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Independent Contractor Guidelines 

To cope with the economic downturn many companies are looking for ways to cut costs. One way some employers use to do this is to hire independent contractors instead of regular employees. However, this cannot be done without fully understanding how the IRS looks at independent contractors.  Below you will find some general guidelines to understanding what determines someone to be a true independent contractor. 

People such as lawyers, contractors and subcontractors who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. 

Common Law RulesFacts that provide evidence of the degree of control and independence fall into three categories: 

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? 

Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) 

Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.Typical questions in making a determination could be:

• If the worker can be discharged at anytime and can choose whether or not to come to work without fear of losing employment
• If the worker controls the hours of employment thus indicating they are acting as an independent contractor
• Whether the work is temporary or permanent
• What is the degree of control over work and who exercises that control?
• What is each party’s level of loss in the relationship?
• Who has paid for materials, tools, supplies and/or equipment?
• What type of skill is required for work?
• Is there a degree of permanence?
• Is the worker an integral part of the business?
• Is the worker allowed to work for other employers?

If you are considering hiring independent contractors or already have some on board and would like an independent review, Human Resources 4U can assist you in making the proper determinations.

Human Resources 4U is a full service Human Resources consulting company specializing in small and midsize businesses.  Note: This article is presented with the understanding that we are not engaged in rendering legal advice.  If legal advice is required, the services of a competent attorney should be sought.

Human Resources 4U          

Your One Stop Human Resources Shop!      

Martin Levy, SPHR                                     www.HumanResources4U.com           

(909) 912-9995                                               hrexec@humanresources4u.com 

Key Components of the New FMLA Rules

Employers will have to make significant changes to their leave procedures under final FMLA regulations published by the Department of Labor. The new rules take effect on January 16, 2009.

• The DOL has changed all of the forms associated with FMLA leave, including its medical certification form and employer response form, which is now split into two forms-notice and designation.
• Employers (rather than the employer’s health care provider) are now able to get more detailed information regarding an employee’s or eligible family member’s serious health condition.

FMLA Certification process

An employee now has 5 business days to furnish a certification from a healthcare provider, with an outside limit of 15 days within which the employee must respond to all requests for certification.Once the employer receives certification, it must notify the employee if certification is insufficient and explain why. The employee then has 7 calendar days to correct the problem. That time frame may be extended if, despite reasonable good faith efforts, the employee is unable to cure the deficiency.An employer may require new certification when the employee’s medical condition lasts beyond the leave year.  

New definitions: DOL has changed definitions for what constitutes “continuing treatment” for a serious health condition (now a 30-day limit on the required two consecutive visits to a healthcare provider), and a 7-day limit (from the onset of incapacity) on the first visit to the provider. Note also that chronic health conditions require at least two doctor’s visits per year. 

New bonus policy options: Under the new regulations, employers are permitted to disqualify an employee from bonus or other payments based on the achievement of a specified goal such as hours worked, product sold, or perfect attendance, where the employee has not met the goal due to FMLA leave, as long as this is done in a nondiscriminatory manner. 

Employee notice requirements

• If an employee gives less than 30 days’ notice for foreseeable leave, the employee must respond to any employer inquiry as to why it was not practicable to give 30 days’ notice.  For unforeseen leaves the employee is now required to provide notice to the employer of his/her need for leave the same day the employee knows of the need for leave or the next day.
• Employees who take intermittent leave for planned medical treatment will now have an obligation to make a reasonable effort to schedule such treatment so as to not unduly disrupt the employer’s operations (current regulations say only that the employee has to “attempt” to do so).

Employer Notice Requirements

• The new regulations contain a new general notice prototype. If an employer has no handbook or other written materials, it must provide the general notice to new employees upon being hired.
• Absent extenuating circumstances, the timeframe for an employer to respond to an employee’s request for leave is extended from 2 business days to 5 business days of the employee’s request for leave or of the employer acquiring knowledge that the leave may be FMLA-qualified.
• A list of essential job functions must be provided with the designation notice if the employer will require that the fitness-for duty certification address the employee’s ability to perform the essential functions of the position.
• Only one designation notice is required for each FMLA qualifying reason per leave year, regardless of whether the leave is taken as a continuous block of leave or on an intermittent or reduced leave schedule basis.
• In situations in which the amount of leave to be taken is not known at the designation stage (e.g., when unforeseeable intermittent leave will be needed), the employer is to inform the employee of the number of hours counted against the FMLA leave entitlement only upon the employee’s request, and no more often than every 30 days if FMLA leave was taken during that period. In addition:
• An employer may “deny” FMLA leave until the required certification is provided. Employees must be given at least 15 calendar days to provide the requested certification, and they are entitled to additional time when they are unable to meet that deadline despite their diligent, good-faith efforts.
• Any absences that occur during the period in which an employer has the right to deny FMLA protection due to the failure to provide timely certification may be treated under the employer’s normal attendance policies.
• Employers may deny FMLA protection when an employee fails to provide a timely certification or recertification, but they are not required to do so. Employers always have the option of accepting an untimely certification.

Finally:The National Defense Authorization Act for Fiscal Year 2008 (NDAA) amended FMLA to allow qualified employees with family members in the military to take leave under two circumstances:

• Qualifying exigency: up to 12 weeks of FMLA leave in a 12-month period because of any qualifying exigency arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the armed forces in support of a contingency operation
• Service member caregiver: a total of up to 26 workweeks of leave during any single 12-month period if the employee is the spouse, son, daughter, parent, or next of kin caring for a military service member recovering from an injury or illness suffered while on active duty in the armed forces 

Human Resources 4U is a full service Human Resources consulting company specializing in small and midsize businesses.  Note: This article is presented with the understanding that we are not engaged in rendering legal advice.  If legal advice is required, the services of a competent attorney should be sought.