Temporary Workers: Employment and Employee Benefits Issues

Transcription

1 You have questions. We have answers. Temporary Workers: Employment and Employee Benefits Issues Lou Rabaut April Goff Norbert Kugele George Whitfield 2013 Warner Norcross & Judd LLP. All rights reserved. WNJ.com You have questions. We have answers. EMPLOYMENT RELATED ISSUES 2013 Warner Norcross & Judd LLP. All rights reserved. WNJ.com 2013 Warner Norcross & Judd LLP. All rights reserved. 1

2 Distinguishing PEO and Temporary Staffing Agencies PEOs Regulated and defined under MCLA PEOs are not temporary staffing agencies PEOs establish joint employment NOT what we are discussing today Temporary Staffing Agency Defined under MCLA (1)(l) 2013 Warner Norcross & Judd LLP. All rights reserved. Page 3 Why Do Companies Utilize Temporary Workers? Deal with fluctuations in demand Seasonal Market upswing/downswings Cheaper Wages; No Benefits Administrative Ease Attraction of Key Skills Try Before You Buy 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 2

3 Immigration Issues I-9; Who Completes? Potential Liability Knew or should have known that worker was unauthorized. Willful blindness is not an excuse. Staffing Agency Contract Only authorized workers provision. Indemnification provision for loss or damages 2013 Warner Norcross & Judd LLP. All rights reserved. Page 5 Workers Compensation Joint Employees Both Temporary Staffing Agency and Recipient Employer receive exclusive remedy protection under Michigan s Workers Disability Compensation Act Both entities shielded from large damage awards, including pain and suffering Employee s recovery limited to economic damages Exception Intentional Torts Injured worker carries burden of proof Must be deliberate act Intent or Substantial Certainty 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 3

4 Unemployment Compensation Temporary Employees placed through a Temporary Staffing Agency are deemed employees of the temporary employment agency. Agency responsible for paying unemployment compensation taxes. Varies by state, but many take this approach 2013 Warner Norcross & Judd LLP. All rights reserved. Page 7 Civil Rights Issues EEOC Position: Both Temporary Staffing Agency and Recipient Employer may be jointly liable for civil rights claims 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 4

5 Occupational Safety and Hazard Administration OSHA recently launched initiative to protect temporary workers from workplace hazards Inspectors are to review records and interview temporary workers regarding training Training must be understandable Language requirements 2013 Warner Norcross & Judd LLP. All rights reserved. Page 9 FMLA If a Temporary Employee on assignment takes FMLA leave, does the Recipient Employer have to take the worker back once he or she returns from leave? Yes, if the temporary employee meets the FMLA eligibility criteria, and if the Temporary Staffing Agency and the Recipient Employer both employ at least 50 employees. Joint obligation; both entities have FMLA responsibilities Both must count temporary employees in determining whether subject to FMLA 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 5

6 FMLA (Continued) Temporary Staffing Agency is Primary Employer Responsible for providing all notices; Provide FMLA; Maintain employee s health benefits; Job restoration Recipient Employer is Secondary Employer Must accept temporary employee returning from FMLA leave in place of the replacement if continuing to use a temporary staffing employee May not interfere with temporary employee s attempt to exercise FMLA rights or discharge or discriminate against employees for opposing practices prohibited by the FMLA even if the FMLA does not otherwise apply to it 2013 Warner Norcross & Judd LLP. All rights reserved. Page 11 ADA -Disability Related Inquiries and Medical Examinations Offer = an assignment with a specific Recipient Employer After Offer, Temporary Staffing Agency or Recipient Employer can ask disability-related questions All applicants for same job Caution when withdrawing offer Prove: (1) cannot perform essential functions of job with reasonable accommodation; or (2) pose a direct threat During Assignment: ask questions or require exam only where reasonable belief that worker unable to do job or direct threat 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 6

7 ADA Reasonable Accommodation and Undue Hardship Temporary Staffing Agency has to provide accommodations for application process Joint Employers Both entities responsible for accommodations on the job Who is responsible? Who will pay? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 13 ADA Qualification Standards, Employment Tests and Other Selection Criteria Temporary Staffing Agency job standards must be jobrelated and consistent with business necessity If not, Staffing Agency is liable for violation unless Recipient Employer requested Agency to use its standard or applied standard itself Is reasonable accommodation available? Test results may not be used to screen out individuals from employment on basis of disability, unless job-related and consistent with business necessity Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 7

