What The Gig Economy Means For Recruiting

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Can You Gig It?

What The Gig Economy Means For Recruiting

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Housekeeping Sponsor Speaker The New Contingent Worker Freelance Strategies Legal Risks Attracting Top Freelance Tech

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TODAY’S SPEAKER

NICOLE GREENBERG, ESQ.Principal Consultant & Chief Legal Advisor

@NGSesq


DISCLAIMERThis webinar and any links provided are for general informational purposes only and should not be construed as legal advice. Receipt of these materials does not create an attorney-client relationship nor is it a solicitation or advertisement to provide legal services. The views expressed in this article may be outdated or repealed by current law. Do not act upon this information without seeking professional counsel in the appropriate jurisdiction.


Defining the Gig Economy

http://www.americanactionforum.org/research/independent-contractors-and-the-emerging-gig-economy/


The “Growing” Gig Economy

Same FreelancersNEW technology

Self-employment is actually shrinking!


The “Growing” Gig Economy

Years of government crackdown on misclassification of contractors led to companies reevaluating the use of “1099’s”

The result?

Many companies require incorporation or employment


The gig economy and sharing economy are being sued to death!

Uber and Lyft Drivers, as well as other workers that would seem to have complete independence have been classified as employees by some courts.

Crackdowns based on the ACA are already in motion and the final phase limited exemptions to companies with <50 employees.

A final blow by the DOL resulted in the conclusion by industry experts that moving forward, the government is going to audit based generally on the concept that EVERY WORKER is SOMEONE’S EMPLOYEE.


Regulatory Compliance ResponsibilitiesHave Changed

Companies that utilize a contingent workforce can no longer shift responsibilities to staffing firms or PEOs without consequence.

New laws (in particular the ACA) actually mandate that the company for whom work is performed must ensure compliance for contingent workers as if they were direct employees.


Compliance StrategiesTo ensure blanket compliance, companies must analyze whether their non-employee workers are properly classified under:

A new 11-part NLRB test The IRS Right to Control Test (federal taxes) The traditional common law Right to Control Test (ERISA and federal

discrimination laws) The modified U.S. Treasury version of the traditional common law Right to

Control Test (Affordable Care Act) The federal court Economic Realities Test (FLSA or Department of Labor in

General)AND…. Individual state law tests used for state wage and hour laws, workers

compensation and unemployment


National Labor Relations Board11 Part Test (New in 2014)In a 2014 FedEx Case, the NLRB held that no bright line exists between "employee" and "independent contractor," rather every case needed to consider a wide array of factors, all of which go to the basic question of whether the worker is "rendering service as part of an independent business.“What defies and “independent business”?(1)significant entrepreneurial opportunity, (2)a realistic ability to work for other companies; (3)a proprietary or ownership interest in the work being done; and (4)control over important business decisions, such as scheduling work, hiring, selection and assigning employees, purchase and use of equipment and commitment of capital.


National Labor Relations Board11 Part Test (New in 2014)

1. Extent of control by employer;2. Whether the individual is involved in a distinct occupation or business;3. Whether the work is usually done with or without supervision;4. Specialized skills;5. Who provides the supplies and tools;6. Length of employment;7. Method of payment;8. Whether the work is part of the employer’s regular business;9. The parties’ beliefs about the nature of the relationship;10. Whether the employer is in the business that the worker performs; and11. Whether the worker is rendering service as part of an independent business.

NLRB11-

PART TEST


The Economic Realities TestOld Concept, New GuidelinesRecent Policy Shift under new Department of Labor Guidelines has basically led to the death of independent contractors as we know them. The 6 factors in the Economic Realities Test remain the same, but the weight given to each has changed drastically. Previously, “Control” was the paramount factor. All factors were given significantly less weight.

As of last year’s guidance, all 6 factors are to be considered equally when determining worker classification.

The conclusion is that even where there is ZERO control over the worker, the DOL may still consider them misclassified, making the client company liable for all regulations governed by the DOL.

What is the nature and degree of the employer’s control?Is the work an integral part of the employer’s business?Does the worker’s managerial skill affect the worker’s

opportunity for profit or loss?How does the worker’s relative investment compare to the

employer’s investment?Does the work performed require special skill and initiative?Is the relationship between the worker and the employer permanent or indefinite?


The Economic Realities Test ExamplesStraight From the Department of LaborExample: Is the Work an Integral Part of the Employer’s Business?

For a construction company that frames residential homes, carpenters are integral to the employer’s business because the company is in business to frame homes, and carpentry is an integral part of providing that service.

In contrast, the same construction company may contract with a software developer to create software that, among other things, assists the company in tracking its bids, scheduling projects and crews, and tracking material orders. The software developer is performing work that is not integral to the construction company’s business, which is indicative of an independent contractor.


