Archive for the ‘Employee/Employer’ Category

Can you prove your independent contractor is not an employee?

Written by Mike Pisauro on April 22nd, 2010 in Basics, Contracts, Employee/Employer | No Comments »

In 2005 there was estimated to be over 10 million people operating as independent contractors.  Small, medium and large companies all use independent contractors to remain competitive and to grow their businesses but understanding the differences between an “independent contractor” and a regular “employee” is neither easy nor trival to the business. It is an area that is riddled with traps for the unwary. According to a Department of Labor study, approximately 38% of small businesses misclassify employees as independent contractors.  The problem is not limited to small businesses. Even large, more “sophisticated” companies, such as Microsoft, Federal Express and Wal-Mart, for example, are not immune to this error.   Given the current market conditions, it may be even more important for a business to get the classification correct.  Tax revenues for all levels of government are down while budget deficits are up.  In an attempt to bridge this gap, the Federal government and state governments are going to be taking a closer look at how companies classify their human resources.

There are many reasons why this classification is often hard to get right.  Realize that just because you, the employer, think of the person you hired as an independent contractor,  the contract itself might state that he or she is  an independent contractor and even the person thinks of themselves as an independent contractor but that doesn’t necessarily mean that they really are  an independent contractor. Furthermore, a person may be an independent contractor under one set of laws but will be considered as an employee under another set of laws. The tests to determine whether a person is an employee or an independent contractor may be different depending on whether it is for taxes, compliance with discrimination laws or the operation of respondeat superior or some other law.  At least for the purposes of determining whether the right taxes have been withheld it is up to the company to prove that the person was properly classified as an independent contractors and should not have been considered an employee.

New Jersey uses the “ABC” test for unemployment responsibility and hour and wage requirements.  NJSA 43:21-19.  Under this test it is up to you, as the employer, to prove that the relationship is that of an independent contract and not that of an employee.  Specifically the state would look at the following:

A.  Is the person now and continues to be free from the control and direction over the performance of the job?  This condition not only has to be in a contract but must be what occurs in fact.  If the actual practice is different than what is set forth in the contract, the contract will have little weight.

B.  Are the services either outside the usual course of the business or performed outside your physical location?  Does the independent contractor work in your office space or do they work from their own location?

C.  Is the individual customarily engaged in an independent established profession or business?  Are you the independent contractor’s only job or does the indepenent contractor perform work for several other companies?

The business must be able to prove that independent contractor meets all three prongs of the ABC test and it is important that a business gets the decision right. Failure to meet all requirements could result in the payment of all back taxes, penalties and interest.  Such ramifications could transform a company from a success to barley surviving or worse.  It may even open the business owner to personal liability for the back taxes.

As a business owner, it is crucial that you fully understand the differences between a true independent contractor and an employee.  You must fully understand what need you are trying to fill by the proposed relationship and then structure it to adequately meet your proposed business need so in order to avoid possible issues in the future.

The legal ramifications to businesses for employees texting while driving.

Written by Mike Pisauro on April 16th, 2010 in Basics, Employee/Employer, Liability | No Comments »

A couple of days ago a post that Glenn Gabe and I wrote was posted over at Search Engine Journal. That post, How Texting and Driving Could Destroy Your Business [With Legal Analysis], looked into the impacts on a business from its employees texting while driving.  In case you did not know in NJ ( and several other states) using your cellphone without a hands free system is against the law.  That means no texting; no instant messaging; no browsing the web; sending and reading emails; or downloading an app for that.   Please go over to How Texting and Driving Could Destroy Your Business [With Legal Analysis] and read the article.

Appellate Division Restricts Company's Computer Usage Policy

Written by Mike Pisauro on July 6th, 2009 in Contracts, Courts, Employee/Employer, Privacy | 1 Comment »

The Appellate Division recently overturned the Trial Court’s decision in Stengart v. Loving Care Agency, Inc. I wrote about this case back in March in “Why it’s important to establish a computer usage/electronic communication policy.” Stengart, the Plaintiff had sent her attorney emails using her own personal web based email account, but used the employer’s computer. After the filing the lawsuit against her employer, the employer was able to forensically recover the emails to the attorney. The Ms. Stengart sought to force the employer to return the emails and disqualify the employer’s law firm based upon violating the attorney client privilege. The Trial Court held that emails sent by an employee to her attorney using her employer’s computer and network was the “property” of the employer and could be used by the employer in the litigation against it by the former employer.

The Appellate Division reversed this decision and held that an employer’s right to the content of an employee’s communications was not unfettered and would not be upheld when it had “no bearing on the employer’s legitimate interests.” The Court also discussed the competing interests between the expectation of privacy between client and attorney versus a company’s interest in monitoring its computer usage.

While not controlling the Court’s decision, the Appellate Division was not clear that the computer usage policy, relied on by the Trial Court, was in place during the time frame the Plaintiff emailed her attorney. Further the Court found the policy, assuming it was in place, was confusing. For example the company acknowledged that employees could use computers for occasional personal use, but never defined or explained the boundaries of personal usage. Then the company provided that all computer usage would be not be private and was the property of the company. Overall the Court found the policy, assuming it was in effect, to be unclear, confusing and conflicting.

