Copy
Simas & Associates, Ltd. Newsletter | August 1, 2014 | Volume II, Issue 9
Firm Announcement

Worker Misclassification Becomes Hot Issue this Summer

Sacramento, CA - As the calendar turns to the dog days of summer, the heat is staying on employer's who misclassify their workers to reduce labor costs. And with minimum wage floors rising, the temptation to try to "convert" one of your employees to an independent contractor becomes a seemingly clever and enticing way to seek relief. 

"Do not believe the mirage," explains Steven L. Simas, owner of Simas & Associates, Ltd.  "Rather, what you are attempting to do is violate the law through employee misclassification."

Employee misclassification is the practice of labeling workers as independent contractors, rather than employees.  Or, labeling non-exempt employees as exempt employees.  The practice allows employers to avoid paying unemployment and other taxes on workers, and from covering them on workers compensation and unemployment insurance.  It also allows them to avoid overtime, minimum wage, and various protective leave laws (i.e. disability, FMLA, kincare, etc.) for these individuals.  


"Misclassification results in employees being denied certain protections and money," explained Mr. Simas, "and the government works hard to identify erroneous or fraudulent denials, punishing accordingly."  The Internal Revenue Service (IRS), U.S. Department of Labor (DOL), as well as the California equivalent of the California Labor and Workforce Development Agency (LWDA), Division of Labor Standards and Enforcement (DLSE), all have worker misclassification as a top priority.  The DOL and LWDA even have a memorandum of understanding regarding joint operations. And both levels of government have new laws and regulations on the books, providing them with authority to fine and collect back wages for misclassified employees.  For example, since 2011, the Wage and Hour Division of the DOL has collected over $18.2 million in back wages for more than 19,000 misclassified workers.

"While the federal and state labor departments focus on violations of minimum-wage and overtime protections, the IRS cracks-down on employers who evade their mandatory contributions Social Security, Medicare, and unemployment taxes," explained Justin Hein, Managing Attorney of the Sacramento Office.  "For California, that also includes workers’ compensation funds," continued Mr. Hein.

The practice reduces labor costs for the employer, by directly reducing contributions that they need to make. It’s estimated that a business can save 30 percent of their labor costs by using independent contractors rather than employees. Indirectly, it reduces potential liability exposure.  "It also leads to gamesmanship in competitive bidding on public contracts," explained Mr. Simas.  "As well as hurting state and federal governments collect tax revenue," chimed in Mr. Hein.  A report by the Government Accountability Office estimated that in 2006 alone, the federal government lost out on $2.72 billion in Social Security, unemployment and income taxes because of employee misclassification.

So, it is no wonder that so many levels of government have made this a focus.  But what can an employer do to avoid being accused of misclassification?

"Work with someone who knows the applicable classification guidelines," answered Mr. Simas.  "It is an area that is 40 shades of gray, not black-and-white.  Also, understand that the agencies overseeing you are going to start with the assumption that everyone working for you should be classified as a non-exempt employee.  So, you need to compile evidence to prove that you (1) ran the particular worker through an appropriate independent contractor versus employee test and exempt versus non-exempt test and (2) documented your findings."  

Even then, you need to be vigilant. "Laws change.  Assignments, tasks, and responsibilities for the worker change," observed Mr. Hein.  "So, this is not just a one-time responsibility.  Rather, it is something you should be revisiting with an HR professional on at least every other year."
 
For more information on our Employment Law and Human Resources services, please visit our website at www.simasgovlaw.com.
Staff Announcement

Steve Simas, Justin Hein, and  Jon-Paul Valcarenghi Teaming Up for SCBA Administrative Law Section Event

The Administrative Law Section of the Sacramento County Bar Association has a quarterly luncheon at Blue Prynt Restaurant and Bar (815 11th Street, Sacramento, California).  Its luncheon for this summer is scheduled for Thursday, August 21 at Noon to 1:00 PM.  The topic is Between a Rock and a Hard Place – When Criminal Law overlaps Administrative Law. and the speakers are Simas & Associates, Ltd.'s own, Steven L. Simas and Justin D. Hein, as well as Jon-Paul Valcarenghi of the Law Offices of Kaizuki and Valcarenghi

This is a presentation that Mr. Simas and Mr. Hein have given a number of times over the years for various criminal bar associations throughout the state of California.  This time, however, Mr. Valcarenghi will be providing a more robust criminal law perspective.

Please RSVP by no later than August 15.  Discounts are available if you RSVP by no later than August 7, for both members and non-members.
Client/Vendor of the Month
 
 
Bentec Medical
1380 East Beamer Street
Woodland, CA 95776
Phoneʉۢ (530) 406-3333
Faxʉۢ (888) 828-8869
Email â€¢ sales@bentecmed.com
 
Bentec Medical specializes in manufacturing the highest quality products and provides professional services to assist in the area of turn-key design, engineering, prototyping for small to high volume production. It is medical device products are successfully used in Oncology, Cardiology, Urology, Pediatrics, ENT and Interventional Radiology. 

