Imagine two restaurants. Right next to each other. On the same block.
Both serve food and alcohol. Both employ cooks, wait staff and dishwashers.
There is equal foot traffic and signage, and neither restaurant is any worse in any outward way than the other.
But one of their owners seems to be making a lot more money.
The other is keeping the lights on, paying the bills, and making a living. But he isn't flashing big stacks. What gives?
One of them isn't paying his employees even minimum wage. He isn't paying payroll taxes, Social Security contributions, unemployment insurance or workers compensation. He's stealing wages from his employees. Current wages, future benefits, and by failing to pay into the employees' funds, the safety of Social Security.
If someone working for the wage thief gets fired or laid off, and they apply for unemployment insurance, they'll find they were never recorded as employed. They will discover their boss never paid unemployment insurance taxes.
"Sorry, no unemployment benefits for you."
Or pray for good fortune if an employee slices open a finger, or slips down some stairs. No workers compensation for that one. The boss never bothered paying those premiums, either. Better hope no infection sets in.
It happens. All. The. Time. Here is a real life example, a case my clients brought to recover unpaid wages: Hamilton v. Buck's 24-Hour Diner, LP
Showing posts with label employee. Show all posts
Showing posts with label employee. Show all posts
Saturday, October 1, 2016
Sunday, December 13, 2015
Unemployment benefits don't hit your bottom line.
A lawyer friend from a nearby firm popped his head in my office door a few days ago.
He wanted to know how his recently-former employee’s claim for unemployment was going to affect his firm’s finances.
This question comes up now and then, but not from other lawyers. In talking to him, it became obvious that, even though he was a lawyer, he had no clue about how the unemployment insurance system worked. Of course I have no idea how divorce proceedings work and he would know that process cold. To each their own.
His employee had been with the firm for years. She quit to take a new job. It didn’t work out, so she left that job and then filed for unemployment compensation. My friend got a notice from the Ohio Dept. Of Job and Family Services telling him that his former employee was going to be collecting benefits. He was worried that he would be paying her directly.
I assured him that the system doesn’t work that way. When she was working for him, and even now, he pays into the unemployment insurance program at least quarterly. His payments are based on the size of his payroll and the risk that his employees will need to partake in the system. If he laid off or fired more people than other industries or employers, then he was a higher risk, and paid a higher premium. Conversely, by keeping people at work for a long time, he would pay less.
He wondered aloud, again, if he’d get a bill for her claim.
No sir, I said. You have already paid your premiums. The DJFS was just letting you know that a claim was being applied to your account. Probably because she had not been with her most recent employer long enough to secure benefits from his policy. Her leaving his office earlier in the year wouldn’t change his risk rating; the DJFS doesn’t hold quits against employers, and her benefits will be paid to her from the insurance pool he had already paid into. Her benefits would not touch his bank account or bottom-line.
This satisfied my colleague. He bid me thanks and a good afternoon. I did my good deed for the day. Back to work.
He wanted to know how his recently-former employee’s claim for unemployment was going to affect his firm’s finances.
This question comes up now and then, but not from other lawyers. In talking to him, it became obvious that, even though he was a lawyer, he had no clue about how the unemployment insurance system worked. Of course I have no idea how divorce proceedings work and he would know that process cold. To each their own.
His employee had been with the firm for years. She quit to take a new job. It didn’t work out, so she left that job and then filed for unemployment compensation. My friend got a notice from the Ohio Dept. Of Job and Family Services telling him that his former employee was going to be collecting benefits. He was worried that he would be paying her directly.
I assured him that the system doesn’t work that way. When she was working for him, and even now, he pays into the unemployment insurance program at least quarterly. His payments are based on the size of his payroll and the risk that his employees will need to partake in the system. If he laid off or fired more people than other industries or employers, then he was a higher risk, and paid a higher premium. Conversely, by keeping people at work for a long time, he would pay less.
He wondered aloud, again, if he’d get a bill for her claim.