In its decision the Court affirmed the right of an employer to unilaterally set the rules and regulations of employee conduct, but noted that this right was not unlimited and had to be reasonable and related to the employee’s duties. Having affirmed employer’s policies in general, the Court had trouble enforcing the alleged computer usage policies of Loving Care because the policies did not seem to have a strong enough relationship to the employer’s legitimate interests. The Court was also concerned that internet access has become so entrenched in our society that people routinely access bank records, file income tax returns, access medical records and other very confidential private activities. And Loving Care’s policy did not account for these realities. The employer had not provided a legitimate interest in ownership over these kinds of personal records.

The Court in reversing the trial court, wrote:

A policy imposed by an employer, purporting to transform all private communications into company property – merely because the company owned the computer used to make private communications or used to access such private information during work hours – furthers no legitimate business interest.

While the Court agreed that companies have an interest to make sure their employers are not engaged in illegal activity using company property, and that the company had a legitimate interest in ensuring that its employees where not distracted from the company business, companies usually did not have an interest in the content of the personal communications.

The difficult thing with this ruling is that the Court did not explain the contours of what an employer could and could not do in monitoring an employee’s computer usage. Instead the Court hinted that this area maybe worthy of legislative direction. Until the legislature acts, the questions for employers are many. Would a Court make a distinction between a company’s claimed ownership over confidential private information versus a company’s monitoring of an employees computer usage. If a company can monitor but not retain, a record of employees’ computer activity, how can a company defend a disciplinary or firing decision if it cannot retain the proof? Also would a court enforce a complete banned on an employee’s use of a company computer system for personal usage?

While the enforceability of any computer/eletronic usage policy will be open for interpretation by the Courts, it is still better to have a well crafted policy in place than not having one at all.

Employees, Employers and one legal aspect of Twitter

Written by Mike Pisauro on May 29th, 2009 in Employee/Employer | No Comments »

Last weekend I was invited by Glenn Gabe, SEO guru and author of The Internet Marketing Driver to add a lawyer’s perspective of Twitter.  The question was who “owns” a twitter account an employee or the employer.  Glenn proposed five different scenarios of employees and I provided my legal analysis as to who owns the account.  The full content of the article is on Search Engine Journal here.

Twitter, Facebook, Linkedin, blogs, etc. have or on the verge of remaking many aspects of employer/employee relations and pose so interesting challenges to businesses.  I will take a look in future posts on some additional legal ramifications of Twitter, blogs and other social media forums.

Why it’s important to establish a computer usage/electronic communication policy ?

Written by Mike Pisauro on March 25th, 2009 in Courts, Employee/Employer, Privacy | 2 Comments »

The ability to search the Internet and communicate through email has become an integral part our daily existence – both at the office and at home. However, the line separating these two worlds is not always clearly delineated. For example, you may find yourself using the office computer to pay personal bills online during your lunch hour or, logging in to the office computer after hours to catch up on work in order to make your deadlines. Some studies suggest that at least 1/3 of the time an employee spends on the computer is for non-work related activities. While many employers understand their employees’ desire or need to do non-work related activities at work. But it should be understood that not all of this activity is innocent. For example nearly 70% of the pornographic material downloaded from the internet is done during the work day. If this is going on at your business it may open you up to a lawsuit for hostile work environment. In addition to incoming material, you also need to keep an eye on what is going out to ensure that client lists and other proprietary information is not being distributed outside of your business – either intentionally or accidentally.

The question, from both an owner’s and an employee’s perspective, should be “are those computer activities private to the individual or are they company property?” The answer to that question boils down to whether the company has a policy in place regulating employees’ computer usage.

A recent law division case reaffirmed the importance having both an established policy in place and ensuring that your employees are aware of that policy. In the case of Stengart v. Loving Care Agency, Inc., an employee used her company-issued laptop to access her personal webmail account to communicate with her attorney regarding the filing of a lawsuit against her employer. After the employee left the company and filed suit the company and its lawyers made a copy of the laptop’s hard drive and recovered the emails to and from her attorney. The former employee attempted to bar the employer from using those emails as she alleged they were protected under the attorney client privilege.

In determining whether or not the emails were protected by the privilege the Court looked to whether the employee had an expectation of privacy in the emails. The Court rejected the employee’s claim by noting that while the law provides some level of privacy to an employee’s use of the a company’s computer that expectation of privacy can be negated by the company’s computer usage policy. In this case the employer had established a policy that provided that the computers were company assets and that all emails, voice mails, internet use and communication and files maintained on those computers were part of the company’s business and client records. The policy specifically provided that the electronic communications were not considered private or personal to the employee.

In light of the employer’s policy on computer use and communication, the Court ruled:

When an employee has knowledge of the employer’s electronic communication policy which adequately warns that any and all internet use and communication conducted on the employer’s computer is not private to the employee and warns that E-mail and voice mail messages, internet use and communication and computer files are considered part of the company’s business and client records, such communications are not . . . to be considered private or personal.

In short a Court is unlikely to enforce any rights to privacy that an employee may have in regards to their electronic communications if the employee is clearly on notice that they should not expect privacy. This means that the employer should have a written policy, signed by the employees, on computer usage. The policy should not only detail the privacy issues but also clearly identify what is considered “appropriate usage” of the computer.

By establishing clear policies in these regards you can also help protect your business against loss of vital information or the creation of an inappropriate work environment.

Finally, even with the right policies in place, keep in mind that a policy that is not enforced is almost as bad as no policy at all. Therefore, you should ensure that your employees adhere to that policy and that any exceptions are clearly dealt with.