Here’s a question we hear from time to time:

Q – Can I require a doctor’s note from an employee who has taken time off for an illness?

A – Generally – Yes

EEOC Office of Legal Counsel staff members wrote the following informal discussion letter in response to an inquiry from a member of the public.

ADA: Disability-Related Inquiries and Medical Examinations of Employees

October 5, 2004

Dear:This responds to your July 30, 2004, letter to the Equal Employment Opportunity Commission (Commission) asking whether the Americans with Disabilities Act (ADA) permits an employer to require medical records from employees to justify their use of sick leave. Specifically, you state that a commercial airline recently began requesting pilots to provide all of their medical records to justify the use of sick leave even when, in some instances, the leave was taken more than one year prior to the employer’s request. Pilots who refuse to provide their records may be disciplined or fired for insubordination.

The ADA strictly limits the circumstances under which an employer may make disability-related inquiries or require medical examinations of employees. Generally, an employer only may ask questions or request medical documentation when it has a reasonable belief, based on objective evidence, that: (1) an employee’s ability to perform essential job functions will be impaired by a medical condition; or, (2) an employee will pose a direct threat due to a medical condition. See EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act (Guidance), July 26, 2000. (This Guidance can be found on our website at www.eeoc.gov. ) An employer also is entitled to know whether an employee’s absence or request for sick leave is due to legitimate medical reasons. An employer, therefore, may ask an employee to justify the use of sick leave by providing a doctor’s note or other explanation for the use of sick leave, as long as it has a policy of doing so for all employees. Id. at Question 15. An employer, however, may not ask for documentation unrelated to the use of sick leave (such as information about an illness or condition other than that for which sick leave was requested) or for more information than is necessary to justify the sick leave request. We believe that requiring all of an employee’s medical records to support a sick leave request will violate the ADA.Employers also may make disability-related inquiries or request medical documentation when an employee who has been on leave for a medical condition seeks to return to work, if the employer has a reasonable belief that the employee’s present ability to perform essential job functions will be impaired by a medical condition or that he or she will pose a direct threat because of a medical condition. Any inquiries or documentation, however, must be limited to what is needed to assess the employee’s ability to work. A request for medical records made a year or more after sick leave has been taken and after a pilot has resumed flying cannot be justified under this standard. The ADA strictly prohibits an employer from using an employee’s leave as a justification for making far-ranging disability-related inquiries or requiring unrelated medical documentation. Id. at Question 17.

I hope this information is helpful to you. This letter is an informal discussion of the issues you raised and does not constitute an official opinion of the EEOC. If you have any questions, please contact me or Joyce Walker-Jones at Joyce.Walker-Jones@eeoc.gov.)Sincerely,

HR Discussion – As the letter above points out it is acceptable to require that an employee bring a doctor’s note when the employee has used an illness as an excuse for missing work.

Perhaps the most important element of having a policy that requires a doctor’s note is consistency. The best way to be consistent is to establish a policy long before the business in required to consider how to handle this kind of situation.
Many businesses will not require a doctor’s note for a one or two day illness but will have a threshold of a 3 day illness requiring a doctor’s note before the employee can have the absence excused.

As the letter above points out, it is not a good idea to discharge and employee who refuses to bring a doctor’s note as required by your policy. However, you can still discipline the employee. The discipline in this case would be for an unexcused absence but not for refusing to bring the required note.

The attendance policy should be very clear, for example, within the attendance policy there could be a statement that advises employees that an absence of 3 or more days for an illness will be considered to be an unexcused absence if an employee does not bring a doctor’s note stating that the employee was too ill to work for the time missed by the employee. Don’t ask for a diagnosis – just a statement that the employee was seen by the doctor and that the doctor determined that the employee should stay home for X number of days. The policy should also state that an unexcused absence of three or more days is considered an infraction that requires a discharge from employment.

There is no magic number of days or number of infractions – each business needs to decide what is appropriate for their situation. However – be consistent. And when in doubt, please call the HR Dept at A Plus Benefits.

Next week we will re-visit some issues of doctor’s notes and FMLA.

Randall Barker is the VP of Human Resources for A Plus Benefits, Inc.

Read Randall’s previous HR Update.