The Economic Realities Test ExamplesStraight From the Department of LaborExample: Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?

A worker provides cleaning services for corporate clients. The worker performs assignments only as determined by a cleaning company; he does not independently schedule assignments, solicit additional work from other clients, advertise his services, or endeavor to reduce costs. The worker regularly agrees to work additional hours at any time in order to earn more. In this scenario, the worker does not exercise managerial skill that affects his profit or loss. Rather, his earnings may fluctuate based on the work available and his willingness to work more. This lack of managerial skill is indicative of an employment relationship between the worker and the cleaning company.

In contrast, a worker provides cleaning services for corporate clients, produces advertising, negotiates contracts, decides which jobs to perform and when to perform them, decides to hire helpers to assist with the work, and recruits new clients. This worker exercises managerial skill that affects his opportunity for profit and loss, which is indicative of an independent contractor.


The Economic Realities Test ExamplesStraight From the Department of LaborExample: How Does the Worker’s Relative Investment Compare to the Employer’s Investment?

A worker providing cleaning services for a cleaning company is issued a Form 1099-MISC each year and signs a contract stating that she is an independent contractor. The company provides insurance, a vehicle to use, and all equipment and supplies for the worker. The company invests in advertising and finding clients. The worker occasionally brings her own preferred cleaning supplies to certain jobs. In this scenario, the relative investment of the worker as compared to the employer’s investment is indicative of an employment relationship between the worker and the cleaning company. The worker’s investment in cleaning supplies does little to further a business beyond that particular job.

A worker providing cleaning services receives referrals and sometimes works for a local cleaning company. The worker invests in a vehicle that is not suitable for personal use and uses it to travel to various worksites. The worker rents her own space to store the vehicle and materials. The worker also advertises and markets her services and hires a helper for larger jobs. She regularly (as opposed to on a job-by-job basis) purchases material and equipment to provide cleaning services and brings her own equipment (vacuum, mop, broom, etc.) and cleaning supplies to each worksite. Her level of investments is similar to the investments of the local cleaning company for whom she sometimes works. These types of investments may be indicative of an independent contractor.


The Economic Realities Test ExamplesStraight From the Department of LaborExample: Does the Work Performed Require Special Skill and Initiative?

A highly skilled carpenter provides carpentry services for a construction firm; however, such skills are not exercised in an independent manner. For example, the carpenter does not make any independent judgments at the job site beyond the work that he is doing for that job; he does not determine the sequence of work, order additional materials, or think about bidding the next job, but rather is told what work to perform where. In this scenario, the carpenter, although highly skilled technically, is not demonstrating the skill and initiative of an independent contractor (such as managerial and business skills). He is simply providing his skilled labor.

In contrast, a highly skilled carpenter who provides a specialized service for a variety of area construction companies, for example, custom, handcrafted cabinets that are made-to-order, may be demonstrating the skill and initiative of an independent contractor if the carpenter markets his services, determines when to order materials and the quantity of materials to order, and determines which orders to fill.


The Economic Realities Test ExamplesStraight From the Department of LaborExample: Does the Work Performed Require Special Skill and Initiative?

A highly skilled carpenter provides carpentry services for a construction firm; however, such skills are not exercised in an independent manner. For example, the carpenter does not make any independent judgments at the job site beyond the work that he is doing for that job; he does not determine the sequence of work, order additional materials, or think about bidding the next job, but rather is told what work to perform where. In this scenario, the carpenter, although highly skilled technically, is not demonstrating the skill and initiative of an independent contractor (such as managerial and business skills). He is simply providing his skilled labor.

In contrast, a highly skilled carpenter who provides a specialized service for a variety of area construction companies, for example, custom, handcrafted cabinets that are made-to-order, may be demonstrating the skill and initiative of an independent contractor if the carpenter markets his services, determines when to order materials and the quantity of materials to order, and determines which orders to fill.


The Economic Realities Test ExamplesStraight From the Department of LaborExample: Is the Relationship between the Worker and the Employer Permanent or Indefinite?

An editor has worked for an established publishing house for several years. Her edits are completed in accordance with the publishing house’s specifications, using its software. She only edits books provided by the publishing house. This scenario indicates a permanence to the relationship between the editor and the publishing house that is indicative of an employment relationship.

Another editor has worked intermittently with fifteen different publishing houses over the past several years. She markets her services to numerous publishing houses. She negotiates rates for each editing job and turns down work for any reason, including because she is too busy with other editing jobs. This lack of permanence with one publishing house is indicative of an independent contractor relationship.


