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© 2014 Brigham Young University–Idaho 1 © 2008 Brigham Young University–Idaho
© 2014 Brigham Young University–Idaho Underlying Purpose of the FLSA Overtime and Recordkeeping Requirements Suffered or Permitted to Work Duty of Management - The mere promulgation of a rule is not enough Comp Time is not permissible in the private sector Trainings – 4 part compensability test University Travel Key Points from FLSA Part 1
© 2014 Brigham Young University–Idaho EMPLOYEE OR INDEPENDENT CONTRACTOR March 2014 3
© 2014 Brigham Young University–Idaho 4 Independent Contractor Policy Significant legal consequences and penalty assessments may result if an individual who meets the legal definition of an employee is erroneously hired as an independent contractor. Generally most individuals hired by the University are employees. However, those that meet certain requirements might be classified as independent contractors.
© 2014 Brigham Young University–Idaho 5 Independent Contractor Normally the reasons for contracting work out are to achieve something ordinarily not within the usual capabilities of the University’s regular employees. Employees of the University including students are not eligible to be independent contractors of the University. Pub 15-A – Internal Revenue Service “The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.”
© 2014 Brigham Young University–Idaho 6 Independent Contractor Classification Three elements the IRS uses to determine worker classification: 1. Behavioral control 2. Financial control 3. Type of relationship
© 2014 Brigham Young University–Idaho 7 Behavioral Control Anyone who performs services for you is your employee if you can control what will be done and how it will be done. What matters is that the employer has the right to control the details: When and where work is done What tools and equipment are used Where supplies and services are purchased Who trains individuals
© 2014 Brigham Young University–Idaho 8 Financial Control Does the worker have a significant investment in assets or tools? Are there unreimbursed expenses that the worker has to bear themselves? Are the worker’s services available to the public? Do they get paid only if they finish the job? Independent contractors can realize a profit or loss on a job.
© 2014 Brigham Young University–Idaho 9 Type of Relationship Relationship of the Parties Whether the worker gets any type of benefits – vacation and sick pay, pension plan, and health or life insurance. The permanency of the relationship such as continuing indefinitely or only for a specific project or period. Does the worker have his own business, which he markets to others?
© 2014 Brigham Young University–Idaho 10 Employee or Contractor The IRS has developed a twenty question test for Independent Contractors to help determine classification as an employee or contractor. For the following questions, a 'yes' answer (except #16 and #18) is indicative of an employer/employee relationship. 1. Is the worker required to comply with instructions about when, where and how the work is done? 2. Is the worker provided training that would enable him/her to perform a job in a particular method or manner? 3. Are the services provided by the worker an integral part of the business' operations? 4. Must the services be rendered personally? 5. Does the business hire, supervise, or pay assistants to help the worker on the job? 6. Is there a continuing relationship between the worker and the person for whom the services are performed? 7. Does the recipient of the services set the work schedule? 8. Is the worker required to devote his/her full time to the person he/she performs services for? 9. Is the work performed at the place of business of the company or at specific places set by the company? 10. Does the recipient of the services direct the sequence in which the work must be done? 11. Are regular oral or written reports required to be submitted by the worker? 12. Is the method of payment hourly, weekly, monthly (as opposed to commission or by the job)? 13. Are business and/or traveling expenses reimbursed? 14. Does the company furnish tools and materials used by the worker? 15. Has the worker failed to invest in equipment or facilities used to provide the services? 16. Does the arrangement put the person in a position of realizing either a profit or loss on the work? 17. Does the worker perform services exclusively for the company rather than working for a number of companies at the same time? 18. Does the worker in fact make his/her services regularly available to the general public? 19. Is the worker subject to dismissal for reasons other than non-performance of the contract specifications? 20. Can the worker terminate his/her relationship without incurring a liability for failure to complete the job?