From time to the Human Resources Department here at A Plus Benefits receives an inquiry concerning how a client might classify one of their employees as an independent contractor in order to avoid paying overtime wages. Generally this happens when the client wants to have the employee perform some kind of work that is different from the employees regular job on an after hours basis.

The short answer is….it is all but impossible to accomplish. A more “smart alec” answer is - you can indeed call a duck a horse – but the duck is still a duck no matter what you do. So, you can call an employee an independent contractor but the employee is in fact just an employee and would have to jump through a lot of hoops in order to qualify as an independent contractor. It is all but impossible to accomplish.

Below are some important factors to know about Independent Contractors.

Legal Exemptions
Independent contractors relieve employers of a variety of legal compliance issues, as the following examples illustrate:

• Independent contractors do not count toward the employee thresholds used for determining employer coverage under most federal employment statutes.

• Employers have no obligation to pay federal and state unemployment insurance, Social Security, and Medicare taxes on behalf of independent contractors.

• Employee protections under the Fair Labor Standards Act, ERISA, the Family and Medical Leave Act, the National Labor Relations Act, and federal nondiscrimination statutes do not apply to independent contractors.

• Employers often do not have to pay state workers’ compensation premiums on behalf of independent contractors.

As a result, using independent contractors can save employers substantial money. However, improperly classifying employees as independent contractors carries substantial penalties. As a result, employers need to make sure that a worker meets the requisite tests for independent contractor status. These tests and exceptions to the tests are discussed below.

Common-Law Test
IRS examines 20 factors—derived from court rulings or common law—to determine whether someone qualifies as an independent contractor or an employee for purposes of federal income, Social Security, Medicare, and unemployment taxes.

Similar factors for determining employee or independent contractor status apply under:

• the National Labor Relations Act, which specifically exempts independent contractors from its employee protections (29 U.S.C. § 152(3));

• the Occupational Safety and Health Act (OSHA Standard Interpretation Letter “Information on Temporary Workers, Particularly Those in the Electronic Assembly Industry,” 4/30/96); and

• most federal discrimination laws, including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act.

The IRS test often is termed the “right-to-control test” because each factor is designed to evaluate who controls how work is performed. Under IRS rules and common-law doctrine, independent contractors control the manner and means by which contracted services, products, or results are achieved. The more control a company exercises over how, when, where, and by whom work is performed, the more likely the workers are employees, not independent contractors.

A worker does not have to meet all 20 criteria to qualify as an employee or independent contractor, and no single factor is decisive in determining a worker’s status. The individual circumstances of each case determine the weight IRS assigns different factors.

NOTE: Employers uncertain about how to classify a worker can request an IRS determination by filing Form SS-8, “Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.” However, some tax specialists caution that IRS usually classifies workers as employees whenever their status is not clear-cut. In addition, employers that request an IRS determination lose certain protections against liability for misclassification.

20 Factors
The 20 factors used to evaluate right to control and the validity of independent contractor classifications include:

• Level of instruction. If the company directs when, where, and how work is done, this control indicates a possible employment relationship.

• Amount of training. Requesting workers to undergo company-provided training suggests an employment relationship since the company is directing the methods by which work is accomplished.

• Degree of business integration. Workers whose services are integrated into business operations or significantly affect business success are likely to be considered employees.

• Extent of personal services. Companies that insist on a particular person performing the work assert a degree of control that suggests an employment relationship. In contrast, independent contractors typically are free to assign work to anyone.

• Control of assistants. If a company hires, supervises, and pays a worker’s assistants, this control indicates a possible employment relationship. If the worker retains control over hiring, supervising, and paying helpers, this arrangement suggests an independent contractor relationship.

• Continuity of relationship. A continuous relationship between a company and a worker indicates a possible employment relationship. However, an independent contractor arrangement can involve an ongoing relationship for multiple, sequential projects.

• Flexibility of schedule. People whose hours or days of work are dictated by a company are apt to qualify as its employees.

• Demands for full-time work. Full-time work gives a company control over most of a person’s time, which supports a finding of an employment relationship.

• Need for on-site services. Requiring someone to work on company premises—particularly if the work can be performed elsewhere—indicates a possible employment relationship.

