Having employees is one of the most challenging aspects of running a business. There are many complicated laws governing when workers are considered employees, how they should be treated, how much they must be paid, and much more. Having an attorney may be very helpful in assuring your business is compliant with the myriad of laws and administrative rules. Attorney Patrick McGuiness has extensive experience in many facets of employment law and is a frequent author and lecturer on employment law topics.
Employees or Independent Contractors
How a business classifies workers is not the final determination about the workers’ status. If the Department of Labor audits a business, they apply the provisions of the Fair Labor Standards Act to the employer-worker relationship which exists. Then they make a determination based on the total activity of the situation and how much the employer controls the workers activities.
Among the factors which the Court has considered significant are:
1) The extent to which the services rendered are an integral part of the principal’s business. If they are, then the relationship looks more like that of an employer-employee.
2) The permanency of the relationship. The more permanent and exclusive a relationship is, the more it looks like that of an employer-employee.
3) The amount of the alleged contractor’s investment in facilities and equipment. If the business provides the worker with the facilities and tools with which to do their work, it looks like an employer-employee relationship.
4) The nature and degree of control by the principal. When a business controls the time, place and methods of the workers work, it looks like an employer-employee relationship.
5) The alleged contractor’s opportunities for profit and loss. When a worker is paid on an hourly basis, and cannot gain a profit by working more efficiently it looks like an employer-employee relationship.
6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor. If a worker is allowed to hold themselves out as being “for hire” by others then they appear to be an independent contractor.
7) The degree of independent business organization and operation. If a worker has a business entity such as a Limited Liability Company (LLC) or Corporation, and operate it independently of the company being audited, then they appear to be a legitimate independent contractor.
None of these factors alone proves a worker should be classified as an employee or independent contractor. The relationship in total is looked at and a determination is made. It is often helpful to have the assistance of an attorney when looking at the relationship a company has with workers.
Unless there is a contract which states otherwise, employment in Minnesota is considered to be “At-Will”. This means that an employer can terminate or fire an employee at any time and for any reason as long as that reason is not illegal. Illegal reasons for termination in Minnesota include discrimination based on race, creed, color, sex, national origin, ancestry, religion, age, disability, sexual orientation or marital status.
There is also a common misconception that a “2 week notice” must be given before an employee can quit, or be laid off. Under Minnesota law, there is no need for any notice to be given in order to leave a position or be terminated.
Compensation is important to every employee. How much a business must pay their employees depends on a number of factors, including figuring out what law applies to the business. It is also important to consider if any exemptions to overtime and minimum wage laws apply to any categories of workers at the business.
Minnesota law and the Fair Labor Standards Act differ on overtime requirements. Some small businesses may only fall under Minnesota law, which requires overtime be paid at time and one half rate after 48 hours in each 7 day work week. Most Minnesota business fall under the Fair Labor Standards Act, this applies to businesses that gross more than $500,000 per year, OR “avail themselves of interstate commerce”. The Fair Labor Standards Act requires employees be paid time and one half rate overtime for all hours worked over 40 hours in a 7 day work week.
A “7 day work week” is a period of 7 consecutive days which is designated by a business as their work week. There is no requirement that it be Sunday – Saturday, it can be whatever works best for the business. The work week can be changed from time to time, so long as the change is not designed to avoid paying overtime to employees.
Once again, Minnesota law and Federal Law differ on minimum wage requirements. Minnesota law requires employees of businesses grossing $625,000 or less be paid a minimum of $5.25 per hour. Further, an employer may pay $4.90 an hour as a “Training Wage” to new employees who are younger than age 20 during their first 90 consecutive days of employment. Permanent or current employees may not be displaced by new employees covered by the training wage.
However, most business fall under the Fair Labor Standards Act, which requires workers be paid a minimum of $7.25 per hour. Generally speaking, if both Federal and State law apply to a given situation, it is safest to follow the law which is more protective of employees.
Employers are free to offer incentive pay such as “double time” pay for nights, however, neither State nor Federal law requires any additional pay for holidays, nights, or weekends. There is also no limit on the total number of hours an employee can work in a work week as long as the employee is compensated properly for overtime.
There is a common misconception that employees can be paid a salary in order to avoid the need to pay them overtime. This is not always the case. Under the law, the presumption is that employees must be paid overtime unless their position qualifies for an exemption to overtime requirements.
To qualify for the executive employee exemption, all of the following tests must be met:
To qualify for the administrative employee exemption, all of the following tests must be met:
Learned Professional Exemption
To qualify for the learned professional employee exemption, all of the following tests must be met:
Creative Professional Exemption
To qualify for the creative professional employee exemption, all of the following tests must be met:
Computer Employee Exemption
To qualify for the computer employee exemption, the following tests must be met:
1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
4) A combination of the aforementioned duties, the performance of which requires the same level of skills.
Outside Sales Exemption
To qualify for the outside sales employee exemption, all of the following tests must be met:
Highly Compensated Employees
Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.
Blue Collar Workers
The salary exemptions as outlined above, apply only to “white collar” employees who meet the salary and duties tests. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. Non-management employees in production, maintenance, landscaping, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime pay .
Fluctuating Work Week
Another method of compensating employees is called the Fluctuating Work Week method. The Fluctuating Work Week involves paying a worker the same base rate each week they work (similar to a salary), but there is still an overtime payment that must be made when the worker works more than 40 hours in a work week. In order to properly compensate an employee using the Fluctuating Work Week method, four criteria must be met:
These criteria may seem straightforward, but it is best to speak with an attorney when assessing whether paying employees using the Fluctuating Work Week is compliant for a business’s employees.
Employee handbooks are a great way of explaining company policies and procedures. They can provide employees with an overview of the company, the working practices & environment. A good handbook can also provide a business with a layer of legal protection by setting clear standards and expectations which employees must comply with. In short, a good handbook is essential to running a good business.
On the other hand, a poorly done employee handbook can cause a lot of harm. Business managers and owners tend to want very rigid policies in place that address almost every fathomable situation. Having policies in place that are too specific can make it hard for employers to be flexible in dealing with real situations. Policies that are too broad can have the opposite effect and make it hard for businesses to hold employees accountable. These seem like two sides to the same coin, and in a way they are.
When drafting your handbook, it is important to include information on the following topics:
A Contract is an agreement between two or more parties who agree to exchange something. Contracts are the way we document what is agreed upon between the parties. Every contract is different and may require specific assistance during drafting. The goal when drafting a good contract is to use plain language and meaningfully convey the shared understanding the parties have about their agreement.
There are many types of contracts. It could be a contract for the purchase of goods, for the purchase of services, or for purchasing real estate. Whatever type of contract is involved, it is important to make sure everything that has been agreed upon is addressed in the contract documents. This may result in a document that is lengthy and potentially confusing, underscoring the need to use plain language.
Failing to draft a contract well and accurately express the agreement of the parties can result in a dispute. Contract disputes usually arise because one party feels that the other party failed to perform as outlined by their agreement.