No sir, I said. You have already paid your premiums. The DJFS was just letting you know that a claim was being applied to your account. Probably because she had not been with her most recent employer long enough to secure benefits from his policy. Her leaving his office earlier in the year wouldn’t change his risk rating; the DJFS doesn’t hold quits against employers, and her benefits will be paid to her from the insurance pool he had already paid into. Her benefits would not touch his bank account or bottom-line.
This satisfied my colleague. He bid me thanks and a good afternoon. I did my good deed for the day. Back to work.
Friday, August 30, 2013
Contractor or employee? Still a burning question.
While I generally represent employees in wage and hour lawsuits, I sometimes represent employers. They want my expertise and my perspective as a plaintiff's attorney. I am often reluctant to do so, because it forecloses them as potential defendants in the future. Nonetheless, some small companies are my clients and I can help.
These little companies are start ups, or they were started by a single man or woman doing a job who then needed help. They put someone to work and then pay them like they themselves had been paid. That is to say with a flat rate, as a contractor. These new employers often believe that if they pay someone like a contractor, and tell their employees that they are actually contractors, then voila, they are contractors.
Oy vey.
In fact, the employer and employee can't make that decision between themselves. An employee can't waive his status as an employee, nor can he release his employer from liability to pay overtime or SSN benefits, or Medicare, or payroll taxes etc. If the employers are wrong, then they can find themselves facing hefty IRS claims with fines and penalties, and similar claims by state taxing
authorities asking about where all the withholdings are. In addition, some of these new employers are in businesses that lead to on-the-job injuries. If the employer was calling their roofing workers contractors, for instance, and not paying workers compensation insurance, and that worker falls and hurts himself, and then wants medical expenses and lost wages, then the employer will suddenly find that saving a few bucks on payroll taxes has ballooned into a major loss.
The question is control. States often have statutory definitions of employees and contractors. They usually employ a control test. Basically stated, if the person paying for the work provides the work, the tools and resources, controls the worker's hours of work and can discharge the worker for any reason, then the worker is controlled and is an employee. That classification triggers statutory responsibilities and extra costs. But the extra costs are a fraction of what they could be if the employees are misclassified.
Often the employer and the "contractor" are okay with their relationship. The employer has no costs other than paying a straight wage to the worker, and the worker pays no taxes or other withholdings up front. They may even be getting paid cash. Everybody is happy. It's when the relationship sours, usually when someone gets fired or hurt, that the wages of sin are collected. And it can be an unholy amount of wages.
It is much safer, and less costly and dangerous, not to mention ethically superior, to err on the side of employer/employee rather than contractor/sub contractor. If it's close, make them employees. If you have any questions about what's close, then email or phone me. www.langendorflaw.com.
These little companies are start ups, or they were started by a single man or woman doing a job who then needed help. They put someone to work and then pay them like they themselves had been paid. That is to say with a flat rate, as a contractor. These new employers often believe that if they pay someone like a contractor, and tell their employees that they are actually contractors, then voila, they are contractors.
Oy vey.
In fact, the employer and employee can't make that decision between themselves. An employee can't waive his status as an employee, nor can he release his employer from liability to pay overtime or SSN benefits, or Medicare, or payroll taxes etc. If the employers are wrong, then they can find themselves facing hefty IRS claims with fines and penalties, and similar claims by state taxing
The question is control. States often have statutory definitions of employees and contractors. They usually employ a control test. Basically stated, if the person paying for the work provides the work, the tools and resources, controls the worker's hours of work and can discharge the worker for any reason, then the worker is controlled and is an employee. That classification triggers statutory responsibilities and extra costs. But the extra costs are a fraction of what they could be if the employees are misclassified.
Often the employer and the "contractor" are okay with their relationship. The employer has no costs other than paying a straight wage to the worker, and the worker pays no taxes or other withholdings up front. They may even be getting paid cash. Everybody is happy. It's when the relationship sours, usually when someone gets fired or hurt, that the wages of sin are collected. And it can be an unholy amount of wages.
It is much safer, and less costly and dangerous, not to mention ethically superior, to err on the side of employer/employee rather than contractor/sub contractor. If it's close, make them employees. If you have any questions about what's close, then email or phone me. www.langendorflaw.com.
