WHAT

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Daniel D. PipitoneChairman – Energy & Maritime Section

DOES ANYONE WORK FOR THE UNITED

STATES DEPARTMENT OF LABOR?

EMPLOYEES VS. INDEPENDENT CONTRACTORS

PREVALENT USE OF INDEPENDENT CONTRACTORS

INDEPENDENT CONTRACTORS

Company MenDirectional DrillersField ConsultantsGate AttendantsLand MenPipeline ManagersPumpers

OTHER INDUSTRIES

Cable CompaniesCommercial TruckingJanitorial/Cleaning ServicesOvernight Mail DeliveriesPostal DeliveriesTaxisTelephone Line/Tower

Repair Services

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

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)

UNITED STATES DEPARTMENT OF LABOR

2009 ANNOUNCEMENT OF INITIATIVE

CONVERSION OF INDEPENDENT CONTRACTORS TO EMPLOYEESINTER-AGENCY COOPERATION

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

MISCLASSIFICATION IS PERVASIVE

THE MIGHT OF THE GOVERNMENT

AVOID INVESTIGATION AND PROSECUTION

PROTECTIVE MEASURES TO ENSURE COMPLIANCE

VULNERABILITY

BUSINESS DISTRACTION

AVOID BACK PAY AND PENALTIES

AVOID APPLICATION OF OTHER LAWS

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

NO ONE FACTOR IS DETERMINATIVE

STATUS IS DEPENDENT UPON THE TOTALITY OF CIRCUMSTANCES

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

MANAGE BUSINESS UTILIZING INDEPENDENT

CONTRACTORS

SCRUTINIZE INDEPENDENT CONTRACTORS BEFORE

RETAINING

COMMUNICATE WITH CLIENTS

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

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

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

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

ENFORCEMENT TACTICSInexperienced 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

ENFORCEMENT TACTICSInexperienced 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

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.

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

EXERCISE CARE

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

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

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”

AURA OF INVINCIBILITY OF UNITED STATES DEPARTMENT OF LABOR ERODED

COURT COSTS AND ATTORNEYS’ FEES SOUGHT

“WINNING TAKES CARE OF EVERYTHING.”

- NIKE / TIGER WOODS