This was posted in December of this year but the content was too good not to share with our readers.
By: Christopher Andree, Gowlings
New rules for temporary employees were recently put into force in Ontario. In addition to affecting the temporary employees 
themselves, the new rules affect the temporary help agencies who place the temporary employees, as well as the clients who use the temporary employees in their businesses. Following are some of the highlights of the new rules enacted in Bill 139, Employment Standards Amendment Act (Temporary Help Agencies) 2009.
Which employees are affected by the new rules? The new rules apply to “assignment employees”. An assignment employee means an employee who is employed by a temporary help agency for the purpose of being assigned to perform work on a temporary basis for clients of the agency.
Which businesses fall within the definition of "temporary help agency"? If a business employs individuals for the purpose of assigning them to perform work for a client on a temporary basis, the business may be considered to be a temporary help agency for the purposes of Bill 139.
What obligations does Bill 139 impose on temporary help agencies?
1. Finder’s Fee Restrictions: Temporary help agencies are prohibited from restricting clients and temporary employees from entering into an employment relationship. If a client and temporary employee enter into an employment relationship directly at any time 6 months after the temporary employee first performed work for the client, the agency is prohibited from charging a fee to the client.
2. Prohibition against charging fees to temporary employees: Temporary help agencies are not permitted to charge temporary employees fees for things such as joining the agency, being assigned by the agency, receiving assistance with resume writing and job interviews, or entering into an employment relationship with a client.
3. Information regarding assignment: Temporary help agencies have an obligation to provide the following information in writing to the temporary employee: legal/business name of agency and client, contact information for agency and client, remuneration and benefits associated with an assignment, hours of work, general description of the work to be performed, pay period/day, and estimated term of assignment (provided that information is available).
4. Temporary Layoffs: For the purposes of triggering a deemed termination of employment under the Employment Standards Act, a temporary employee will be on temporary layoff during any week he/she is available to work but not assigned to a client.
5. Termination and Severance Obligations: Termination and severance pay (subject to some exceptions) is payable upon the termination of employment of a temporary employee and will be calculated based upon the greater of actual earnings during the notice period or the temporary employee's average earnings during the 12 week period immediately preceding his/her last day worked.
What restrictions does Bill 139 place on clients of agencies? No client of a temporary help agency will be allowed to refuse or end the assignment of a temporary employee who makes enquiries, or seeks compliance or enforcement of his/her rights under the Employment Standards Act. A breach can result in an order for both compensation and reinstatement.
Does Bill 139 have any impact on existing temporary help arrangements? Bill 139 applies to all temporary employees, including those assigned before it came into force. Any provision in an existing client or temporary employee contract which is inconsistent with the provisions of Bill 139 is void and unenforceable. Further, if the agency has not already provided the required information regarding an assignment to its existing temporary employees, it is required to do so immediately.
What should temporary help agencies do as a result of the changes? Temporary help agencies should familiarize themselves with the provisions of Bill 139 and undertake a review of any fees charged to clients and/or temporary employees, the wording of their client and temporary employee agreements, and any related policies and practices to ensure that they are compliant with Bill 139. Agencies may also wish to advise their clients of the new requirements and the restrictions placed upon them.
What should clients of temporary help agencies do as a result of the changes? Clients of temporary help agencies should familiarize themselves with the provisions of Bill 139 and undertake a review of their agreements with temporary help agencies. They should also review their practices regarding the use of temporary employees to ensure their practices are consistent with the new legislation.
Where can you go for more information? For further information, you may want to review the text of Bill 139 and the accompanying Explanatory Notes by clicking on the following link:
http://www.labour.gov.on.ca/english/es/ib_tha.html
Fifty-eight percent of Canadian hiring managers said they plan to add new employees in the second half of the year, according to a survey by CareerBuilder.
Information technology ranked as the top area for recruitment with 30% of hiring managers saying they are adding jobs in that area. It was followed by customer service with 26% of managers hiring in this area.
"While companies plan to hire more workers in the second half of the year, they report they will do so gradually," said Brent Rasmussen, president of CareerBuilder North America. "In addition, they will continue to focus on revenue generating positions and maintaining their current staff levels in an effort to facilitate growth and sustain their businesses through the rest of 2010."
