Called A ‘Manager'? You Still May Be Entitled To Overtime

The New York Times recently published a great article about tricks employers use to try to avoid paying overtime, such as labeling a worker a “manager” when he or she is really no such thing. In part, the article provides an example of a Panera Bread worker:

For four years beginning in 2014, Tiffany Palliser worked at Panera Bread in South Florida, making salads and operating the register for shifts that began at 5 a.m. and often ran late into the afternoon.

Ms. Palliser estimates that she worked at least 50 hours a week on average. But she says she did not receive overtime pay.

The reason? Panera officially considered her a manager and paid her an annual salary rather than on an hourly basis. Ms. Palliser said she was often told that “this is what you signed up for” by becoming an assistant manager.

The story then notes how employers avoid paying the require overtime:

Federal law requires employers to pay time-and-a-half overtime to hourly workers after 40 hours, and to most salaried workers whose salary is below a certain amount, currently about $35,500 a year. Companies need not pay overtime to salaried employees who make above that amount if they are bona fide managers.

Many employers say managers who earn relatively modest salaries have genuine responsibility and opportunities to advance. The National Retail Federation, a trade group, has written that such management positions are “key steps on the ladder of professional success, especially for many individuals who do not have college degrees.”

But according to a recent paper by three academics, Lauren Cohen, Umit Gurun and N. Bugra Ozel, many companies provide salaries just above the federal cutoff to frontline workers and mislabel them as managers to deny them overtime.

Lebau & Neuworth is one of the premier wage-hour law firms representing workers. We are here to fight for you, so contact us at (410) 296-3030 or lebauneuworth.com/contact-us.

The ‘Gig Economy’ and Your Wage Rights as an Independent Contractor

A very interesting article was recently posted in the New York Times Op-Ed about the problem of the “gig economy.”

Technology companies, such as Uber and Lyft, tout the benefits of the “gig economy,” in which workers are designated as independent contractors, not employees. The problem is, independent-contractor status often does not benefit workers.

Being an independent contractor is, theoretically, beneficial because workers are their own boss, working whenever and as much as they want. However, the companies are typically the real beneficiaries of the independent contractor designation. This is because independent contractors are typically exempt from the protections of the Fair Labor Standards Act (FLSA), the federal statute that governs the payment of wages, such as a minimum wage or overtime pay. Accordingly, companies can entice workers to work long hours for low pay and without overtime.

Because of the lower associated costs, companies often misclassify employees as independent contractors. The problem is so rampant that the United States Department of Labor (DOL), the federal agency that enforces the FLSA, is actively working with the IRS to combat employee misclassification.

This is important because being misclassified not only denies workers wages to which they are entitled, but it can also affect their eligibility for programs such as Social Security retirement and unemployment.

If you think that you have been misclassified as an independent contractor, the attorneys at Lebau & Neuworth may be able to help. We are experienced at handling cases involving employee misclassification and unpaid wages. For more information, contact us at (410) 296-3030or lebauneuworth.com/contact-us.

You May Not Be an Independent Contractor – and May By Eligible for Overtime

An independent contractor is generally thought of as someone who is compensated by another party without withholdings and taxes and who also is paid a fixed amount for a specific job or task. Cable TV installers, painters and manual laborers often are paid as independent contractors.

Companies often want to treat laborers as independent contractors so that they do not have to pay overtime compensation to the laborers. Independent contractors who truly are independent and not subject to excessive terms and conditions by the party for which they are performing services are not eligible for overtime pay, under the Fair Labor Standards Act (“FLSA”), which is the overtime law.

Some workers often think that they are not entitled to overtime pay if they consider themselves independent contractors. However, if a worker is not truly an independent contractor, he or she can be eligible for overtime pay – even from a company that is not his or her direct employer. Recently, the Fourth Circuit Court of Appeals, which includes Maryland, said as much in two cases, Hall v. Albrecht, No. 15-1857 (4th Cir. Jan. 25, 2017) and Salinas v. Commercial Interiors, Inc., No. 15-1915 (4th Cir. Jan. 25, 2017).

These cases are extremely important because they show that, under certain circumstances, workers labelled as independent contractors can still get overtime pay – even from a company that is not the direct employer.

In these two cases, the laborers worked as independent contractors for subcontractors that provided services for larger companies, who, together, controlled the terms of their employment. The workers sued the subcontractors and the larger companies as “joint employers,” seeking overtime pay and the Court ruled in favor of the workers.

First, the Court determined that that the companies were the workers’ joint employers because, together, the companies codetermined the essential terms of the worker’s employment. Those “essential terms” included setting the worker’s pay, daily supervision of their work, and providing the workers with the tools and equipment necessary to do their jobs.

Second, the Court found that the workers were employees and not independent contractors. The Court reasoned that, because the companies’ combined influence over the essential terms of the workers’ employment qualified them as the workers’ joint employers, the workers were the employees of the companies. This was true even though the workers were not the employees of either individual company.

Finally, the Court found that the larger companies and the subcontractors were responsible, individually and jointly, for compliance with the FLSA and analogous Maryland state wage laws. Accordingly, the workers were entitled to overtime wages.

If you are an independent contractor or think you are being wrongly denied overtime pay, contact the attorneys at Lebau & Neuworth; we may be able to help, as we are experienced in dealing with joint employment and overtime issues. For more information, contact us at 888-456-2529 or lebauneuworth.com/contact-us.

Mythbusting: Independent Contractor vs. Employee Status

Employers continue to misclassify workers as independent contractors, and not correctly as employees, in order to avoid paying overtime and provide employee benefits.