© 2014 Brigham Young University–Idaho 11 Independent Contractors Test Proctors (Expertise needed) Consultants Sports Officials Dance Judges Trimming Horses (Must have business and use own tools) Guest Speakers and Presenters (non-credit) Entertainment (short-term engagement) Artist Professional Photography (short-term engagement) Student Teacher Supervisors Student Teacher Coordinators (other than University employees)
© 2014 Brigham Young University–Idaho 12 Taxable Compensation All payments for services by individuals and business entities represent taxable compensation to the recipient. If an employer-employee relationship exists, the compensation is considered wages and is subject to withholding tax and applicable FICA contributions. Wages are reported on a W-2 If an independent contractor relationship exists then cumulative annual payments over $600.00 will be reportable to the IRS on a 1099 MISC. Reimbursed travel expenses will be included in taxable amount of the 1099 Misc.
© 2014 Brigham Young University–Idaho 13 Independent Contractor Payments Payment requests for independent contractors need to be completed before the contractor performs the service. All requests for payment to a foreign individual must be reviewed by the Accounts Payable Office for tax treaty issues and withholding requirements. Contracts over $2,500, for a recurring event or where there is risk to the University should be processed through the Purchasing Office. Payments to individuals for a onetime event and under $2,500 may be completed using the independent contractor form.
© 2014 Brigham Young University–Idaho 14 Independent Contractor Payment Request Form
© 2014 Brigham Young University–Idaho 15 Payment Checks will be mailed to the Independent Contractor (Direct Deposit is available) On rare occasions, some vendors may require payment upon completion (day of show) for their services. When this is the case, the requisitioning department must clearly indicate in the “Description Field” of the request that a payment upon completion is requested and the reason for the request for pick up and who will pickup the check. The department should request the check to be picked up the afternoon before the service or performance.
© 2014 Brigham Young University–Idaho 16 Website for Independent Contractor BYU-I Payroll Home Page Under Policies and Procedures select Independent Contractor Questions
© 2014 Brigham Young University–Idaho 17 Employment vs. Workplace Experiences Employment Other Workplace Experiences Student Employee Employee Volunteers Practicum Unpaid Internship Paid Internship
© 2014 Brigham Young University–Idaho Individuals who volunteer or donate their services, usually on a part-time basis, for public service, religious or humanitarian objectives, not as employees and without contemplation of pay, are not considered employees of the religious, charitable or similar non-profit organizations that receive their service. Volunteers Under FLSA
© 2014 Brigham Young University–Idaho What happens if we incorrectly classify an employee as a volunteer? Employees are owed wages, including any overtime payments. Tax withholdings, such as income tax and social security payments, would also need to be paid. We could potentially incur fines or penalties being imposed by the Department of Labor. We would also have to cover the worker for workers’ compensation, as well as potentially being liable for unemployment benefits. We would represent the university poorly in the public eye and would have taught improper practices to our students. Consequences of Misclassification 19
© 2014 Brigham Young University–Idaho Volunteers
© 2014 Brigham Young University–Idaho Scenario: John comes to you and is very interested in the university and really wants to gain a better understanding of your department. You mention that you are not currently hiring, but John’s reply is: “You wouldn’t have to pay me anything. I want to volunteer my time to help you and your department in any way that I can. I would really love to do this because this is a way for me to give back to this university while gaining valuable experience”. Volunteer or Employee?
© 2014 Brigham Young University–Idaho Is the worker motivated by a personal civic, humanitarian, charitable, religious or public-service motive? Are the services performed typically associated with volunteer work? Are the services provided different from those typically performed by paid workers and are the hours of service less than full time? How much control does the nonprofit exert over the volunteer while she or he is performing services? Does the volunteer typically arrange his or her own schedule to provide services when it is convenient for the volunteer? Source: nonprofitrisk.org Volunteer or Employee?
