Hiring Interns

The current economic situation in this country has led to an increase in the use of unpaid internships by companies, especially unpaid internships for young people who have been hit particularly hard by unemployment.  However, employers need to be extra careful in this regard since the U.S. Department of Labor (“DOL”) recently announced that it is cracking down on what it claims is the excessive and improper use of unpaid interns by companies for free labor.  Specifically, the DOL recently proclaimed that “[i]f you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.”

For an unpaid internship to be lawful under the Fair Labor Standards Act (“FLSA”), the intern must be classified as a “trainee” rather than an employee.  The DOL has developed the below six factors to evaluate whether a worker is a trainee or an employee for purposes of the FLSA:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
2. The training is for the benefit of the trainees;
3. The trainees do not displace regular employees, but work under their close observation;
4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

If all the above factors are satisfied, the worker will be deemed a “trainee,” not an employee, and the worker can lawfully be unpaid under the FLSA.  Put another way, unless all the above factors are met, the worker will be classified as an employee entitled to, among other things, minimum wage and overtime.  A misclassification of a worker as a “trainee” could also obligate the company to pay workers’ compensation and unemployment insurance benefits, as well as subject the company to federal and state discrimination laws, tax liability, fines and significant legal bills.

In light of the foregoing, employers must carefully tailor any existing or future unpaid internship programs to make sure that they comply with the above factors in order to avoid liability.  Should you have any questions about this issue, please contact E. Jason Tremblay at Arnstein & Lehr LLP.

Employment Contact being signed by the employee

The legal landscape regarding the use of independent contractors has dramatically changed over the past several years.  For decades, employers’ use of independent contractors was not only rarely challenged, but it was also a way they could save significantly on labor and other costs associated with hiring employees.  In this tough economy, employers may be tempted to use the services of independent contractors instead of employees in order to reduce their bottom-line costs.  However, now more than ever, employers need to be extra careful in this area since both state and federal agencies are cracking down on what they believe is the widespread and improper use of independent contractors.

By way of example, the U.S. Department of Labor (DOL) has recently made the misclassification of workers one of its top priorities.  President Obama’s proposed 2011 budget for the DOL includes an additional $25 Million for what he characterizes as the “Misclassification Initiative.”  In this regard, it is expected that the DOL will hire an additional 100 enforcement personnel to investigate claims of misclassifying workers as independent contractors.

The Internal Revenue Service is also taking the misclassification of employees seriously.  The U.S. Government Accountability Office (GAO) recently concluded that employee misclassification is a “significant problem” because it reduces tax revenues flowing to the federal government.  In fact, the GAO estimates that over $7 Billion in payroll taxes will be lost over the next ten years.  Needless to say, the IRS does not take this loss in revenue lightly and has notified the public that, commencing in 2010, it will increase its employer tax audits with the specific purpose of determining whether employers are misclassifying workers as independent contractors.

States around the country have also seen this as a significant issue.  Illinois, New York, Maryland, Colorado and Delaware, to name a few, have either increased penalties for improperly classifying workers as independent contractors or have passed laws specifically designed to penalize employers for misclassifying workers.  There has even been legislation pending in Congress, which was sponsored a former Illinois Senator named Barack Obama, called the Independent Contractors Proper Classification Act, that would restrict an employer’s ability to classify a worker as an independent contractor.  Specifically, it would grant workers the right to petition the Secretary of Treasury for a determination of their status as employees or independent contractors and obligate employers to provide notice to workers of their right to seek a determination.  Simply put, the issue of misclassifying workers is not going away anytime soon.

Unfortunately for employers, there is no single test to ascertain whether a worker should be classified as an employee or an independent contractor.  And, to make matters worse, different state and federal agencies utilize different tests and standards in this regard.  However, common scenarios that raise red flags to governmental agencies are:

• Individuals classified as independent contractors who perform the same kind of work or duties that employees also perform for the business;
• Individuals classified as independent contractors who perform work that  is essential to the services or work of the business;
• Arrangement where the independent contractor either dedicates all his or her time to the business or is restricted from performing services for other businesses;
• Individuals designated as independent contractors who perform work for which other businesses in the same industry use employees.

In light of the foregoing, all employers must properly evaluate whether any current workers are appropriately classified as independent contractors and, if necessary, change the classification to comply with current federal and state law.  For a more detailed discussion of the benefits, risks and other issues related to the use of independent contractors, please contact E. Jason Tremblay and/or request a copy of the Employment Law Toolkit that he recently authored.

