On January 10, 2024, the U.S. Department of Labor (DOL) issued a final rule regarding employee or independent contractor classification under the Fair Labor Standards Act (FLSA), which is set to take effect on March 11, 2024. Workers classified as employees receive certain protections under the FLSA, including minimum wage, overtime compensation, and other benefits, while independent contractors generally do not. The DOL has stated that the new Rule will increase the number of workers who fall under the protections of the FLSA as employees. This necessarily translates into increased costs for employers, who may pass them along to their customers and workforce in various ways.

In addition to these costs, other issues may arise in the context of employer liability for the acts and omissions of employees and other types of liability associated with employee versus independent contractor status. In addition to the costs of these benefits to employers, certain workers may appreciate the benefits associated with making their schedules and choosing when, where, and how they will perform work.   Employers and workers benefit from certainty and consistency regarding the classification of workers. Unfortunately, the new Rule may prove to have a chilling effect on employers who work with independent contractors out of fear that they may be held liable for employment taxes, workers’ compensation insurance, and other costs in the event that the worker is held to be an employee and not an independent contractor.

The 2024 independent contractor rule makes several changes to the 2021 rule, making it much more likely that a worker would be classified as an employee, not an independent contractor. For example, whereas the 2021 rule focused on a five-factor test, including two “core factors,” including a) the nature and degree of control over the work and b) the workers’ opportunity for profit or loss, the new 2024 rule mandates that employers must consider six individual “non-exhaustive” factors. The Factors are described as all having equal weight in a “totality of the circumstances” analysis of whether a worker is to be classified as an employee or an independent contractor. However, as the Rule clarifies, other non-enumerated factors may be considered.

The six factors include:

1. opportunity for profit or loss depending on managerial skill;
2. investments by the worker and the potential employer;
3. degree of permanence of the work relationship;
4. nature and degree of control;
5. extent to which the work performed is an integral part of the potential employer’s business and
6. skill and initiative.

However, the new Rule set to take effect in less than two months already faces many legal challenges. On January 16, 2024, a group of freelancers filed suit in the Northern District of Georgia seeking a preliminary injunction of the Rule and a declaratory judgment setting the Rule aside. This is in addition to ongoing litigation in the Fifth Circuit challenging the Rule’s compliance with the Administrative Procedures Act and public statements from members of Congress who have vowed to repeal the Rule. It is likely that the new Rule will continue to face challenges and may even be placed on hold. For now, however, employers doing business with independent contractors should assess whether these workers might meet the new test for independent contractor status. Employers should also consult with an attorney when it may be unclear whether they have correctly classified their employees.

The main opposition to the new Rule rests with allegations that the new Rule proposes a set of factors as a test for independent contractor status that would allow DOL and other enforcement entities to classify almost any worker as an employee and not as an independent contractor. In support of these challenges, lawmakers cite the history of a similarly enacted provision in California, which still faces legal challenges. California’s Assembly Bill 5 (A.B. 5), enacted in 2019, originally proposed a similarly narrow definition of an independent contractor. The law was amended almost immediately to accommodate “gig” workers as independent contractors—delivery drivers, personal transportation workers, etc. Issues remain as to the Rule’s impact on the trucking industry, where some drivers have operated as independent contractors for many decades. The matter is still being litigated, as a three-judge panel of the federal Ninth Circuit Court reversed the dismissal by the lower District Court in December of 2023 on grounds of Equal Protection and preliminary injunction standards. Plaintiffs have argued that the exemptions provided to some sectors of the economy but not others violate the California law’s stated purpose.

In the case of the DOL Rule, there is a long history of controversy in the DOL’s attempt to enact a new rule in 2021, which was struck down. In 2020, the DOL issued a rule outlining the factors to be analyzed for employers to determine whether a worker should be classified as an employee or an independent contractor, which was to take effect in 2021 (the “2021 Rule”). However, in March 2021, the DOL published an additional rule delaying the effective date of the 2021 rule, and in May 2021, the DOL published another rule withdrawing the 2021 independent contractor rule. These actions were subsequently challenged, and a Federal District Court issued a decision vacating both the delay and the withdrawal rules issued by the DOL. The District Court ordered the original Rule to take effect on March 8, 2021, as the effective date. In response, the DOL published a new rule to replace the 2021 rule, which is set to take effect in March 2024.

This non-exhaustive factor approach emphasizes that where a worker is dependent upon an individual employer for continued work, it is likely that the worker does not meet the test to be classified as an independent contractor. Until the Courts or Congress address the many challenges to the new Rule, the situation remains fluid until March 2024. We will be publishing any updates as necessary. If you have questions regarding whether your workers should be classified as independent contractors or employees, the attorneys at PS&E are here to help. Don’t hesitate to contact Kristina Curry at kcurry@pselaw.com or (937) 223-1130.