© 2014 Brigham Young University–Idaho 23 Employees As Volunteers
© 2014 Brigham Young University–Idaho Scenario: Lisa loves her job. She enjoys the fact that what she does has an impact and helps make the lives of other people better. She is a non-exempt employee (paid hourly) and her manager has let everyone know that overtime is not allowed. Lisa’s work seems to be never ending and she knows that if she were to spend an extra hour or two every day that she would have no problem keeping up with the work load. She thinks to herself: “I will just stay an extra hour every day, work through lunch some days and volunteer my extra time….after all, I really do believe in the mission and purpose of my work and I would love to provide a service for my employer.” Employees As Volunteers 24
© 2014 Brigham Young University–Idaho Designation of “volunteer” status is not done unilaterally by the employer to avoid minimum wage or overtime requirements; The volunteer time must be for a civic, charitable, or humanitarian purpose without any promise, expectation or receipt of compensation by the employee The act of volunteering truly must be voluntary, without any direct or implied coercion from the employer; The employee’s volunteer activities must not be similar to the services he/she performs as part of his/her regular employment; and The volunteering must be performed outside the employee’s normal work hours. Employees As Volunteers 25
© 2014 Brigham Young University–Idaho Human Resources is the campus point of contact Individuals and couples must meet church service requirements to be called Missionaries are approved and called under ecclesiastical authority Service is 8-32 hrs. per week and lasts 6-24 months Part-time church service missionaries receive assignments with the approval/request of university See full policy (2-14) under Employment Policies Church-Service Missionaries at BYU-Idaho
© 2014 Brigham Young University–Idaho The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school; The training is for the benefit of the trainees or students; The trainees or students do not displace regular employees, but work under close supervision; The employer that provides the training receives no immediate advantage from the activities of the trainees or students and, on occasion, his operations may even be impeded; The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training. Trainee/Practicum Experience
© 2014 Brigham Young University–Idaho The Test For Unpaid Interns
© 2014 Brigham Young University–Idaho The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment; The internship experience is for the benefit of the intern; The intern does not displace regular employees, but works under close supervision of existing staff; The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded; The intern is not necessarily entitled to a job at the conclusion of the internship; and The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. The Test For Unpaid Interns
© 2014 Brigham Young University–Idaho Individuals must be admitted to BYU-Idaho and assigned to a “track” as degree-seeking, fully matriculated students and be at least 16 years old. Student employees must carry at least 6 credits during on-track semesters to qualify for the FICA exception under IRS guidelines. Students are non-exempt employees and receive the protection of overtime wages for any work over 40 hours per week. Student employees who travel as part of their work assignments should follow the Travel Time (2-4 N) Policy. Students must reside in Idaho during their employment. Students may work up to 20 hours per week during their on-track and off-track semesters. Exceptions may be requested to work more than 20 hours per week during off-track semesters only. Student Employment
© 2014 Brigham Young University–Idaho 31 Scholarships Scenario: A student received a scholarship from a department for her special skills to fill a leadership role. Two weeks into working in the role, the student no longer wants to fill this role and decides to leave the program. Question: What happens to the scholarship the student received?
© 2014 Brigham Young University–Idaho 32 Definitions Accolade A mark of acknowledgment Achievement Something that has been done or achieved through effort Aid To provide with what is useful or necessary in achieving an end Allowance An amount of money that is given to someone regularly or for a specific purpose Award To officially decide that someone would get something Benefit Something extra that is given by an employer to workers in addition to their regular pay Contribution A payment made for a special or extraordinary purpose Funding A sum of money or other resources whose principal or interest is set apart for a specific objective Gift Something that is given to another person, group or organization Grant To give something legally or formally Incentive Something that encourages a person to do something or to work harder Payment Something that is given to someone in exchange for something else The act of giving money for something Prize Something offered or striven for in competition or in a contest of chance Salary Fixed compensation paid regularly for services Can impact both exempt and non-exempt employees Scholarship An amount of money that is given by a school, organization, person, etc., to a student to help pay for the student's education Stipend A small amount of money that is paid regularly to someone A fixed sum of money paid periodically for services or to defray expenses Subsidy Money that is paid to aid usually by a government to keep the price of a product or service low or to help a business, organization or student to continue to function Support To give help or assistance to someone or something Wage An amount of money that a worker is paid based on the number of hours, days, etc., that are worked
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