The survey included interviews with 239 Canadian hiring managers conducted between May 22 and June 3.
Source: SIA
On June 17, 2010, the Senate Committee on Health, E
ducation, Labor and Pensions conducted a hearing on the Employee Misclassification Prevention Act, S. 3254 (EMPA). The bill, which was introduced by Sen. Sherrod Brown (D-Ohio) on April 22, 2010, seeks to amend the Fair Labor Standards Act in several significant respects relating to the classification of workers as employees or independent contractors. The proposed legislation would:
Require employers to keep records of persons treated as independent contractors with respect to the hours worked by such individuals and the remuneration paid to them;
Require employers to maintain a record of the classification of each worker as an independent contractor or employee and to provide written notice of such classification to the worker, along with other notifications specified by the bill;
Provide for penalties to be imposed on businesses of up to $1,100 per person for violations of the recordkeeping requirements or for misclassifying workers as independent contractors, and up to $5,000 per person if the violation is found to be repeated or willful;
Provide for a presumption that any worker for whom the required records are not maintained is an employee of the company, which could only be rebutted by clear and convincing evidence that the worker is an independent contractor;
Provide for treble damages for willful violations of minimum wage and overtime requirements if the affected employee was misclassified as an independent contractor;
Require the secretary of labor to create a website that explains the rights that a person misclassified as an independent contractor may have and that would enable workers to file complaints online;
Provide for information sharing and coordination between the Internal Revenue Service (IRS) and the Department of Labor (DOL) with respect to misclassification issues; and
Restrict federal grants to state unemployment compensation systems unless the state has an auditing and investigation program that identifies employers not reporting compensation for unemployment compensation purposes.
In prepared remarks, Seth Davis, Deputy Secretary of DOL, made clear that DOL and the Obama Administration strongly support EMPA. Mr. Davis also noted that DOL’s Wage and Hour Division is actively considering a rule that would require employers, before classifying a worker as an independent contractor, to perform a written analysis of the worker’s status under applicable FLSA precedent, to provide a copy of the analysis to the worker, and to maintain a record of the analysis in the company’s files.
Opponents of EMPA remarked that the proposed legislation would impose enormous costs on owners of small businesses. Sen. Mike Enzi (R-Wyoming) estimated that it would cost billions of dollars for small businesses to comply with the recordkeeping requirements and would, for example, nonsensically require employers to notify employees that they were employees. He also noted that the audits would focus on recordkeeping rather than misclassification and fine employers simply for failing to keep proper records.
Although not the subject of the June 17 hearing, EMPA has been linked to the Taxpayer Responsibility and Consistency Act (TRCA), which was introduced by Sen. John Kerry (D-Massachusetts) on December 15, 2009. TRCA would amend §530 of the Internal Revenue Code in ways that would effectively remove the availability of the Code’s Safe Harbor provisions to all but a very few employers. The §530 Safe Harbor was originally enacted in the late 1970s to protect businesses that were relying on their industry’s long-standing practice of using non-employee workers for the performance of certain services, or on prior IRS audits that made no determination that independent contractors were misclassified. The idea was that the Safe Harbor would be temporary until a new independent contractor standard could be developed that was clear and objective and could be reliably and consistently applied. Contrary to that intent, TRCA would eliminate the availability of §530, except in a very few cases, without the adoption of a law that made the determination of independent contractor status clear and objective.
These legislative efforts, together with increased funding and enforcement efforts applied at both the federal and state levels, provide clear evidence of the increased risks and potential liabilities imposed on companies that use the services of independent contractors. Now is the time for employers to examine their independent contractor relationships and determine whether changes need to be made to those relationships or to the company’s practices in dealing with independent contractors.
The impacts of the new health care laws on contingent workforce management will not be fully understood for some time, and could be subject to change before they
take effect. But some provisions of great concern are approaching rapidly, including a little understood and newly highlighted 1099 reporting provision slated to take effect on January 1, 2012.
