6. Employees1 Copyright 2011 Jean D. Sifleet - All Rights Reserved A program from the Smart Fast Business Advice Series Presenter: Jean D. Sifleet, Business Attorney
7. About Smart Fast® – About Jean D. Sifleet, Esq. http://www.smartfast.com/pages/about.html Smart Fast® is a practical and systematic approach to evaluating options and making informed business decisions. Smart Fast® creator, Jean D. Sifleet, Esq. CPA, is a Business Attorney who helps business owners and entrepreneurs by providing solutions to business issues based on her first-hand experiences as a 3-time entrepreneur. Jean is the author of the Smart Fast® Business Advice Series including many articles, a blog (http://www.smartfast.com/blog/) and books (http://www.smartfast.com/pages/bookstore.html): Ishift™ – Innovation Shift -- Individuals Shifting Gears for Business Innovation (Infinity 2010) Beyond 401(k)s for Small Business Owners (Wiley 2004) Advantage “IP” – Profit from Your Great Ideas (Infinity 2006) Smart Fast® -- Running Your Business & Staying Out of Trouble (Infinity 2005) 2 Copyright 2011 Jean D. Sifleet - All Rights Reserved
8. The legal presumption is that workers are employees. If you want to hire workers – and classify them as contractors or interns or volunteers or temps … and treat them differently than employees – you have to justify the “classification.” Copyright 2011 Jean D. Sifleet - All Rights Reserved 3
9. Contractors are cheaper than employees because you don’t have to pay benefits, payroll taxes, workers comp or unemployment. Unpaid interns are “free.” But, can you justify the “classification?” The penalties for misclassification are expensive! Copyright 2011 Jean D. Sifleet - All Rights Reserved 4
10. Before you get to the classification issue – I suggest that you step back and ask: What are the business goals? Copyright 2011 Jean D. Sifleet - All Rights Reserved 5 Seasonal business – peak season help? Additional “sales” people? Provide work experience for employees’ kids? Reduce costs by bringing outsourced functions in-house (IT, delivery)? Leverage skilled existing staff (apprentice-style training)? Hired experienced people -- but avoid layoff cycles? Minimize costs of payroll and benefits? Build goodwill in the community?
11. Next, I suggest that you take the time to define the work that the worker will be performing. Then, you can better determine how the worker should be “classified.” Copyright 2011 Jean D. Sifleet - All Rights Reserved 6
12. What’s the appropriate classification criteria? Copyright 2011 Jean D. Sifleet - All Rights Reserved 7 Interns (paid, unpaid) Independent contractors / Consultants Part timers Temps Volunteers Employees Pros & Cons?
24. Hands-on learning experiencePenalties: Payment of back wages + fines If willful, criminal sanctions + fines to $10K http://www.smartfast.com/blog/unpaid-interns-be-aware-of-the-dol-guidelines
27. No benefitsIRS – 20 factor test MA – More stringent criteria To properly classify a worker as a contractor, the employer must be able to show: One: Freedom from Control – “Services performed are free from the employer’s control or direction.” Example: An independent contractor completes the job using his or her own approach with little direction and dictates the hours that he or she will work on the job. Two: Service is outside the usual course of the employer’s business – “Services performed do not form a regular and continuing part of the employer’s business.” Example: Newspaper carriers were performing the “usual course of business” for the Athol Daily News, whereas the individual doing landscaping in front of the Athol Daily News was performing services “outside” the usual course of business. Three: Independent trade, occupation or business – “Individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service provided.” Example: Is the worker dependent on only one employer? Or does the worker perform services “of the same nature” for multiple employers?
28.
29. The minimum wage law set out in M.G.L. c. 151, s. 1A, 1B, and 19; 455 CMR 2.01, et seq.
30. The overtime law set forth in M.G.L. c. 151, s. 1, 1A, 1B, and 19.
31. The law requiring employers to keep true and accurate employee payroll records, and to furnish the records to the Attorney General upon request as required by M.G.L. c. 151, s. 15.
43. Copyright 2011 Jean D. Sifleet - All Rights Reserved 18 Penalties Massachusetts: Wage and Hour Violations ( M.G.L. c.149:148): Civil action: Treble damages and attorney’s fees Fines: Up to $10,000 and/or up to 6 mos in jail for 1st offense Up to $25,000 and/or up to 1 yr in jail for additional offenses Willful violations: Fines up to $25,000 and/or up to 1 yr. in jail (1st offense) Fines of $25,000-$50,000 and/or up to 2 yrs. in jail (Subsequent offenses)
44. Copyright 2011 Jean D. Sifleet - All Rights Reserved 19 Penalties Massachusetts: For Workers Compensation (M.G.L. c. 152:25C): Fines: $100 per day of non-compliance Criminal penalties: Up to $1,500 fine and/or up to 1 year in jail Stop work order Unemployment Compensation (M.G.L. c. 151A:15): Failure to pay contributions owed: Penalty of up to 100% of total unemployment contributions due plus interest (12%). Knowing violations or fraudulent actions: Penalty of up to 100% of total unemployment contributions due PLUS a penalty equal to an amount the individual collected while employed. State tax withholding considerations: $500 penalty – fraudulent statements Fine between $100 - $5,000 and/or 1 year in jail
45. Copyright 2011 Jean D. Sifleet - All Rights Reserved 20 Summary - Key Questions: What are the business goals? What is the worker expected to do? (work plan) How will the worker be classified? Check the rules? Get advice? How will you measure results? What will you learn from the experience and incorporate in business practices?
46. QUESTIONS? Jean D. Sifleet, Esq. (508) 361-0916 jean@smartfast.com Copyright 2011 Jean D. Sifleet - All Rights Reserved 21
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