• Sequence of work. If a company requires work to be performed in specific order or sequence, this control suggests an employment relationship.

• Requirements for reports. If a worker regularly must provide written or oral reports on the status of a project, this arrangement indicates a possible employment relationship.

• Method of payment. Hourly, weekly, or monthly pay schedules are characteristic of employment relationships, unless the payments simply are a convenient way of distributing a lump-sum fee. Payment on commission or project completion is more characteristic of independent contractor relationships.

• Payment of business or travel expenses. Independent contractors typically bear the cost of travel or business expenses, and most contractors set their fees high enough to cover these costs. Direct reimbursement of travel and other business costs by a company suggests an employment relationship.

• Provision of tools and materials. Workers who perform most of their work using company-provided equipment, tools, and materials are more likely to be considered employees. Work largely done using independently obtained supplies or tools supports an independent contractor finding.

• Investment in facilities. Independent contractors typically invest in and maintain their own work facilities. In contrast, most employees rely on their employer to provide work facilities.

• Realization of profit or loss. Workers who receive predetermined earnings and have little chance to realize significant profit or loss through their work generally are employees.

• Work for multiple companies. People who simultaneously provide services for several unrelated companies are likely to qualify as independent contractors.

• Availability to public. If a worker regularly makes services available to the general public, this supports an independent contractor determination.

• Control over discharge. A company’s unilateral right to discharge a worker suggests an employment relationship. In contrast, a company’s ability to terminate independent contractor relationships generally depends on contract terms.

• Right of termination. Most employees unilaterally can terminate their work for a company without liability. Independent contractors cannot terminate services without liability, except as allowed under their contracts.

Economic Reality Test
Independent contractors are not covered by FLSA’s minimum wage and overtime protections for employees. Court interpretations have established an “economic reality test” for determining whether someone is an employee or independent contractor under FLSA.

Rather than examine who controls how work is performed, the economic reality test evaluates whether a worker is economically dependent on a company’s business. The greater the economic dependence, the more likely the worker qualifies as an employee protected by FLSA.

Similar to the common law test, the economic reality test focuses on the degree of control exercised by the employer as an essential factor in determining whether an employer-employee relationship exists. While no single factor is controlling or decisive in determining whether an employment relationship exists, the facts and circumstances that courts and federal enforcement officials examine in deciding whether an individual is an employee or an independent contractor are:

• the degree to which the employer controls or directs the manner in which work is performed,

• whether the worker’s opportunity for profit or loss depends on his or her managerial skills,

• whether the worker’s duties are performed for the employer on an ongoing or permanent basis,

• whether the service performed by the worker is an integral part of the employer’s business,

• the extent of the worker’s investment in equipment or materials needed to perform the job, and

• the degree to which the worker is engaged primarily for the benefit of the employer.

Worker’s Compensation
In many states the Worker’s Compensation Insurance Laws have been written to make a business that has hired an independent contractor responsible for work place injuries if the business has not verified that the independent contractor has his own worker’s compensation policy.

This is another was to ascertain if a person is in fact an independent contractor. If upon being quizzed about worker’s compensation, the employee who is acting like an independent contractor seems to know nothing about worker’s compensation insurance and his need to have a policy as an independent contractor – any government investigator or auditor is going to see through the smoke and mirrors that the business has attempted to use to qualify someone who is in fact not an independent contractor as an independent contractor.

Are there penalties for misclassifying employees as independent contractors?
There are penalties for misclassifying employees. If the IRS finds your independent contractor was really an employee, it may assess you:

An amount equal to 1.5% of wages (3% if no information return was filed) if you erroneously treated a worker as an independent for income tax withholding purposes. (The worker is still liable for 100% of his/her income tax bill) [IRC Sec. 3509 (a)(1), (b)].

20% of the worker’s share of Federal Insurance Contribution Act (FICA) tax that you should have withheld (40% if you failed to file an information return) if you erroneously treated a worker as an independent for FICA tax purposes [IRC Sec. 3509(a)(2), (b)].