8 Important to Vet the Temporary Staffing Agency Cheapest is not always best. Wages and Benefits? Basic employment policies? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 15 Well Drafted Agreement Critical Hiring, discrimination and harassment compliance provisions? Conversion or Placement Fee? Commitment to a Certain Number of Temporary Employees? Is arrangement exclusive? Terms and conditions of termination? Is Temporary Staffing Agency taking on training? Who is responsible for failures? Agency fee or mark-up? Agreed-upon performance standards? 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 8

9 You have questions. We have answers. PATIENT PROTECTION AND AFFORDABLE CARE ACT ISSUES 2013 Warner Norcross & Judd LLP. All rights reserved. WNJ.com PPACA Temporary Employees from Staffing Agencies Who is the common law employer? Who has right to direct and control the individual? Result to be accomplished and details and means by which result is accomplished Day to day management and direction? 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 9

10 Who is the Common Law Employer? There is regulatory ambiguity in how this will be determined. Significant lobbying going on. Anti-abuse regulations being drafted Warner Norcross & Judd LLP. All rights reserved. Page 19 PPACA Employer Responsibility Requirements Large employers (50+ FTEs) are potentially subject to penalties if they fail to offer group health plan coverage at affordable rates and with minimum value beginning January 1, Takes into account all common law employees, controlled groups and affiliated service groups. Full-time employees (at least 30 hours per week or 130 hours per month) must be offered affordable coverage. Every hour for which an employee is paid or entitled to pay must be counted. Coverage for dependents must be available. Children must be covered, but not spouses Affordability requirement does not apply to dependent coverage 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 10

11 PPACA Employer Responsibility Requirements Variable hour employees may be tracked using optional look-back determination periods. Full-time employees (regardless of employee classification such as interns, part-time, temporary workers, seasonal workers, etc.) must be offered coverage New employees must be offered within 90 days from initial date of hire Warner Norcross & Judd LLP. All rights reserved. Page 21 Potential PPACA Penalties If 95% of full-time population does not receive coverage: ($2,000 annually per full-time employee x (number of full-time employees first 30 employees). Even if some or nearly all employees are receiving coverage. At least one employee must receive a premium tax credit or tax subsidy to trigger the penalty Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 11

12 Potential PPACA Penalties If coverage is offered but is not affordable or does not provide minimum value: ($3,000 annual per fulltime employee) x (number of employees who go to exchange and receive a tax credit or premium subsidy). One but not both penalties can be imposed. Capped at amount of first penalty. Taxes are non-deductible excise taxes Warner Norcross & Judd LLP. All rights reserved. Page 23 PPACA: Affordable Coverage Two prongs: Affordability: Cannot exceed 9.5% of employee s household income. W-2 test; Stated rate of pay; or Federal Poverty Line. $88.42 monthly contribution is affordable. Minimum Value: Employer must cover no less than 60% of the actuarial value of total allowed benefit costs. Only one plan option must meet both of these requirements Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 12

13 Reducing the Risk If the Temporary Staffing Agency provides healthcare, will this be sufficient to avoid penalties? Is coverage good enough, affordable and provided within appropriate timeframes? What impact will lobbying of these groups have on existing and planned regulations? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 25 Lower Risk Does Not Equal No Risk Crunch the Numbers More than 5% of your population? Roll the Dice Business decision 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 13

14 Welfare Plan Unknowns What overall impact will PPACA have in increased cost for temporary employees? What will be the impact on operations? Lowering temporary employees below 30 hours per week is a solution, but is it a workable solution? What entity will report the employees to the IRS? What will be the impact, if any, to other welfare benefit plans? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 27 You have questions. We have answers. WELFARE PLAN NONDISCRIMINATION TESTING ISSUES 2013 Warner Norcross & Judd LLP. All rights reserved. WNJ.com 2013 Warner Norcross & Judd LLP. All rights reserved. 14

15 Nondiscrimination Tests Multiple nondiscrimination requirements: Group term life insurance (section 79) Health plans (section 105) Cafeteria plans (section 125) Dependent care assistance plans (section 129) 2013 Warner Norcross & Judd LLP. All rights reserved. Page 29 Eligibility Testing Problems Tests look at whether the plan benefits enough non-highly compensated employees. If temporary workers are common law employees, must count. May cause plan to fail the eligibility tests 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 15

16 Benefits Testing Problems Tests look at whether the same benefits are available to everyone If temps are common law employees: Is anybody providing benefits? Are the benefits at least as good as what highlycompensated employees receive? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 31 If temps are not common law employees? Is the worker a leased employee? A worker who is not a common law employee of the recipient organization if he or she works: Pursuant to agreement between recipient organization and leasing organization On substantially full-time basis for at least one year Under recipient organization s primary direction or control Can create the same problems as common law employees Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 16