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• The Americans with Disabilities Act (ADA) does not prevent an employer from inquiring about or requesting documentation or other confirmation that an employee received a vaccination.
• However, documentation or other confirmation of vaccination provided by the employee to the employer is medical information about the employee and must be kept confidential.
• If an employer or its agent offers voluntary vaccinations to employees, meaning that the employer does not require vaccination, the employer must comply with federal employment nondiscrimination laws. For example, not offering voluntary vaccinations to certain employees based on national origin or another protected basis under the EEO laws would not be permissible.
• If an employer requires its employees to be vaccinated, then the employer will have to show that any pre-vaccination screening questions are “job related and consistent with business necessity.”

The ADA applies to employers that require employees to be vaccinated. To request an accommodation, an individual does not need to mention the ADA or use the phrase “reasonable accommodation,” just as is the case with any other request for a disability-related accommodation.

• If a particular employee cannot meet the requirement to be vaccinated, because of a disability, the employer may not require compliance for that employee unless it can demonstrate that the individual would pose a “direct threat” to the health or safety of the employee or others in the workplace. A “direct threat” is a “significant risk of substantial harm” that cannot be eliminated or reduced by reasonable accommodation.
• Employees who are not vaccinated due to pregnancy may be entitled to job modifications, including telework, changes to work schedules or assignments, and leave to the extent such modifications are provided for other employees who are similar in their ability or inability to work. Employers should ensure that supervisors, managers, and human resources personnel know how to handle such requests to avoid disparate treatment in violation of Title VII.
• The ADA does not limit the incentives an employer may offer to encourage employees to voluntarily receive a COVID-19 vaccination, or to provide confirmation of vaccination, if the health care provider administering a COVID-19 vaccine is not the employer or its agent. By contrast, if an employer offers an incentive to employees to voluntarily receive a vaccination administered by the employer or its agent, the ADA’s rules on disability-related inquiries apply and the value of the incentive may not be so substantial as to be coercive.
• When the employer or its agent administers a COVID-19 vaccine, the value of the incentive (which includes both rewards and penalties) may not be so substantial as to be coercive. Because vaccinations require employees to answer pre-vaccination disability-related screening questions, a very large incentive could make employees feel pressured to disclose protected medical information to their employers or their agents.

As these existing and recently updated guidance documents demonstrate, there are some considerations that employers should address prior to constructing and implementing vaccination policies with respect to the ADA and other employment laws. If you have legal questions regarding these issues, please contact Kristina Curry at kcurry@pselaw.com or 937.223.1130.

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The Ohio Bureau of Workers’ Compensation (OBWC) has made the following announcement regarding changes to the email mailbox from which employers will be receiving their statements. It is important for employers to receive their statements as payment to the BWC may affect coverage and other matters:

Email Notices to Come From New Address
Beginning August 2, 2021, employers who receive eNotices from the BWC about their monthly invoice will receive the messages from a new email address: BWCPolicyInvoice@public.govdelivery.com. This is the latest step in their transition to a different email delivery system called GovDelivery. This new system has a different look and feel than before. If you don’t receive email notices when you normally would, please check your spam folder. If you see the email there, mark it as not spam to receive future messages correctly. Check with your email provider for instructions on how to mark messages as not spam. As we continue to increase our use of electronic communications, look for more opportunities to request eNotices on different topics concerning your policy. If you have questions, call 1-800-644-6292.

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Some companies are in the midst of rehiring employees laid off due to the pandemic, and for others that’s still in the future. Either way, as you make plans to protect your employees’ health, be sure you know how to protect your business too. In this post we’ll talk about two important ways you must follow the law and best practices as you continue or begin the rehiring process.
Avoid Discrimination Claims
Any time you lay off an employee and later refill the position, the potential exists for a discrimination claim if you offer the job to someone else or end up hiring a different person. It’s critical to understand what may constitute discrimination so you can avoid it.

Of course, your policies should state explicitly that your hiring practices do not discriminate on the basis of race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, age (40 or older), disability and genetic information (including family medical history), or protected veteran status. But in the age of COVID-19 extra caution is warranted.

According to the Centers for Disease Control and Prevention (CDC), some people are especially vulnerable to severe COVID-19 disease and complications, including people over 60, those with underlying medical conditions, pregnant women, and others. But these do not count as valid reasons to not rehire an employee. Even if you have your employees’ best interests and health in mind, it can still be construed as age or other discrimination. One option may be to discuss plans for a delayed start or work from home if possible; however, the employer should make the final decision whether to accept this kind of arrangement.
You can also avoid claims of discrimination by using the same considerations for making both layoff/furlough and rehiring decisions. For example, if a business laid off employees based on seniority, then seniority could be the main factor considered when deciding who to bring back to the active workforce.
But there are valid reasons to not rehire someone, or to delay a return-to-work temporarily, as long as it is not discriminatory, based on objective criteria, and well-documented. Some examples include, but are not limited to:

• documented past poor performance
• significant changes to the job that make the person no longer qualified
• newly added job duties that the person cannot perform (for non-discriminatory reasons)
• diagnosis of COVID-19 in the employee, a family member, or person the employee is caring for
• current doctor’s orders to self-quarantine
• inability to obtain childcare (or dependent care) due to school or care center closure due to COVID-19

Always make rehiring decisions on a case-by-case basis, taking care that you are able to document the legitimate non-discriminatory reasons for making such decisions.  If you are uncertain, consult with an attorney or employment specialist.
Document Offers to Return to Work
It is always the best practice to make a formal, written offer of employment. This helps document the actions that an employer took. Retain records of any response, or document a lack of response from any employee as well. Because many employers have taken out PPP loans, they may wonder how rehiring impacts loan forgiveness. It is unlikely the SBA will penalize employers in the loan forgiveness calculation if the employer can show that they made a good faith, written offer of rehire, and can document the employee’s rejection of that offer. Letters should include a return-to-work date, an overview of what’s changed and what hasn’t, the status of their benefits, a summary of new health and safety procedures for reassurance, a deadline to accept or decline the offer, and a job offer to return an employee to “suitable work.” Exact definitions vary from state to state, but in general, suitable work means a job that offers wages comparable to recent employment and work duties that correspond to education level and previous work experience.
Just because you offer suitable work, however, does not guarantee it will be accepted. Those collecting unemployment are usually required to certify weekly that they are attempting to find employment (though some states have suspended this requirement due to the unique circumstances of many COVID-19 layoffs). It’s implied that offers of employment must be accepted except if there is “good cause” to reject it, such as a change to the nature of the work, reduced pay or salary, a new duty location, for example. When an employee refuses an offer to return to work and is collecting unemployment compensation benefits, a final determination of whether good cause exists must be made by an administrative law judge.
Two reasons that do not qualify as “good cause” are fear of contracting COVID-19 (as long as you are following safe practices and taking reasonable precautions for worker and customer safety during the pandemic) or the fact that the person is earning more from unemployment benefits than the offered wages or salary. Depending on your state’s requirements, you may be required to report these types of refusals.
For example, in Ohio, “employees are expected to return to their previous employment if asked to do so and if there is not otherwise good cause for refusing to return to work.” Refusing to return to work without good cause makes an individual ineligible for further unemployment benefits. Employers can notify the agency by filing the “Eligibility Notice/Refusal to Return to Work Form. https://secure.jfs.ohio.gov/covid-19-return-to-work/.
Employers are eager to get back to business as usual. They need to follow health and safety precautions to continue opening the economy, but it is also important to take steps to protect company’s legitimate business interests when rehiring employees. If you have any questions regarding how to handle reopening your business and COVID-19, or for any other employment and labor law matters, please contact Matthew Stokely at mstokely@pselaw.com or Kristina Curry at kcurry@pselaw.com, or call (937) 223-1130.

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Here is a summary of the new provisions in the Paycheck Protection Flexibility Act:

• Extends the minimum repayment time of PPP loans to five years. This applies to any PPP loan made on or after June 5, 2020. Borrowers and lenders are free to negotiate a longer term of repayment at 1% interest.

• Extends the covered period for using PPP loan proceeds from June 30, 2020, to December 31, 2020.

• Extends the covered period for PPP loan forgiveness from eight weeks from the date of origination to the earlier of 24 weeks from the origination date or December 31, 2020. A borrower who received a loan before the bill’s enactment could elect to continue using the 8-week covered period set forth in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

• Extends the deadline for the safe harbors for FTE levels and salary reductions from June 30, 2020, to December 31, 2020.

• Provides that the amount of loan forgiveness will not be reduced by a reduction in the number of full-time equivalent employees, if, with respect to the period February 15, 2020, to December 31, 2020, the borrower is able to document in good faith that it was unable to rehire employees or unable to return to the same level of business activity due to an inability to comply with governmental standards related to sanitation, social distancing, or other safety requirements due to coronavirus.

• Provides that at least 60 percent of PPP loan proceeds should be used for payroll costs to receive loan forgiveness (overturning the 75 percent standard set forth by the Small Business Administration (SBA) and U.S. Treasury Department).

• Eliminates the six-month deferral of payments due under PPP loans and replacing it with a longer 10-month deferral as long as the borrower applies for forgiveness within 10 months of the end of the covered period. The covered period is the earlier of 24 weeks from loan origination or December 31, 2020.

• Allows for all employers to take advantage of the CARES Act deferral of the employer portion of social security payroll taxes, regardless of whether they have had a PPP loan.