A civil penalty equal to 100% of the total amount of tax evaded or not collected, if the IRS finds your misclassification was an attempt to evade or defeat employment taxes. The responsible person must receive written notice by mail or in person [IRC Sec. 6672]. There may also be a criminal penalty of a $100,000 fine ($500,000 in the case of a corporation) and/or five years in prison [IRC Sec. 7201].

Up to $50 per Form W-2 you should have filed but didn’t (maximum penalty, $250,000 per calendar year) because you treated the worker as independent.

A civil penalty of $50 per W-2, if the IRS finds you willfully failed to furnish correct W-2s to employees [IRC Sec. 6674]; there’s also a criminal penalty consisting of a $1,000 fine and/or one year in prison for willful failure to furnish W-2s as required [IRC Sec. 7204].

Interest on past-due tax payments (although IRS’s Proposed Regulations would allow an interest-free adjustment if you failed to file Form 941 for a given quarter solely because you improperly failed to treat any individuals as employees for that quarter (and therefore failed to pay over any withheld income tax or employer-employee FICA tax) [26 CFR 31.6205-1].

When in doubt
We encourage any client of A Plus Benefits who has a question about independent contractors and employees to call us for direction. We are committed to keeping you far from the danger line that can be crossed when an employee is improperly allowed to work as an independent contractor.

Randall Barker is the VP of Human Resources for A Plus Benefits, Inc.Read Randall’s previous HR Update.

Read Randall’s previous .

Q: Do I have to pay overtime to a nonexempt employee who is working two different jobs? If so, how do I calculate it?

A: According to the federal Fair Labor Standards Act (FLSA), employers must pay overtime to nonexempt employees for all hours worked over 40 in a single workweek, even if the employee is working two separate jobs for the same organization.

A common example is the employee who offers to provide custodial duties in the evening after his regular shift is over. The organization knows the individual and is confident that he will do a great job – plus the organization knows the employee needs additional income and this seems a great way to help both the organization and the employee.

However, this apparent win-win situation can create a huge problem if the employee’s pay is not calculated according to Department of Labor regulations.

Calculating overtime can be a little tricky when an employee works two or more jobs for which the employee is paid different hourly rates since overtime must be based on the employee’s “regular rate of pay.”

Typically, the employee’s regular rate of pay when he works two jobs (or more) is calculated as the weighted average of the different rates. For example, the regular rate of an employee who works 35 hours per week at $15 per hour as a machine operator ($525), and works 10 hours that same week at $7 per hour cutting the grass outside the plant ($70), is $595 divided by 45 hours, or $13.22 per hour.

35 hours x $15 + 10 hours x $7 = $525 / 45 hours = $13.22 (regular rate of pay)$525 (regular earnings) + 5hours x $6.61 ($6.61 is the premium rate for 5 hours of overtime – that base rate has already been included) This week’s pay would be $558.05.Thus, the overtime rate for this employee is one and one-half times $13.22, or $19.83 per hour, regardless of which job the employee performs during the extra hours. The employee’s regular and overtime rates will vary from week to week with the number of hours spent performing each job.

Thus, the overtime rate for this employee is one and one-half times $13.22, or $19.83 per hour, regardless of which job the employee performs during the extra hours. The employee’s regular and overtime rates will vary from week to week with the number of hours spent performing each job.Thus, the overtime rate for this employee is one and one-half times $13.22, or $19.83 per hour, regardless of which job the employee performs during the extra hours. The employee’s regular and overtime rates will vary from week to week with the number of hours spent performing each job.Alternatively, an employer and employee may agree, before the work is performed, that the overtime rate will be based on the regular rate that applies to the type of work performed during the hours in excess of forty (it is a good idea to memorialize this agreement with a signed document prior to having the work performed). Therefore, if an employee spends 35 hours in a week working as a machine operator at $15 per hour, and five hours a week cutting the grass at $7 per hour, the overtime rate for any additional hours spent cutting the grass is $10.50 per hour. Conversely, the overtime rate for any additional hours spent working as a machine operator is $22.50. This method of computation is available for hourly employees only and does not apply to nonexempt salaried employees.