Thursday, August 8, 2013
The FLSA loves employees and their lawyers.
The federal Fair Labor Standards Act, also known as FLSA (pronounced Full-sa), is the law that requires employers to pay employees overtime wages for weekly hours worked in excess of forty. It has been around since 1938, with some modifications on the way.
Several employee friendly clauses were built into the law and its regulations. There have also been thousands of court decisions that have added weight to the statute. All that being said, the FLSA has become an extremely useful tool for employee representatives.
A couple of quirks that a lawyer or an employee should know: Employers can't shield themselves from personal liability. Very often large and small businesses are incorporated into corporations or limited liability companies. These legal creations usually insulate officers and owners from financial liability for actions of the corporation. However, the FLSA broadly defines "employer" as any entity or person that has control or influence over the employees' hours of work and pay. I have surprised many owners and managers and their lawyers by attaching personal liability for unpaid wages.
Next on the list of powerful benefits is the requirement that employers maintain records of hours
worked by, and payments made to, their employees. The law requires a rolling three year maintenance of this information. When there is a dispute about whether an employee worked overtime, an employer's failure to produce the records of hours worked and pay earned is a killer. The law specifically requires that the employer maintain them. Courts have consistently held, over decades, that in the absence of contemporaneously created records, the employee's estimate of hours worked controls. In the absence of specific evidence to contradict the employee's estimate (like time cards) the Court will allow the employee's estimate to stand as the amount of hours worked. An employer can't complain about the estimate when they fail to keep the lawfully required records.
Even employees who are classified as salary exempt should have time records maintained for them. At a minimum the smart employer will record that they worked the expected amount of hours in a work week. If there is any doubt about whether the employee is exempt from overtime, even a shred of doubt, then the conservative employer will keep detailed records.
Rounding out this incomplete list of unique FLSA features is the liquidated damage and attorney's fees provision. Under §216 of the FLSA, an employer who is shown to have violated the law is required to pay the back wages, an equal amount in additional damages, and the employee's attorney's fees. Congressmen in 1938 expected that the unpaid wages may be less than the attorney's fees, and Courts have consistently awarded fees based on comparable attorney rates in the geographic area where the case is tried. Needless to say, the awards of fees can be significant.
An employer and his lawyer ought to take claims of unpaid overtime very seriously from the first moment they are raised. The risks of allowing litigation to proceed can well exceed an early payment of the wages that should have been paid on demand and investigation.
I had a case a few years ago where I was trying to get the employer's attorney to discuss a settlement for my six employee clients. The attorney was unaware of the FLSA risks and finally said "you're being tiresome, go ahead and sue us." I did and got an award the defendant is still paying, with attorney's fees in excess of the back wages.
The FLSA is the best friend to an employee and the employee's lawyer. It is still not very well known by employers and their lawyers, but 7,000 federal cases a year are bringing them around. The bottom line is that is best to take allegations of FLSA violations very seriously and very quickly, before attorney's fees exceed what any employer would have anticipated.
More information available on my website: www.LangendorfLaw.com
Several employee friendly clauses were built into the law and its regulations. There have also been thousands of court decisions that have added weight to the statute. All that being said, the FLSA has become an extremely useful tool for employee representatives.
Next on the list of powerful benefits is the requirement that employers maintain records of hours
Even employees who are classified as salary exempt should have time records maintained for them. At a minimum the smart employer will record that they worked the expected amount of hours in a work week. If there is any doubt about whether the employee is exempt from overtime, even a shred of doubt, then the conservative employer will keep detailed records.
Rounding out this incomplete list of unique FLSA features is the liquidated damage and attorney's fees provision. Under §216 of the FLSA, an employer who is shown to have violated the law is required to pay the back wages, an equal amount in additional damages, and the employee's attorney's fees. Congressmen in 1938 expected that the unpaid wages may be less than the attorney's fees, and Courts have consistently awarded fees based on comparable attorney rates in the geographic area where the case is tried. Needless to say, the awards of fees can be significant.
An employer and his lawyer ought to take claims of unpaid overtime very seriously from the first moment they are raised. The risks of allowing litigation to proceed can well exceed an early payment of the wages that should have been paid on demand and investigation.