 
Additional guidance from the Small Business Administration and the U.S. Treasury Department is expected within the coming weeks.  The attorneys at Pickrel, Schaeffer and Ebeling advise clients on all aspects of post-pandemic planning and legal compliance.  If you need assistance with planning for these changes, modifying your existing PPP loan forgiveness plan, or other strategies to return to business safely, please contact Kristina Curry or Matt Stokely at kcurry@pselaw.com or mstokely@pselaw.com, or call (937)223-1130.
 
You may also be interested in the following article:  https://www.pselaw.com/returning-to-business-and-ppp-loan-forgiveness/
 

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The loan forgiveness portion of the Paycheck Protection Program (PPP) Small Business Administration (SBA) loans will permit Employers who borrowed during the Covid-19 crisis to have up to 100% of the balance of a loan forgiven if the employer-borrower meets certain criteria.  Generally, these criteria require that the business maintain or restore the level of Full-Time Equivalents (FTE’s) that they employ, as well as the individual salaries of their employees, to pre-Covid-19 levels.  But what if employees who are able to work refuse to return?

A new Interim Final Rule (IFR) published by the SBA/Treasury Department on June 1, 2020 gives specific guidance to employers regarding what they must do in order to take advantage of the “safe harbor” on PPP loan forgiveness calculations when employees decline an offer to return to work.  If the employer borrower has offered to rehire an employee and followed the steps below, they will be permitted to exclude these employees from their loan forgiveness calculations.
In order to take advantage of the safe harbor provision, employer borrowers may exclude any reduction in full-time equivalent employee headcount or reduction in an individual’s salary that is attributable to an individual employee if:

1. The borrower made a good faith, written offer to rehire such employee (or, if applicable, restore the reduced hours of such employee) during the covered period or the alternative payroll covered period;
2. the offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours;
3. the offer was rejected by such employee;
4. the borrower has maintained records documenting the offer and its rejection; and
5. the borrower informed the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer.

 The federal CARES Act that created the PPP loan framework reduces the amount of the PPP loan that may be forgiven if the employer borrower reduces the number of FTE’s or the amount of individual employee salaries. This reduction is waived if the employer borrower eliminates the reduction in full-time equivalent employees and salaries.
In Ohio, informing the state unemployment insurance office involves notifying the Ohio Department of Job and Family Services (ODJFS).  Currently, ODJFS is revising the forms that it may provide for this purpose.  However, ODJFS provided an email address where employers may notify ODJFS of the employee’s refusal to return to work.  We recommend that employers email the names of the employees, along with the offer letters and documentation of the employee’s refusal to return, to the following email address:  UIReturntoWork@jfs.ohio.gov
Pickrel, Schaeffer and Ebeling is here to help with all issues regarding employee’s safe return to work.  If you need legal guidance on how to return employees to work safely, PPP loan forgiveness issues or complying with local, state and federal Covid-19 regulations, please contact Kristina Curry or Matt Stokely in the Labor and Employment Department at kcurry@pselaw.com or mstokely@pselaw.com, or call (937)223-1130.

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Companies that were not eligible to take the loan, because they were large companies with other forms of liquidity that they could draw upon, may return the funds by May 14, 2020 with “no questions asked.” 

The U.S. Treasury and the SBA issued frequently asked questions (FAQs) on PPP loans. One question asks whether businesses owned by large companies with adequate sources of liquidity to support their ongoing operations qualify for PPP loans. According to the SBA FAQ, all borrowers must evaluate their economic need for a loan under the standards in effect at the time of the loan application. The standards are set by the Coronavirus Aid, Relief and Economic Security (CARES) Act, which established the PPP, as well as subsequent regulations.  Borrowers must certify that their PPP loan request is necessary due to “current economic uncertainty” that made the loan necessary to support ongoing operations. The certification must be made in good faith, taking into account the borrower’s current business activity and ability to access other sources of liquidity in a way that’s not “significantly detrimental” to the business.

Treasury Secretary Steven Mnuchin has stated that PPP loans of $2M or more will be scheduled for audit. The loan application notes that making a false statement to obtain a guaranteed loan from the SBA is punishable by imprisonment of up to five years and/or a fine of up to $250,000.  The federal False Claims Act (FCA) permits treble damages, or triple the amount of the government’s actual damages, as well as civil penalties, imprisonment up to five years and a fine up to $250,000 for criminal liability.  Further guidance is expected from the SBA and Treasury within the coming days.  Please contact Kristina Curry at kcurry@pselaw.com, or one of our attorneys who are prepared to assist you if you have questions regarding your PPP loan, loan forgiveness, or whether you should consider any responses to the repayment deadline date on May 14, 2020. 

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• Record keeping requirements for PPP What is FTE?
• Loan Forgiveness Unemployment What are the important dates to keep in mind?
• How do I bring back employees if they have been laid off? 
• Should I be concerned about employees not returning when I can bring them back to work?
• Are there other options to consider as an employer if I didn’t get a PPP loan?

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