2. hutchlaw.com
Overview of Discussion –
“Hot Topics” in Employment Law
Employee Classifying & Paying Workers
Independent Contractor versus Employee
Unpaid Interns
Employment Considerations
Employment Status (Exempt versus Non-Exempt)
Wage Hour Laws/Other Compensation Considerations
Documenting the Relationship & IP
Ownership
HR Practices & Why
General Compliance Considerations
Taxes, Posting Requirements, Record-Keeping
Employment Laws “by the numbers” (# of employees)
3. hutchlaw.com
Initial Contractor Classification
Independent Contractor vs. Employee
Based on Relevant Facts; 3 Main Considerations
Behavioral Control
Direction, Control, Training
Financial Control
Profit and Loss, Investment, Payment
Nature of Relationship
Contracts, Duration, Inclusion
Services as key to business
4. hutchlaw.com
Initial Contractor Classification
(cont.)
Operational Aspects
Employees sign offer letters; independent
contractors or consultants sign contracts
Taxes are withheld from employee pay;
contractors are provided a 1099 and required to
pay taxes on their own behalf
Employees are eligible for benefits; contractors
are not
REGARDLESS of how the relationship is defined,
agencies use their own tests to determine how to
classify the relationship!
5. hutchlaw.com
Initial Contractor Classification
(cont.)
Results of Misclassification
Fines
Back taxes
Back pay and Overtime
Law suits to include in Past Benefits
Exclusion from future Contracts
Scenario - Audit from regulatory agency
(IRS, DOL, NCDOL, NCESC, Industrial
Commission); disgruntled contractor or an
disclosure against the reps & warranties in a
corporate transaction
6. hutchlaw.com
Employment Classifications
Independent Contractor
Employee - Typical Employment Status
Regular (never ‘permanent’) Full-Time - hired indefinitely;
works a full workweek (often 40 hours)
Regular Part-Time – hired indefinitely; works less than a
full workweek
Temporary/Seasonal – Hired for a specified, limited
period, either full time or part time; can be hired directly
(on your payroll) or through an agency (would not be
employee for payroll tax purposes, but may be for other
purposes).
7. hutchlaw.com
Employment - Compensation
Compensation – Fair Labor Standards Act
Non-Exempt: Minimum wage $7.25 (currently)
plus overtime (1 ½ regular rate of pay) must
be paid for all workers unless exemptions
apply
Exempt Employees: (paid a set salary regardless of
hours worked)
Executive
Administrative
Learned Professional
Creative Professional
Outside Sales
8. Employment – Compensation
(cont.)
Unpaid Internships
Similar to training in an educational environment;
Is for the benefit of the intern;
The intern does not displace regular employees, but
works under close supervision of existing staff;
Employer derives no immediate advantage; and on
occasion operations may be impeded;
No job entitlement at conclusion; and
Clear understanding that intern is not entitled to
wages
Document expectations and ownership of IP
9. hutchlaw.com
Employment – Compensation
(cont.)
Legal Risks of Misclassifying Exemption/Not
Paying Wages:
Possibility of personal liability
Liquidated damages equal to the unpaid wages
Interest
Attorneys’ fees
Criminal sanctions
Business risks too!
Cost & Delay to clean up
Transaction Impediments
10. hutchlaw.com
Employment – Compensation
(cont.)
Other Compensation Concepts
Deferred compensation
Equity!!!
Bonuses
Vacation/Paid Time Off (Note on NC law: can disclaim payment on
termination in advance of when earned)
Severance
Benefits
11. hutchlaw.com
Employment - Documentation
Documentation Associated with Hiring
Offer Letters – should concisely define the
employment relationship:
Key business terms
Employment contingencies
Employment Agreement – severance
Business Protection Agreement
Employment At-Will
12. hutchlaw.com
Employment - Documentation
Business Protection Agreements (Intellectual
Property Protection)
Confidentiality
Ownership of Intellectual Property
Non-solicitation (customers and employees)
Non-competition
Non-disparagement
13. HR Practices & Why
Recruiting & Hiring
Start-Up Trend: Too Quick to Hire, Too Long to Fire
Responsibilities for the role & goals to accomplish, you’ve
got your job description!
Get the right person for the job!
Don’t hire just because someone will work for Equity!
Performance Management
Goals, training, informal discussions & PIPs
Investigations & Documentation
hutchlaw.com
14. HR Practices & Why
Separations
“Things will get worse before they get better.”
More Complicated with More Time
Things to Consider
Final Pay (when, how)
Deductions from Pay
Return of Company Property
Exit Interview
Release Agreements
References
hutchlaw.com
15. Employment - Compliance
I-9s
1st
day, employee must complete/sign Section 1;
Employer must physically examine the original
documents and record the information in Section 2
within 3 business days
Keep in separate, secured file (not personnel file)
Retain for the longer of 3 years or 1 year after
employment ends
E-Verify mandatory for certain federal contractors and
for NC employers with 25 or more employees;
New hire reporting
W-4/NC-4
Payroll taxes
16. Posting Requirements
Consolidated Poster
Document Retention
Personnel File (no
medical records,
no I-9s)
Meal & Rest Breaks
Multistate Environment
Employment - Compliance
17. hutchlaw.com
Employment - Compliance
Applicable to ALL
employers, regardless
of the number of
employees:
FLSA/NC Wage and Hour Act
Federal Insurance Contributions Act (FICA)
Immigration Reform & Control Act (IRCA)
Occupational Safety and Health Act (OSHA)
Employee Retirement Income Security Act (ERISA) (if
benefits are offered)
Equal Pay Act
Fair Credit Reporting Act
National Labor Relations Act (NLRA)
At least 15 employees Americans with Disabilities Act (ADA);
Title VII of the Civil Rights Act, Pregnancy Discrimination Act
At least 20 employees: Age Discrimination in Employment Act (ADEA); Consolidated
Omnibus Budget Reconciliation Act (COBRA)
At least 50 employees: Family and Medical Leave Act (FMLA)
At least 100 employees Worker Adjustment & Retraining Notification Act (WARN);
EEO-1 Reporting