I had a case a few years ago where I was trying to get the employer's attorney to discuss a settlement for my six employee clients. The attorney was unaware of the FLSA risks and finally said "you're being tiresome, go ahead and sue us." I did and got an award the defendant is still paying, with attorney's fees in excess of the back wages.
The FLSA is the best friend to an employee and the employee's lawyer. It is still not very well known by employers and their lawyers, but 7,000 federal cases a year are bringing them around. The bottom line is that is best to take allegations of FLSA violations very seriously and very quickly, before attorney's fees exceed what any employer would have anticipated.
More information available on my website: www.LangendorfLaw.com
Wednesday, July 31, 2013
Glorious blatant misclassification
Employees misclassified as independent contractors present great opportunities for major recoveries of unpaid wages and overtime.
Undercapitalized or greedy contractors bid jobs low on the basis of low cost labor. They will bid low because they know they can pay their laborers straight time for their hours, no matter how many, and most of those laborers will be glad to be getting paid.
Some contractors tell their employees that they will be classified as contractors and will not get unemployment insurance or workers comp. or have taxes taken from their pay, or get overtime. The employees think this is fine. All they hear is "no taxes."
Prevailing wage states require contractors working on state funded jobs to pay their employees an inflated wage similar to what the local union members would get for the same work. It's an incentive to hire union members. The catch is that independent contractors don't have to receive prevailing wage. They get paid for the job. So, unscrupulous subcontractors purposely mis-classify their employees as subcontractors and then deny them the prevailing wages they are due on the grounds that they are not employees and are merely getting paid for the job.
Even when they think they are right, they are wrong. Some of these contractors will even issue paychecks from their in-house payroll system, to their "independent contractor" employees, showing pay for say 56 hours at regular pay for a week. This is printed above the "overtime" line which shows 0 hours and $0. That's 16 hours of overtime paid at the regular rate. This violation sets up damages equal to 16 hours at the regular rate. And that is just for one week. Think three years of this nonsense, for multiple employees, and add in attorney's fees. That's right, it gets big fast.
These willful violations of the Federal Fair Labor Standards act lead to three years of trailing liability and liquidated damages, not to mention attorney's fees. Thanks to Zavala v. Wal Mart Stores, an unpaid overtime case out the federal District Court of New Jersey, liability for unpaid wages can extend to the general contractor or the owner of the job.
This kind of case makes me tingle all over.
Undercapitalized or greedy contractors bid jobs low on the basis of low cost labor. They will bid low because they know they can pay their laborers straight time for their hours, no matter how many, and most of those laborers will be glad to be getting paid.
Some contractors tell their employees that they will be classified as contractors and will not get unemployment insurance or workers comp. or have taxes taken from their pay, or get overtime. The employees think this is fine. All they hear is "no taxes."
Prevailing wage states require contractors working on state funded jobs to pay their employees an inflated wage similar to what the local union members would get for the same work. It's an incentive to hire union members. The catch is that independent contractors don't have to receive prevailing wage. They get paid for the job. So, unscrupulous subcontractors purposely mis-classify their employees as subcontractors and then deny them the prevailing wages they are due on the grounds that they are not employees and are merely getting paid for the job.
Even when they think they are right, they are wrong. Some of these contractors will even issue paychecks from their in-house payroll system, to their "independent contractor" employees, showing pay for say 56 hours at regular pay for a week. This is printed above the "overtime" line which shows 0 hours and $0. That's 16 hours of overtime paid at the regular rate. This violation sets up damages equal to 16 hours at the regular rate. And that is just for one week. Think three years of this nonsense, for multiple employees, and add in attorney's fees. That's right, it gets big fast.
These willful violations of the Federal Fair Labor Standards act lead to three years of trailing liability and liquidated damages, not to mention attorney's fees. Thanks to Zavala v. Wal Mart Stores, an unpaid overtime case out the federal District Court of New Jersey, liability for unpaid wages can extend to the general contractor or the owner of the job.
This kind of case makes me tingle all over.
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