The Economic Realities Test ExamplesStraight From the Department of LaborExample: What is the Nature and Degree of the Employer’s Control?A registered nurse who provides skilled nursing care in nursing homes is listed with Beta Nurse Registry in order to be matched with clients. The registry interviewed the nurse prior to her joining the registry, and also required the nurse to undergo a multi-day training presented by Beta. Beta sends the nurse a listing each week with potential clients and requires the nurse to fill out a form with Beta prior to contacting any clients. Beta also requires that the nurse adhere to a certain wage range and the nurse cannot provide care during any weekend hours. The nurse must inform Beta if she is hired by a client and must contact Beta if she will miss scheduled work with any client. In this scenario, the degree of control exercised by the registry is indicative of an employment relationship

Another registered nurse who provides skilled nursing care in nursing homes is listed with Jones Nurse Registry in order to be matched with clients. The registry sends the nurse a listing each week with potential clients. The nurse is free to call as many or as few potential clients as she wishes and to work for as many or as few as she wishes; the nurse also negotiates her own wage rate and schedule with the client. In this scenario, the degree of control exercised by the registry is not indicative of an employment relationship.


What should companies do?What are your goals?

Do you want to have control over your workers?

Do you need to be able to assess their performance and make decisions accordingly?

Will an independent contractor salesperson be effective without using your company’s business cards and e-mail system?

Do you need to pay for their training or business expenses?

Do you want to stop them from working for competitors?

Do you need to require full-time work?


Upwork Report: Flexibility & Freedom are keydrivers for freelancing


Top Reasons for Freelancing: To have flexibility in my schedule (i.e. what days or times I work) To be my own boss To work from the location of my choosing To be able to pursue work I am passionate about or find meaningful To have a schedule that enables me to pursue my personal passions To be able to spend more time with friends, family & my personal life To be in control of my own financial future To earn extra money

Attract Talent with Factors that DriveFreelancer Mentality


Upwork Report: Key Freelancer Concernsdrivers for freelancing


Key Freelancer Concerns: Cost of health care Unpredictable income Saving for retirement High taxation rates Difficulty finding more clients or projects Non-payment or late payment by clients

But Wait…. How can a Client help alleviate these concerns without risking being seen as an employer?

Attract Talent by Alleviating Concerns


Sorry….. Probably Not.


For any Resource staffed on a Microsoft Project, Supplier must ensure that the Employee’s employer will:o collect and maintain all payroll and employment files or records, including time sheets, as required

by applicable state and federal wage and hour laws and regulations;o pay all compensation due, including, withholding of income taxes, and pay and withhold social

security and other payroll taxes, unemployment insurance, workers’ compensation insurance payments and disability benefits;

o accurately and timely pay any business and occupational taxes;o accommodate any disabilities as may be required by law;o train the Employees and establish a career development program for them;o investigate and resolve all complaints, claims and/or grievances.o If the employer has 50 or more total Employees (not just those engaged at Microsoft), provide at

least 15 days of paid time off (5 may be paid sick leave) to any employee who is staffed on a Microsoft Project, and has worked for said employer for at least 1500 hours in the prior 12 months in any capacity (not just with Microsoft).

o Provide ACA compliant health insurance to all U.S.-based Employees who work a total of 30 or more hours per week (not just >30 hrs for Microsoft)

CASE STUDY:New Microsoft Staffing Provider Obligations


Microsoft Justification for New Supplier StandardsEnsuring suppliers share our commitment to strong minimum employment standards: We want to work with suppliers who share our commitment to strong minimum standards for their people who work on our behalf. That’s why we are requiring our suppliers provide their employees who do our work at least 15 days of paid time off.

That’s also why we require anyone doing work at a Microsoft supplier on behalf of Microsoft to be an employee of that supplier, and not an independent contractor. This is designed to ensure eligibility for important workplace protections such as minimum wage, overtime compensation, unemployment insurance, and workers compensation.

Probable Reality: Microsoft knows that they risk becoming “common law employers” & are embracing “co-employment” instead.

California and a few other states have laws related to mandatory PTO and sick leave. If a supplier employer doesn’t provide it when they are required to do so, Microsoft could be liable for it.

Federal law and the ACA are the main culprits for the second part. Regardless, Microsoft knows they have liability as either a common law employer or a joint employer and they would rather just make individuals performing services for them have anything to complain about!

CASE STUDY:New Microsoft Staffing Provider Obligations


YOU’VE GOT QUESTIONS. WE’VE GOT ANSWERS.

WELL…KINDA….


DISCLAIMERThis webinar and any links provided are for general informational purposes only and should not be construed as legal advice. Receipt of these materials does not create an attorney-client relationship nor is it a solicitation or advertisement to provide legal services. The views expressed in this article may be outdated or repealed by current law. Do not act upon this information without seeking professional counsel in the appropriate jurisdiction.



NICOLE GREENBERG, ESQ.

@NGSesq

Recruiting & HR

What The Gig Economy Means For Recruiting