Like the proposed Employee Misclassification Prevention Act (EMPA) bill, this new requirement would “pierce the corporate veil” of hidden independent contractor vendors and require immediate discovery and control over challenging spend categories such as statement of work consultants and sub-contractors.
According to Michael Tanner, a senior fellow of the CATO Institute:
The latest surprise is Section 9006(b)(1) . . . which requires that businesses provide a 1099 form to every vendor with whom they do more than $600 worth of business over the course of a year. . . Of course businesses already have to file 1099s for outlays on items like consultants. But the new rule will mean that even the smallest of businesses will have to issue a form — and file with the IRS — for virtually every purchase or payment. Consider how many business transactions go on every single day in a $14 trillion U.S. economy. Millions, perhaps hundreds of millions, of forms will be winging their way between businesses and between businesses and the IRS. The potential for mistakes and lost forms would be tremendous. And with errors would come audits and penalties."1
With legislation like this already passed into law, there is no need to wait for the Employee Misclassification Prevention Act to start bringing SOW consultants and incorporated independent contractor vendors -- including project services spend -- into your centralized Contingent Workforce Management program.
You will be required to not only track this spend, but issue 1099s, starting in just a year and a half. Given the tremendous amount of organizational change such a requirement represents, enterprises should look to starting the process of a deep contractor risk assessment now.
After all, even if this particular provision affecting 1099s laws is extended or overturned, the message from legislators and regulatory agencies is clear -- there will be no more hiding of independent contractors for purposes of misclassifying workers.
1. Tanner, Michael. CATO Institute. “Health Bill Floods Business In Paper.” May 6, 2010. http://www.ajc.com/opinion/health-bill-floods-business-521926.html?tag=content;selector-perfector
Posted by Liz Greene
PSC 2010 Contractor Survey ResultsAs other labor laws begin to blur in the dust of the D.O.L. and I.R.S's proposed changes, employers are finding it increasingly difficult to stay compliant. Remaining abreast of what rules and regulations are being impacted by proposed changes is
just half the battle. New areas are being looked at with scrutiny to determine what is "fair".
According to Employment Law specialists, Jackson Lewis, LLP, the time a worker actually works is now being looked at for fairness. "Another compliance challenge involves the changing scope of the workday and workplace. Some employees use cell phones, PDA's and home computers to access company networks, check e-mail, and listen o voice mail during "nonworking" hours. Other spend time in security clearance lines at airports, putting on and taking off protective gear before and after their jobs duties. These increasingly common practices push the boundaries of the workday and workplace and challenge the wage and hour compliance."
How many hours a day do you commute to work? Are you working or commuting. We know we all do it but it certainly will be hard for company's to figure out what's fair and enforcible.
Please let us know how you see this issue...what's fair?
who are facing
In our continuing coverage of the government's stepped up efforts to reign in misclassified workers, the US Department of Labor (DOL) in the Obama 
administration, is now softening and trying to change the predatory approach and is trying to help employers with an internet resource designed to assist employers in navigating the legal changes of federal employment regulations.
The new DOL Web site features a series of interactive online Advisors, which, the DOL claims, “help users determine if they are in compliance with federal employment laws by asking questions, providing information and directing the individual to appropriate resolutions.”
Topics covered include:
- payroll and overtime
- workplace poster requirements
- health benefits
- re-employment rights for returning uniformed service members
- federal contractor compliance
To see the site and learn more, the link is http://www.dol.gov/elaws/
CHECK OUT OUR NEXT BLOG WHICH WILL TALK MORE ABOUT THE D.O.L.'s GUIDANCE ON PREVENTION.
If you would like to see if you are at risk and what opportunites are available, please take a moment and complete our Free Risk/Reward Assessement by clicking the sign below.
As we continue to report on the impending changes regarding the misclassification of workers, it is obvious that the changes being implemented will have long 
reaching effects on much of the Human Resource Related Services. As the article below shows, these changes will have an effect on the Fair Labor Standards Act (FLSA). Share with us where you're seeing impact.