Since 1985, Bentec Medical has been one of the few completely integrated suppliers of custom manufactured medical devices. Our Northern CA and Costa Rica facilities offer state of the art in-house capabilities for design, prototype, and fabrication of quality silicone components and assemblies.  Incorporated in 1994, Bentec Medical specializes in the manufacturing of medical device products and is internationally recognized as one of the top OEM manufacturers.

Simas & Associates, Ltd. appreciates serving as Div 15 Tech, Inc.'s attorney since earlier this summer.  If you would like to be featured as our law firm’s “Client/Vendor of the Month,” please contact us at info@simasgovlaw.com
Featured Agency Announcement

California Supreme Court Unanimously Rules that Federal Statute Does Not Preempt State Labor Laws and Regulations

San Francisco, CA - A federal statute that largely deregulates the transportation industry does not bar California from enforcing its labor and unemployment compensation laws against an interstate motor carrier, the state Supreme Court unanimously ruled yesterday.

The justices affirmed a ruling by this district’s Court of Appeal allowing Attorney General Kamala Harris to proceed with an Unfair Competition Law suit against Long Beach-based PAC Anchor Transportation, Inc. ("PAC Anchor")

The attorney general sued PAC Anchor in 2008, saying the company had misclassified its drivers as independent contractors, rather than employees, and thus deprived them of their rights under the unemployment compensation, workers’ compensation, minimum wage, and other statutes, all to the disadvantage of the workers, as well as PAC Anchor’s competitors.

In 2009, Los Angeles Superior Court Judge Elizabeth White granted judgment on the pleadings, saying the action was preempted by the Federal Aviation Administration Authorization Act of 1994, which bars the states from regulating the “price, route, or service” of any motor carrier. The Court of Appeal, however, said that traditional labor regulation does not relate to goods, prices, or services within the meaning of the FAAAA and that Congress had no intention of preempting such regulation when it passed the act.

Justice Ming Chin, writing yesterday for the high court, agreed with the Court of Appeal. The FAAAA does not preempt a UCL action based on labor regulations, either on its face or as applied to PAC Anchor.  

“Congress passed the FAAAA in order to end a patchwork of state regulations,” Chin acknowledged. “However, nothing in the congressional record establishes that Congress intended to preempt states’ ability to tax motor carriers, to enforce labor and wage standards, or to exempt motor carriers from generally applicable insurance laws.”
Featured Blog Entry
 
Graceful Goodbyes: 10 Tips to Ensure Smooth Employee Transitions 

Terminating employment, no matter the reason, is usually not fun for anyone. However, if poorly executed, it has the opportunity to be an extraordinarily unpleasant situation that is damaging to all parties involved. With a bit of finesse and a good plan, a company can relieve an employee of their post gracefully.

 
Being in the middle of this decision may cloud our judgment and make us want to rip the task away like the proverbial Band-Aid just to get it over with, but as you know, a good business reputation is very important. We spoke to a group of HR professionals with deep ties in the field to garner some suggestions on how to best manage a termination with as much discretion and professionalism as possible.

To keep reading this entry, please click here: 
Graceful Goodbyes: 10 Tips to Ensure Smooth Employee Transitions.  For more blog entries from our attorneys and legal staff, please visit our law firm’s official blog – Wit of Mandate.
Word of the Month

In Pari Delicto

Latin term indicating that two or more parties are equally at fault.  Most commonly used when courts deny relief to both/all parties, because of wrongdoing by both/all.  This term is related to the doctrine of “unclean hands,” which is an equitable defense asserting that the opposing party should not be awarded any damages because of its own wrongdoing. 

For more terms related to our practice areas, please visit our law firm’s glossary at 
SimasGovLaw.com - Glossary.
Surprise!


One week before Steve's birthday, friends, family, and colleagues alike surprised him with a birthday party at Chevy's on the River.  Yes, the mariachi band was summoned.  It was a great time.  Colleen Moore, our San Luis Obispo paralegal, even made the trip up to take part in the festivities.

For photographs of the event, as well as other firm photographs, please visit our law firm's Facebook gallery.  
Upcoming Calendar

August 2 - National Day of SEVA.

August 3 - NFL Hall of Fame Induction.

August 7 -
PGA Championship Begins.

August 13 - Summer Mixer - Women Lawyers of Sacramento, SABA.

August 14 -
LPGA Championship begins.  Also, Little League World Series begins.

August 15 - Kick-Off -
SCBA Administrative Law Section; Legal Fusion - Wiley W. Manuel Bar Association.

August 16 - National Tell a Joke Day.

August 21 - Between a Rock and a Hard Place - When Criminal Law Overlaps Administrative Law -
SCBA Administrative Law Section Luncheon.  Also, Veteran's Court - SLO County Bar Association.

August 22 - McGeorge Welcome Dinner - SacLEGAL.

August 25 -
U.S. Open Begins.

August 29 - King Hall Welcome Dinner-
SacLEGAL.

August 30 - National Marshmallow Toasting Day.

September 1 - Happy Labor Day!

September 4 -
NFL Season Kick-Off.
Connect With Us
Copyright © 2014 Simas & Associates, Ltd., All rights reserved.
unsubscribe from this list    update subscription preferences 

Email Marketing Powered by Mailchimp