this matter, see the article in our February newsletter by clicking here or contact DSDA attorney Hilary L. Velandia at hvelandia@dsda.com.
April 7, 2009
Doerner Saunders is providing multiple speakers for a seminar in Oklahoma City on Water Rights Sales and Transfers In Oklahoma. The Firm's attorneys will cover issues ranging from regulatory and environmental issues to water supply contracts and tribal water rights. For more information, or to register, click here.
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