Employee Misclassification Bill Proposes Changes to FLSA [Compensation.BLR.com]
Employers who misclassify their employees as non-employees are the target of a bill brought before Congress earlier this month. The bill would require organizations to keep accurate records of non-employees, such as independent contractors. Employers would also face new penalties for misclassifying employees.
The bill, referred to as the Employee Misclassification Prevention Act, proposes to make amendments to the record keeping and notice requirements section of the FLSA.
The bill would require employers who are subject to FLSA to keep accurate records of all workers, employees and non employees (e.g. independent contractors). Records would include the hours worked, payment, and classification of each worker.
Employers would have to give notices to all of their workers, employees and non-employees, upon hire or if there was any change of the employee's classification status. Written notices would need to:
- Inform the worker of their classification
- Direct them to the appropriate Department of Labor (DOL) website for further information
- Provide contact information to the local DOL office
- Include a special paragraph for non-employees regarding their rights
The bill would prohibit organizations from firing or discriminating against any worker, employee or non-employee, for filing a complaint, testifying in a hearing, or serving on an industry committee regarding misclassification practices.
The language of the Special Penalty for Certain Misclassification, record keeping, and Notice Violations-Section 16 of the FLSA would be changed to include "individuals" in addition to employees. In addition, civil penalties for misclassification practices would be increased to up to $1,100 per worker, and up to $5,000 per worker for willful repeat violations.
The bill also includes a provision for the Secretary of Labor to establish an employees' rights website.
In addition to the amendments proposed to the FLSA, the bill aims to make changes to the Social Security Act (42 U.S.C. 503(a)). The changes are intended to increase enforcement by:
- Improving auditing and investigative procedures
- Issuing quarterly report s to the Secretary of Labor on findings
- Establishing administrative penalties for misclassification practices
To increase effective enforcement of misclassification, the bill seeks to promote inter-department communication. The bill proposes that if any section of the DOL has evidence of an employer participating in misclassification, they should report the information to the Wage and Hour Division (WHD), who then can choose to refer it to the Internal Revenue Service (IRS).
The act would also allow the WHD to target employers for auditing purposes if they are in industry with a history of misclassifying employees.
The bill was referred to the Committee on Education and Labor and the Committee on Ways and Means for review.
The entire bill, H.R. 5107, is available online at the Library of Congress website.
To determine if your firm is at risk...take PSC's free RISK/REWARD assessment. Click sign below.
Everybody is buzzing about the historic passing of the Obama Healthca
re reform in the United States. Whether a Republican or a Democrat, you will agree that this legislation will go down as a historic event for many reasons.
Many individuals, companies and industries will be impacted by this new legislation. One that we would like to look at are the possible implications to the Professional Employment Organization (PEO) Industry. The PEO companies provide services used by small and medium sized businesses (SMB) to outsource their payroll and human resources administrative departments. PEO's are also used by large corporations to provide an outsourced form of management for independent contractor and other various recruitment activities.
The Negative
One of the biggest markets that the PEOs provide services to is the SMB Market. Many companies have utilized the PEO industry to gain greater buying power for various employee benefits and outsource the various HR "Administrivia" that SMB's don't have the time or resources to focus on. However, now that the SMB market may have access to a healthcare alternative for their employees, or now even get a tax benefit for offering there own benefits, the PEO industry may find itself losing a large part of their market share to the National Healthcare Option. One need only to look at the PEO market in our Northern neighbor, Canada. The demographics on the PEO industry are a fraction, on a prorated basis, of the industry here in the US. Canadian Small and Mid Size businesses do not have to rely on PEO's due to the National Healthcare system currently in place. There has been growth in the larger client size deals for the Canadian PEO Industry but, like in the US, this has primarily been to mitigate risk and improve the management of large independent contractor populations.
The Positive
With the National Healthcare option, there have been studies alleging that many full time workers will leave their corporate jobs to pursue more independent type of positions now that an alternative option is available. This may cause a larger growth in the ranks of independent contractors working in the market driving organizations to pursue the use of PEO organizations, as in Canada, to mitigate tax and co-employment risks by the centralization of these resources managed by a third party.
While definitely still to soon to tell and with many more aspects of the legislation and the PEO industry to consider, we will continue to welcome your insights and options and continue to report on this industry changing movement.