Victims’ Economic Security and Safety Act (VESSA)

On May 27, 2009, the Illinois legislature approved a significant overhaul to the Victims’ Economic Security and Safety Act, also know as VESSA, which requires covered employers to provide leave and other accommodations to employees and their family members who are victims of domestic abuse or sexual violence.  Once signed into law by the Governor, which is expected to be within the next several weeks, VESSA will be significantly broadened, not only increasing the protections offered to eligible employees, but also expanding coverage of the Act to include small private employers.  This article will outline some of the significant amendments of VESSA and will also provide employers with guidance on what to do in response to the new law.

Small Businesses are Now Covered Employers

Perhaps the most significant modification to VESSA is the fact that it expands coverage of the Act to include employers with 15 or more employees.  In the past, VESSA applied to private employers with 50 or more employees, as well as public employers.  As a result, many small employers in Illinois will now be required to comply with VESSA for the first time.

Reasons for VESSA Leave are Expanded

The reasons an eligible employee can take leave under VESSA has also been expanded.  VESSA grants unpaid leave rights when an employee or the employee’s “family or household member” is the victim of domestic or sexual violence.  VESSA leave may be taken for such things as: (1) relocating from the household, (2) seeking medical or psychological care, (3) participating in safety planning to increase the safety of the victim, (4) obtaining victim services, and (5) seeking legal guidance or remedies to ensure the victim’s safety (such as time off for relevant civil and criminal court matters).

However, who constitutes a “family or household member” has been greatly expanded in the new law, thereby broadening the circumstances when an employee can take leave pursuant to VESSA.  Specifically, the new amendments to VESSA expand the definition of a “family or household member” to include “any person who is related by blood or by present or prior marriage, and any other person who shares a relationship through a son or daughter.”  The current definition is limited to the employee’s spouse, parent, son, daughter and any person who jointly resides in the same household.

Length of VESSA Leave Depends on Size of Employer

The unpaid leave entitlement for an eligible employee working at a company employing 50 or more employees remains the same at 12 weeks in any 12-month period.  However, employees working for an employer with between 15 and 49 employees are now entitled to 8 weeks of unpaid leave during any 12-month period.

And, unlike before, employers may not require employees to substitute available paid or unpaid leave for VESSA leave.  Therefore, employees can take their full allotment of unpaid leave under VESSA and then also take any earned paid time off, such as vacation or paid time off.  This is a significant deviation from the old VESSA, as well as the FMLA, where employers can require employees to use accrued paid time during FMLA leave.

Expanded Protections Under VESSA

Similar to the FMLA, VESSA requires than an employee be restored to the same or equivalent position upon their return from VESSA leave.  Employee benefits, pay and terms of employment must also be restored.  In this regard, health care coverage must be provided to the eligible employee while on leave.  The amendments also expressly prohibit retaliation by the employer, as well as discrimination against any employees who either exercise their rights or oppose any acts protected by VESSA.

Additionally, like the Americans with Disabilities Act, VESSA mandates that employers must reasonably accommodate the protected employee unless the employer can prove an undue hardship, taking into account exigent circumstances and any danger facing the employee.  Reasonable accommodations under VESSA now include such things as job restructuring, transfer, reassignment, modified work schedules, implementing safety procedures, as well as providing assistance in documenting domestic or sexual violence that occurs at the workplace or in a work-related setting.

Don’t Forget About the Posting Requirements

As before, every covered employer is required to conspicuously post and maintain documentation summarizing VESSA from the Illinois Department of Labor.  An employer’s failure to provide notice to its employees can now lead to monetary fines.  Once VESSA is signed into law, it is expected that the VESSA poster will be updated to incorporate the recent changes to VESSA and available through the Illinois Department of Labor website.

What Employers Need To Do Now?

Since VESSA has been greatly expanded, and since it will be effective immediately when signed into law by the Governor, covered employers (now, companies with 15 or more employees) are recommended to take the following steps immediately:

1. Review the new law, as amended, and become familiar with the new law.
2. Train your managers and supervisors on the new law so that they can be familiar with what to do, and how to respond, when circumstances occur giving rise to VESSA leave.
3. Review and modify your existing VESSA policies to incorporate the new law.
4. If you do not have a written VESSA policy (for example, because you were previously not a covered employer), you should have a VESSA policy drafted and distributed to your workforce, as well as incorporated into your employee handbook.
5. Once the updated VESSA poster has been finalized by the Illinois Department of Labor, you need to post the notice in a conspicuous location at your worksite, along with the other federal and state-mandated labor law posters.

We will provide additional notices and information regarding VESSA if there are any further developments.  In the meantime, if you have any questions regarding how to comply with VESSA, or any other employment-related questions, please contact your Arnstein & Lehr LLP employment law attorney.

Pending Legislation - FORWARN Act

Introduced just recently into the House and Senate, the Federal Oversight, Reform, and Enforcement of the WARN Act (“FOREWARN Act”) would dramatically amend the Worker Adjustment and Retraining Notification Act (“WARN Act”).  The FOREWARN Act was introduced in response to the significant rise in factory closings and mass layoffs currently being implemented in the United States.

