Employers often mention that their most valuable assets are their employees. However, those valuable assets also can be very costly without the proper preparation and policies.
In 2016, suppliers will continue to face challenging employment-related issues. Specifically, there will be increased scrutiny on employer use of independent contractors, changes to paid sick leave for employees and the significance of the UAW’s newly negotiated contracts with the Detroit 3.
Here’s an overview of the key issues and steps to make sure they don’t become headaches.
Independent Contractors
If you use independent contractors, you will want to reevaluate whether those individuals are properly classified.
Employers who make the wrong decision face potential liabilities for state or federal minimum wage and overtime pay, workers’ compensation insurance and federal and state taxes (including unemployment benefits).
On July 15, the U.S. Department of Labor issued an administrative interpretation memorandum declaring that most workers legally are employees under the Fair Labor Standards Act (FLSA). In the memorandum, the DOL emphasized it uses an expansive interpretation of the “suffer or permit to work” language that defines employment under the FLSA.
The DOL also states the vast majority of workers classified as independent contractors are invalidly classified and that companies engaging their services are violating the law. According to the memorandum (and most courts), the proper analysis is the “economic realities test,” which analyzes whether a worker is operating a business of their own (an independent contractor) or economically dependent on the employer, regardless of skill level (an employee).
Paid Sick Leave
For those suppliers that also are federal contractors or subcontractors, 2016 should be used to prepare for a change in employee sick leave based on an Executive Order signed by President Obama Sept. 7. The Order requires federal contractors to provide employees with the ability to earn up to 56 hours (seven days) of paid sick leave per year.
Slated to take effect Jan. 1, 2017, employees would earn an hour of paid sick leave for every 30 hours of work.
The paid sick leave can be used for an employee’s own physical or mental illness, injury or medical condition, as well as to care for a child, parent, spouse, domestic partner or any other individual related by blood or affinity, whose close association with the employee is the equivalent of a family relationship.
Paid sick leave accrued under the order will carry over from one year to the next and will be reinstated for employees rehired by a covered contractor within 12 months after a job separation.
In case of foreseeable leaves, oral or written notice must be provided at least seven calendar days in advance. If the leave is unforeseeable, notice must be provided as soon as practicable.
Even without being a federal contractor or subcontractor, employers will need to be prepared to deal with employee leave issues in 2016.
For example, the DOL issued a rule change effective March 27, 2015, expanding leave rights under the Family and Medical Leave Act to same-sex married couples. Under the rule, the definition of “spouse” was amended so that an eligible employee in a legal same-sex marriage will be able to take FMLA leave for his/her spouse regardless of the state in which the employee resides, even in states that do not currently recognize same-sex marriages. However, the FMLA still does not apply to civil unions or domestic partnerships.
As a final note, suppliers should make sure they are using the latest FMLA forms released by the DOL on May 27, 2015.
Impact of UAW’s New Contracts
The give and take between the UAW and the Detroit 3 on issues such as wages and benefits are sure to have a trickle-down impact on the automakers’ relationships with suppliers, as well as the suppliers’ relationships with the union.
For example, in the UAW’s new agreement with Fiat Chrysler, Easter Monday will be observed as a holiday. That, along with other planned flexible scheduling changes, could impact suppliers practicing just-in-time delivery. Day-to-day implementation of these new contract terms likely will raise employment issues that were not anticipated during the bargaining sessions. Suppliers would be wise to keep track of ongoing developments to ensure they are prepared for changes coming in 2016.
Michael Groebe is an employment attorney based in the Detroit office of Foley & Lardner, where he advises employers in all aspects of labor and employment law.