A “red flag warning” – do not use the alternate method of calculating overtime unless you have a written agreement with the employee to pay the overtime premium on the rate of pay connected to the work done after 40 hours. A Plus Benefits will not calculate overtime using the alternate method unless a written agreement between the employee and employer is submitted with the payroll reports. A Plus will require new documentation (a new signed and dated agreement) for each week that the alternate method is used. If an organization is audited by the Department of Labor and claims to have used the alternate method of calculating overtime but does not have a written agreement for each week that the alternate method was used, the Department of Labor will require the organization to pay each employee affected back-pay along with some penalties and interest.

The overtime requirements, instituted in 1938 to prevent employers from taking advantage of employees, can turn what seems to be a “win-win” situation (allowing your employees to perform a necessary job and earn extra money) into a penalty for employers. As a result, some employers hire independent contractors to do these jobs (i.e. custodial work) at straight time rates instead of paying their own employees the overtime.

Beware – claiming that your employee was an independent contractor while performing additional work will surely result in fines and penalties if your organization is audited by the Department of Labor, be aware that the Department of Labor does not have a long term payment program - if an organization is found guilty of overtime violations the organization is generally expected to cut a check for any back-pay as well as interest, fines, and penalties within several days of the audit’s completion.

Our next HR Update will examine the subject of independent contractors and the hurdles that need to me cleared in order for a person to legally be an independent contractor.

Randall Barker is the VP of Human Resource for A Plus Benefits, Inc.

Read randall’s previous HR Update.

A Vietnam veteran with post-traumatic stress disorder posed a threat to others and was properly terminated by the U.S. Postal Service, but USPS failed to explain why he was denied pay, leave, and disability retirement, the U.S. Court of Appeals for the Tenth Circuit ruled Aug. 30, remanding the case on those issues (Jarvis v. Potter, 10th Cir., No. 06-4090, 8/30/07).

On two occasions, Lanny Bart Jarvis struck and kicked a co-worker when she startled him, and he later struck another co-worker who shoved him in passing. He was able to restrain himself from striking his manager when she startled him.
Jarvis told the supervisor he had PTSD and asked that co-workers be told to announce themselves before approaching him.

When Jarvis was terminated after an investigation, he sued under the Rehabilitation Act in the U.S. District Court for the District of Utah, which ruled for USPS. That court found that the risk of violence could not be eliminated by a reasonable accommodation because the accommodation Jarvis sought—that co-workers announce themselves—would not eliminate the possibility that he might be startled accidentally. His request was not reasonable, the district court said, because it attempted to shift to co-workers the burden of preventing him from engaging in violence.

Qualification at Issue
“The postal service does not dispute on appeal that Mr. Jarvis is an individual with a disability,” the Tenth Circuit said. “The issue before us is whether he is ‘otherwise qualified,’ ” it said.

The Americans with Disabilities Act, which provides guidance in Rehabilitation Act cases, defines “qualified individual with a disability” as one who “with or without a reasonable accommodation, can perform the essential functions of the employment position,” the court said. “In other words, one who cannot perform the essential functions of the job, even with a reasonable accommodation, is not an ‘otherwise qualified’ individual,” the court said.

An Equal Employment Opportunity Commission regulation defines “direct threat” as a “significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation,” the court said. The rule states that the factors at issue include the duration of the risk, the nature and severity of the potential harm, the likelihood that the potential harm will occur, and the imminence of the potential harm, it said.

“In our view, the record compels the conclusion that the postal service’s determination that Mr. Jarvis was a direct threat was an objectively reasonable decision,” the court found.

In addition to Jarvis’s three assaults on co-workers, evidence included a letter from Jarvis’s health-care provider stating that his PTSD was unlikely to dissipate and that he was a threat in the workplace. USPS also relied on Jarvis’s own statements that his PTSD was getting worse, that he could no longer stop at the first blow, and that, if he hit someone in the right place, the blow could be fatal, the court said.

“Based on this evidence, three of the four factors in the EEOC regulations—duration, imminence, and likelihood—were clearly met,” the court said. Jarvis’s “symptoms would last indefinitely, he could erupt at any moment if startled, and it was highly likely that someone would startle him, even if inadvertently.”

“The postal service was not required to ignore the risk of inadvertent startling,” the court said, affirming the district court’s dismissal of Jarvis’s discrimination claim.