Initially, the FOREWARN Act would require employers to give at least 90 days advance written notification, as opposed to current requirement of 60 days, of a covered plant closing or mass layoff.  In addition to the currently required recipients of WARN Act notices, new notices would also need to be sent to the Secretary of Labor and the governor of the state where the plant closing or mass layoff will occur.  Additionally, under the FOREWARN Act, employers with at least 75 full or part-time employees (down from 100 full-time employees) would be covered under the WARN Act.  Further, a covered “plant closing” would be one affecting at least 25 full or part-time employees (down from 50 full-time employees) and a covered “mass layoff” would be one that affects at least 25 employees (down from 33% of full-time employees amounting to at least 50 workers, or 500 workers).  A “mass layoff” would also no longer have to involve a single site of employment.

Among other significant changes, the FOREWARN Act would also modify the required contents of a WARN Act notice, obligate covered employers to post a WARN Act poster and increase the potential damages to an aggrieved employee to double back pay for each day the employer was required to provide notice, along with interest.  Finally, the FOREWARN Act would also prohibit an employee from waiving, deferring or losing any rights under the WARN Act without the approval of the Secretary of Labor or the attorney general of the relevant state or unless a private attorney on behalf of the affected employee negotiates the waiver/agreement.

The FOREWARN Act has been referred to the Senate Health, Education, Labor and Pension Committee and the House Committee on Education and Labor.

Arnstein & Lehr LLP Partner, E. Jason Tremblay, recently published the 2009 Edition of The Employment Law Toolkit.

Click here to request a complimentary copy of The 2009 Edition of The Employment Law Toolkit.

Employment Law Toolkit 2009 Table of Contents and Intro

HR Advisor May-June 2009: Avoiding Employment-Related Litigation in 2009 and Beyond

The DOL model notices contain information that COBRA qualified beneficiaries must receive about their eligibility to receive a subsidy toward payment of their COBRA premiums in different situations.  There are three model notice for use by employers, all of which can be found at http://www.dol.gov/ebsa/COBRAmodelnotice.html:

(1) a General Notice (full version) that can be used for all qualified beneficiaries in connection with any type of qualifying event that occurs at any time from September 1, 2008 through December 31, 2009.  This version contains the “regular” COBRA notice as well as the additional notifications required by ARRA;

(2)  a General Notice (abbreviated version) that can be provided to former employees who have experienced a qualifying event on or after September 1, 2008, who elected COBRA coverage, and who still maintain that COBRA coverage; this model can also be used in conjunction with a “regular” COBRA notice to update it for ARRA; and

(3)  a Notice in Connection with Extended Election Periods, which must be provided to any “assistance eligible individual” whose qualifying event occurred at any time from September 1, 2008, through February 16, 2009, and who either did not elect COBRA continuation coverage, or elected COBRA continuation but subsequently discontinued it. This is the Notice that must be provided by April 18, 2009.

Employers and COBRA administrators must tailor these COBRA model notices to comply with the administrative procedures and other requirements of their particular group health plans.

US Immigration Logo

For the second time in a little over a year, the U.S. Citizenship and Immigration Services (“USCIS”) issued a revised Form I-9 to be used by employers to verify an employee’s authorization to work in the United States.  Effective February 2, 2009, employers will have to complete the updated Form I-9 for all new hires and for re-verification of certain employees with temporary work authorization.  Among other minor technical changes, the new Form I-9 again changes the types of documents that employers may accept to prove an employee’s authorization to work:

• Temporary Resident Card (Form I-688) and Employment Authorization Cards (Forms I-688A and 1-688B) are no longer valid to establish both identity and employment authorization.
• Acceptable List A documents now include foreign passports containing certain machine-readable immigrant visas, as well as passports from the Federated States of Micronesia and the Republic of the Marshall Islands (but only if presented with an I-94 or an I-94A) and the new U.S. Passport Card.
• All documents presented during the verification process must now be unexpired.  Previously, certain expired documents, such as U.S. passports, were acceptable.

The new Form I-9, as well as the list of what documents are acceptable, will be available commencing on February 2, 2009 on the USCIS website at: www.uscis.gov/i-9.  Employers are strongly encouraged to begin using the revised Form I-9 as of February 2nd since non-compliant employers may be fined or penalized for not using the new Form I-9.

The new Form I-9 does not need to be completed for existing employees.  It must only be used for new hires and for re-verification of employees upon the expiration of their current authorization.  If you have any questions about this article or the revised Form I-9 requirements, please contact E. Jason Tremblay at Arnstein & Lehr LLP or your usual Arnstein & Lehr LLP attorney.