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Independent Contractors
2014 Legislative Session: Running Updates

Each year, the Hawaii Employers Council provides its members with updates on labor and employment law bills that are being addressed by the legislature. One of those documents, the Legislative Digest, is actually currently available to the general public, and can be accessed here:  HEC Legislative Updates.

Bills that are still alive as of the Second Lateral deadline address (1) the minimum wage, (2) payment of wages via direct deposit and pay cards, and (3) workers’ compensation drugs, fee schedule and settlements.

For the 2014 Legislative Session, the Legislative Digest is available for the following key deadlines:

  • Bills Introduced (available)
  • First Lateral (available)
  • First Crossover (available)
  • Second Lateral (available)
  • Second Crossover (available)
  • Sine Die  (available)
  • Veto Deadline (available)

As more deadlines pass, I will update this blog entry to indicate when the most recent Legislative Digest is available.

Other updates, such as articles providing a detailed explanation of several of the significant measures and talking points on certain bills, however, are available only to HEC members.

Employers (Generally) Own Creative Works Of Their Employees

Over the years, I have had many clients ask me who owns the intellectual property rights to the creative works of their employees.  This question has arisen in a variety of situations, ranging from design companies, to companies that are asking their employees to assist with company branding.

In JustMed, Inc. v. Byce (9th Cir. April 5 ,2010), the Ninth Circuit recently gave us some guidance on this issue.  In issuing its decision, the court first noted that the federal Copyright Act provides that copyright ownership “vests initially in the author or authors of the work.”  The court then noted, however, that an exception to this rule exists under the “works made for hire” doctrine, where the “employer or other person for whom the work was prepared is considered the author” and owns the copyright, unless there is a written agreement to the contrary.

The court also explained that a “work made fore hire” is a “work prepared by an employee within the scope of his or her employment.  Therefore, works created by employees belong to the employer, but works created by an independent contractor remain with the original author.

In this case, the court ruled that the original author was an employee, and not an independent contractor.  Interestingly, there were factors that supported a finding that the author was either an employee or independent contractor, and the deciding factor was that the employer was a “small start-up” company that conducted business more informally.  Therefore, it was more difficult to decide whether the individual in question was an employee or independent contractor, and for the purposes of this particular case, it should not make the company more susceptible to losing control over products created within the company.  Go figure.

IRS To Audit 6000 Employers On Independent Contractors

The Internal Revenue Service has recently announced that it will be conducting random audits of approximately 6,000 U.S. employers for employment tax compliance and proper classification of independent contractors.  The audits will be conducted over the next three years, and will include employers of all sizes and types, including non-profit organizations.

The audits are intended to serve two purposes:  (a) generate revenue from non-compliant employers  and (b) serve as a statistical sample of employers that are in compliance while identifying areas of non-compliance and techniques used to avoid employment taxes.  The audits will focus on worker classification, fringe benefits, non-filers, officer’s compensation, and employee expense reimbursement.

Oftentimes, employers are tempted to classify workers as independent contractors, rather than employees, in order to save costs on employee benefits and employment taxes.  Employers should be aware, however, that incorrectly classifying employees as an independent contractor can lead to hefty penalties and fines.  In addition, employers can also be liable for other claims, such as medical bills, workers compensation benefits, and unpaid overtime, should they arise.

Employers are advised to check whether their workers are properly classified as employees or independent contractors.  You can view the federal guidelines on independent contractors here and the State of Hawaii guidelines here.  You should also contact an experienced labor and employment attorney if you need assistance interpreting these guidelines.

FedEx Delivery Drivers are Independent Contractors

Earlier this week, in FedEx Home Delivery v. NLRB (D.C. Cir. April 21, 2009), the U.S. Court of Appeals for the D.C. Circuit ruled that FedEx Home Delivery drivers were independent contractors, and not employees under the National Labor Relations Act.

In reaching its decision, the court noted that the drivers appeared to share many “characteristics of entrepreneurial potential,” such a being able to use their trucks for any personal or commercial purpose, to serve multiple routes, to hire and fire their own drivers, and to assign their contractual rights to delivery routes without obtaining the company’s permission.

This decision is significant because the D.C. Circuit utilized an “entrepreneurial” standard for the “independent contractor” test under the NLRA, instead of the multi-factor common-law test.