However, with regard to Jarvis’s retaliation claims, the appeals court said USPS “has not explained why Mr. Jarvis was denied the opportunity to retire rather than be terminated or why he was denied pay and access to accrued vacation and sick leave while he was on administrative leave.” As a result, the court said, it was necessary to reverse the dismissal of those claims and send them back to the trial court for further proceedings.

Case #2 - Working With People - Off-Duty Conduct

In the electronic age, off-duty conduct is a growing concern for employers, with employees running controversial blogs and Web sites. While employers may be embarrassed by some off-duty behavior, attempts to curb it can be seen as an invasion of privacy.

Employee Terminated for Sex Web Site Featuring His Wife

“You can’t fire me for running that Web site,” Officer Daniel Savante insisted. “This is a free country and I can do what I like when I’m not on duty.”

“Oh no you can’t! Not when you damage our department’s reputation and make us a laughingstock in the whole community,” responded Chief Martin Dunning.

Was sex site a firing offense?

Facts: The employee, a police officer, began running a Web site in 2000 featuring sexually explicit photographs and videos of his wife. The Web site portrayed his wife in various sexual poses and activities.

In addition to running the Web site, the couple created CD-ROMs of their exploits and even held “barmeets” where fans of their Web site could meet them in person and have pictures taken with the couple. On the Web site, the employee’s face is rarely seen, although the site includes pictures of his face in photos taken at the barmeets.
Despite the notoriety of his Web site, the employee never informed the police department that he was running a sex business, although other members of the force knew about it, including another officer whom the employee had convinced to start his own online sex enterprise.

In 2001, news of the Web site reached department officials, who ordered the employee to cease all related activity. News of the Web site and the police department’s investigation also was reported by the press. The press coverage caused a strong reaction within the police force, and officers later testified that civilians taunted them with comments about the Web site. Officers also reported that as a result, morale was low.

The employee was ultimately dismissed, and a review board supported that decision. The employee sued, but the U.S. District Court for the District of Arizona sided with the employer.

Award: The employee failed to show that his First Amendment rights were violated, a divided U.S. Court of Appeals for the Ninth Circuit ruled Sept. 5 (Dible v. Chandler, 9th Cir., No. 05-16577, 9/5/07).

Discussion: In affirming the trial court, the Ninth Circuit relied on City of San Diego v. Roe, 543 U.S. 77 (2004)—which also involved a police officer and a sex business—in which the U.S. Supreme Court said that the speech may not be protected if it is detrimental to the employer even if the speech itself is unconnected to the employee’s work.

Describing the employee’s speech as “sleazy,” “vulgar,” and “indecent,” the Ninth Circuit said the police officer could not “help but undermine” respect for the police force by running a sex business and that nothing in the speech was an issue of public concern or value. The court added that the employee admitted his sole interest was not in conveying a message but instead in making money.

The Ninth Circuit (one of the most liberal and employee friendly) also dismissed the employee’s privacy and free association claims, suggesting that someone who displays and promotes his wife’s sex acts—while also sometimes participating—was on shaky ground when it came to making a privacy claim.

However, Judge William C. Canby Jr., in a concurrence agreeing only with the employee’s firing, said that although the employee’s behavior may be unpopular, it was not disruptive to the level necessary to justify violating his free speech rights.

“To apply [a] restriction to off-duty expression by a public employee, unrelated to his employment, is to reject the established principle that public employees may not be required to surrender their constitutional right of free speech as a condition of their employment,” Canby asserted.

Pointers: Employers should tread carefully when threatening action against employees for off-duty conduct—such as Web sites, blogs, romantic relationships, and criminal activity—even if there are not statutory protections for the workers, according to attorneys.

Employers generally have few statutory restrictions preventing them from taking action against employees for off-duty behavior. However, focusing on such behavior creates privacy concerns, lawyers assert.

The common law idea of employment at-will still dominates, and therefore employers can sanction employees for off-duty behavior, especially when the behavior damages the reputation of the employer.

Still, some employees have successfully challenged such actions by arguing invasion of privacy, wrongful discharge, or breach of contract.

Randall Barker is the VP of Human Resources for A Plus Benefits, Inc.

Read Randall’s previous HR update.