Please share your views with us. Also, take a moment to complete our Risk/Reward assessment and let us help you determine what opportunities for savings and/or potential risks you might have.
by Maria Ricci
There are quite a few steps that should be considered before providing a 
contractor with an engagement contract and sealing the deal. Whether you are hiring for a couple of hours or several months the impact of a poorly executed engagement can result in misfortune later!
Get Ready, Set and Go!:
- A Statement of Work (SOW) is provided to the engagement officer (hiring manager) with the following details: name of the contractor, contact information, rate, start date and end date of the engagement.
- Have both an Independent Contractor Agreement and an Employment Agreement available and insure that both have been carefully established and approved by your legal counsel based on the classification the worker is electing to engage with.
- Communicate with the Contractor. Review the statement of work and establish whether they will be processed as an Independent Contractor or Employee. The on boarding package you will provide to the contractor and the checklist you need to use is different depending on the workers classification status.
Below are examples of items you need to include on a checklist. Items may vary based on federal, state/provincial tax and labor laws.
| EMPLOYEE (T4/W2) CHECKLIST | INDEPENDENT CONTRACTOR CHECKLIST
|
| |
- Employment Agreement w/ resume
| |
- Federal, State/Provincial Tax Forms
| - Articles of Incorporation
|
- Corporate Employee Handbook
| |
- Copy of Policies and Procedures
| - Copy of Policies and Procedures
|
- Payroll Forms/Direct Deposit
| |
- Background Check Authorization
| - Proof of Background Check Completion
|
- Expense Reimbursement Forms
| - Expense Reimbursement Forms
|
- Time Sheet/Entry Instructions
| |
ETC...
| ETC...
|
As you can see there are quite a few things to consider. Building the process, actualizing the agreements, validation, distribution and collection of the forms, ongoing compliance, etc… You also need to factor in the cost and time you will need to invest before you even get to the, "Get Ready, Set and Go stage!"
Once you see what's behind compliance, outsourcing may be a great option. :)
Let PSC know how we can help...
by Maria Ricci
I have a strong belief that whether you are a small, medium size or large corporation, a tenure policy will definitely be one of great benefit to you. Although it is not obligatory for an enterprise to have one, it plays an important role in the proper management of your 
independent contractor community, it is a highly contributing factor toward the mitigation of co-employment risk and it also promotes cost saving opportunities.
The benefits are not easily acquired. Here are some items to consider when establishing the policy:
- Establish a limit that coincides with the recommended time line present in your labor law standards based on your province or state of business.
- Ensure that the proper resources are in place to monitor-audit the policy.
- Select a vendor management tool that will assist with the quality control of the established policy.
- Seek legal advice to ensure validity and protection of the established policy.
- Create a clear “exception” process because there will be some.
Benefits of voting “Yea”:
- Will reduce the risk of an independent contractor claiming employee status due to length of service.
- The obligation to recruit for new talent in order to comply with the established tenure will assist the corporation in obtaining a more contemporary workforce.
- All of the above will assist the corporation in achieving their cost saving objectives. This will occur with the acquisition of new talent through positive turnover. Through attracting a contemporary workforce wanting to share their gained experience versus being paid top dollar for the experience they have gained through the years working for the same corporation.
- Decreases the financial risks of a negative legal ruling.
Risks of voting, “Nay”:
- Will increase the risk of having to offer a permanent position to an independent contractor due to length of service.
- Will increase the risk of having to incur unnecessary legal fees to debate the hiring of an independent contractor due to length of service.
- Will increase the risk of not engaging the best talent to get the job done.
- Will increase the risk of paying out of market rates in trying to retain a contractor who has already been there past ideal tenure.
I vote Yea!!
TRUE STORY: A client of ours terminated a contractor who had been with the company for 15 years. Yes, 15 years. The contractor sued the corporation for back severance for the 15 years and other fringe benefits not received. While not yet through the court system yet, the ruling which will most likely be in favor of the employee will be approximately $1.2MM in severance, benefits and taxes.
Please share your thoughts…….