In fact, Lebau & Neuworth recently sued the same employer on three separate occasions over a five-year period because it continued to misclassify its employees. In all, we recovered nearly $600,000 for over 100 employees. Hopefully, the employer has now learned its lesson.

Workers oftentimes do not know their rights and protections the law provides them regarding their “employee status.” The U.S. Department of Labor just days ago released a “12-Point Misclassification Mythbusters” document. The 12 misclassification myths identified by the Labor Department are:

If I am an independent contractor under one law, I am an independent contractor under other laws.
If I am classified as an independent contractor, I am not eligible for unemployment insurance (UI).
I received a 1099 tax form from my employer, and this makes me an independent contractor.
It does not make a difference if I am classified as an independent contractor or an employee.
I am an independent contractor because I signed an independent contractor agreement.
I am not on the payroll, so I am not an employee.
I have my own employer identification number (EIN) or paperwork stating I am performing services as a Limited Liability Corporation (LLC) or other business entity. This means that I am an independent contractor.
My employer wants me to be an independent contractor, and that means I am not an employee.
I telework or work off-site, so I am an independent contractor.
I have been an independent contractor for years; this means I will continue to be an independent contractor.
I operate a franchise. This means that I am an independent business.
I am an independent contractor because it is established practice in my industry to classify workers like me as independent contractors.

Our favorites our myths Nos. 3 and 5. The U.S. Department of Labor cracks open those myths, explaining:

FACT No. 3: Receiving a 1099 does not make you an independent contractor under the FLSA.

You may be an independent contractor if your work does not fall within a law’s definition of employment. Similarly, you are an employee if your work falls within a law’s definition of employment. Receiving a 1099 tax form is simply the result of how your employer classifies you for federal tax purposes, but the form itself does not mean you are correctly classified as an independent contractor for federal tax purposes. And, receipt of a 1099 is irrelevant to determining whether you are an employee under the FLSA or the FMLA.

Example: Taxes

Under federal tax laws, you are not an independent contractor for tax purposes just because you receive a 1099. What matters is whether the person receiving your services has the right to control how you perform your work. To learn more about whether you are an independent contractor or employee for federal tax purposes, please visit the IRS’ website.

Example: Minimum Wage, Overtime, and other FLSA Protections

Receiving a 1099 does not make you an independent contractor under the FLSA. In fact, whether you receive a 1099 is irrelevant. Under the FLSA, you are an employee if your work indicates you are economically dependent on an employer. On the other hand, you are an independent contractor if, as a matter of economic reality, you are in business for yourself. It is important to remember that you can be an employee under the FLSA even if the IRS considers you an independent contractor. To learn more about whether you are an employee or independent contractor under the FLSA, please visit the DOL Misclassification Initiative page.

FACT #5: Signing an independent contractor agreement does not make you an independent contractor under the FLSA.

As a condition to being allowed to work, employers sometimes require workers to sign an agreement stating that the worker is an independent contractor. Under the FLSA, FMLA, and MSPA, you are an employee if, as a matter of economic reality, your work indicates that you are economically dependent on an employer, and you are an independent contractor if you are in business for yourself. Any label that you or the employer give to the relationship, even in an agreement signed by you, is irrelevant. Instead, what matters is whether the reality of the situation indicates that you are economically dependent on the employer (i.e., you are an employee) or in business for yourself (i.e., you are an independent contractor).

Similarly, for federal tax purposes, signing an independent contractor agreement does not make you an independent contractor. It may be just one relevant fact in determining the relationship of the parties.

To better understand how different laws determine whether you are an employee, the benefits and protections these laws provide to employees and what they require of employers, please see Myth No. 1.

So, who are you going to call if you have any mythbusting questions on employment and/or employee benefits law? The answer should be the attorneys at Lebau & Neuworth at at (410) 296-3030 or lebauneuworth.com/contact-us.

Baltimore City Bans Criminal Background Checks for Initial Job Applicants

Baltimore City recently passed a new law preventing employers within city limits from making inquiries about a job applicant’s criminal record or background before offering that person a “conditional” job offer. The city law, titled "An Ordinance Concerning ‘Ban the Box’— Fair Criminal Record-Screening Practices," makes it illegal for employers within Baltimore City who are hiring for jobs within the city to have a check box or question on paper asking all job applicants about criminal backgrounds. In fact, the law bans all inquires -- spoken or written, direct or otherwise. Once an applicant receives a “conditional” job offer, an employer can make such inquires and conduct criminal background checks before hiring. The Fair Criminal Record-Screening Practices law defines a "conditional job offer" as a job offer subject to express conditions communicated to the job applicant beforehand, such as subject to a criminal background check, security clearance, reference check, or some other “condition.” The Baltimore City law only applies to employers hiring for jobs located within Baltimore City, according to the most recent publicly available draft of Baltimore City Council Bill 13-0301. Employers who serve the infirmed elderly, such as a nursing home, or minors, such as a day care, are exempt and can require applicants to disclose criminal histories from the beginning of the hiring process. The law goes into effect on August 13, 2014, reports Mondaq. If wronged, a job applicant can seek lost pay damages, reinstatement to the job sought and attorney’s fees. Anyone wrongly screened for criminal backgrounds, for jobs within Baltimore City, can file a complaint with the Baltimore Community Relations Commission. -- this is the mandatory first step. The Fair Criminal Record-Screening Practices law also makes it illegal to punish an employee who complains about an illegal background check. If you feel you have been wrongly required to provide this criminal background information (after August 13, 2014), contact Lebau & Neuworth, LLC. We at Lebau & Neuworth are experienced at bringing claims of employment wrongdoing before local, state, and federal agencies and at court. We may be able to help you with Fair Criminal Record-Screening Practices.