17 Implications Excluded from plan? Will you still pass non-discrimination tests? Employer responsibility (ACA) implications? Different benefit program (maybe through temp agency)? Would separate plans pass nondiscrimination tests? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 33 You have questions. We have answers. RETIREMENT PLAN ISSUES 2013 Warner Norcross & Judd LLP. All rights reserved. WNJ.com 2013 Warner Norcross & Judd LLP. All rights reserved. 17

18 Who s an Employee? Common law employees Deemed employees: Self-employed persons Leased employees as defined 2013 Warner Norcross & Judd LLP. All rights reserved. Page 35 Why do we care? Assume service recipient has retirement plan Exclusive benefit rule: Only employees may participate Leased employees not required to participate but must count as employees for other purposes If could exclude leased employees for all purposes, could have retirement plans only for owners, management and high paid employees 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 18

19 Threshold Question Common law employee of service recipient? Employee of leasing organization? Both? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 37 ERISA Definition Employee means any individual employed by an employer No help! Useless 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 19

20 Common Law Applies Common law definition of employee controls for ERISA purposes Nationwide Mutual Insurance Co. v. Darden (503 US 518, Sup. Ct. 1992) 2013 Warner Norcross & Judd LLP. All rights reserved. Page Factor Test (Rev. Rul ) Has to follow instructions Training = control Integrated into business No delegation Supervisor hires/sets pay Continuing relationship Employer sets hours Full-time services Employer s premises Employer sets sequence Reports required Paid by hour, week, month Payment of expenses Furnishing tools/materials Lack of investment No share profit or loss Single recipient entity Service available to others Right to discharge Right to end services 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 20

21 Control Determines Employer controls and directs employee What, when and how Independent contractor is told what but not when or how Leased Employee? Somewhere in between? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 41 Based on Entire Relationship Single factor not decisive Number of factors pro or con not decisive Impact of each factor must be weighed Reality trumps terms of written agreement 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 21

22 PEO Compromise IRS solution Relates only to PEO plan Must be multiple employer plan (MEP) Doesn t address plan of service recipient 2013 Warner Norcross & Judd LLP. All rights reserved. Page 43 Code Definition of Leased Employee Leased Employee is any person who is not an employee of the service recipient and provides services to the Recipient Employer if Pursuant to agreement between Recipient Employer and leasing organization, On substantially full-time basis for at least one year, and Under primary direction or control of the service recipient 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 22

23 Code Definition of Leased Employee Substantially full-time basis means lesser of: 1,500 hours per year, or 75% of customary hours for position A person who meets the definition becomes the service recipient s employee for retirement plan purposes 2013 Warner Norcross & Judd LLP. All rights reserved. Page 45 Must Exclude Leased Employees become participants in plan unless excluded from participation by the plan; so first rule is to exclude from participation in all retirement plans 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 23

24 What s the Problem? If Leased Employees are excluded from participation in all retirement plans, what s the problem? Here s the rub: Even though excluded from participation, Internal Revenue Code requires Leased Employees must be treated as employees for certain other purposes 2013 Warner Norcross & Judd LLP. All rights reserved. Page 47 Can t Exclude OK to exclude from participation but can t exclude them for the following tests: Minimum participation Minimum coverage General non-discrimination Minimum vesting Maximum contributions and benefits, and Other requirements 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 24

25 Microsoft Lesson Excluded only Leased Employees and independent contractors Retirement plans generally now also exclude misclassified persons or other variations such as persons classified as Leased Employees or independent contractors 2013 Warner Norcross & Judd LLP. All rights reserved. Page 49 May Allow Participation Plan may permit Leased Employees to participate Do this only after careful consideration of all of the implications Discretion: Plan may define Leased Employees by deleting or reducing requirement of one year of full-time service 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 25

26 Common Failure: Service Crediting If a temporary employee becomes a Leased Employee, all prior service as a temporary employee must be credited for eligibility and vesting purposes If a temporary employee becomes a regular employee, all prior service as a temporary employee must be credited for eligibility and vesting purposes 2013 Warner Norcross & Judd LLP. All rights reserved. Page 51 Must Have Information You must have service and compensation information about all temporary and leased employees Make sure your contract with leasing organization obligates the leasing organization to provide the recipient organization this information on a complete, accurate and timely basis 2013 Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 26

27 QUESTIONS? 2013 Warner Norcross & Judd LLP. All rights reserved. Page 53 Contact Information Louis C. Rabaut Norbert F. Kugele (616) (616) April A. Goff George L. Whitfield (616) (616) Warner Norcross & Judd LLP. All rights reserved. Page Warner Norcross & Judd LLP. All rights reserved. 27