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In recent years, there has been a movement by many employers to hire independent contractors rather than employees, or to attempt to convert their existing employees into independent contractors. The initial impetus for the move to independent contractors was to save taxes. With an employee, the employer must pay a share of withholding tax as well as social security. Employing independent contractors frees the employer from some of these taxes. The Internal Revenue Service has taken a dim view of this move away from employer/employee relationships to employer/independent contractor relationships. The Internal Revenue Service has adopted a multi-point test with some 20 to 25 factors which its agents are to analyze in making the determination of whether an individual is truly an employee or an independent contractor. The key test, however, out of the numerous factors is the “right of control.” In essence, if the employer merely assigns a task and the individual carrying out the task can determine the method, mode, time, tools, etc. for completing the assignment, the individual is most likely an independent contractor. On the other hand, if the employer dictates the time and place for the work to be performed, the method, tools, materials and the like, the IRS will normally find that the individual is an “employee.” If the employer makes an improper designation, it not only has the obligation to pay the taxes that it failed to pay, but it must also include interest and penalty. Now, in a new ruling by the Ohio State Supreme Court, Pusey
v. Bator, the Court has given The Trial Court had held that even if the trespasser’s death was a result of YSP’s negligence, Greif Brothers was not liable because YSP was an independent contractor and, as a general rule, an employer is not liable for the negligent acts of its independent contractors. The Court of Appeals affirmed the Trial Court’s decision; however, the Supreme Court rejected the Trial Court’s reasoning, stating that although the general rule is that an employer is not liable for the negligent acts of its independent contractors, “there are however, exceptions to this general rule, several of which stem from the non-delegable duty doctrine.” The Court held that an employer may not delegate (1) “affirmative duties that are imposed on the employer by statute, contract, franchise, charter or common law, and (2) duties imposed on the employer that arise out of the work itself because the performance creates dangers to others (i.e., inherently dangerous work).” The Court reasoned that since the duty in such instances cannot be delegated, the liability also cannot be transferred. Although the facts in the Pusey case involve the negligent use of a firearm, the Court stated, “work is inherently dangerous when it creates a particular risk of harm to others unless special precautions are taken.” Applying this reasoning, one can envision that the Court might find that the storage or movement of hazardous materials, operation of dangerous equipment, and a myriad of other work environments could fall into this “exception,” preventing employers from shifting liability by engaging the services of an independent contractor. The bottom line of the Pusey decision is that an employer must take special care when determining to use an independent contractor as opposed to its own employees. First, of course, there are always the tax consequences of making the wrong election as to whether an individual is an employee or in fact an independent contractor. Secondly, there is the danger that even if an individual is in fact an independent contractor, the employer may not escape liability because of one of the exceptions to the general rule. Thirdly, since the employer has little or no control over the independent contractor by the very nature of the relationship, the employer can do less to protect itself from liability for the negligent acts of an independent contractor. And, finally, there are issues as to whether the employer can insure itself against acts of an independent contractor in the same fashion as it can insure against the negligent acts of its own employees. Thus, decisions to employ independent contractors or to substitute independent contractors for one’s own employees should be reviewed carefully with legal counsel to make certain the type of liability which attached in the Pusey case can be avoided. Gerald B. Chattman,
Esq. is a Shareholder and member of the Employment Law
Practice Group. He can be reached at gchattman@bdblaw.com
or 216.615.7354. Sexual harassment and other forms of harassment and discrimination are a fact of modern business life. Despite the professed goal of the law to eliminate discrimination and harassment in the workplace, the fact is that charges are increasing at an alarming rate. The number of sexual harassment and racial harassment charges filed with the Equal Employment Opportunity Commission (EEOC) and state fair employment practices agencies like the Ohio Civil Rights Commission (OCRC) more than doubled in the decade of the 1990's. One of the problems facing the business community today is the fact that the laws relating to discrimination and harassment are complicated and often counter-intuitive. Nonetheless, for a couple of reasons it is vitally important for businesses to comply with the law. First, discrimination or harassment in the workplace takes away from productivity - it interferes with work performance. Second, in the event that harassment occurs, the defense of a charge brought before state or federal agencies, or in court, is expensive, time-consuming, and bad for morale, even in the case of a successful defense. Recent developments have made it clear that the laws relating to harassment and discrimination have, as one of their goals, the elimination of discrimination from the workplace. One of the best ways to accomplish this goal is to promulgate, implement and enforce policies against harassment. An EEOC Enforcement Guidance specifically counsels that “. . . employers should establish anti-harassment policies and complaint procedures covering all forms of unlawful harassment.” Of perhaps as much importance is the fact that appropriate sexual harassment and discrimination training is a cost-effective way for businesses to limit their liability for violations of the law. Recent U.S. Supreme Court cases have made explicit what has always been good policy. Two cases decided on the same day in 1998, Burlington Industries, Inc. v. Ellerth, and Faragher v. City of Boca Raton, clarified the long-standing question of company liability for hostile environment sexual harassment caused by the actions of supervisory employees. The Court held that a plaintiff would no longer have to show that the company condoned harassment or even knew that it was going on. As long as the harasser was a supervisory employee, the employer was “vicariously liable.” In place of the concept of knowledge of, or participation in, the harassment, the Court gave employers an “affirmative defense” for liability if “the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and . . . the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer . . .” Shortly after these decisions were rendered by the Supreme Court,
the EEOC made it clear what an employer had to do to take advantage
of the defense provided in Faragher and The employer should provide training to all employees to ensure that they understand their rights and responsibilities.” The very next year, the Supreme Court recognized the training component of the position they set out in Faragher and Burlington and even created a “safe harbor” from punitive damage awards under Title VII for employers who “adopt anti-discrimination policies and . . . educate their personnel on Title VII’s prohibitions.” Even the EEOC has taken the position that the rule enunciated in Burlington and Faragher applies to harassment by supervisors based on race, color, sex (whether or not of a sexual nature), religion, national origin, protected activity, age, or disability. It is critically important for every employer to have a comprehensive, written sexual harassment policy and to implement the policy in the context of a training program for all employees, but especially one targeted at all supervisors and managers. Such a training program should inform management and supervisory personnel of the definition of sexual harassment, discuss how to handle complaints and most importantly, teach employees how to prevent harassment in the workplace. An appropriate program should lay out the employer’s obligations and the steps that should be taken, including adopting a strong anti-harassment policy, developing appropriate sanctions for offenders, and educating and sensitizing employees, especially supervisors, to the presence of sexual harassment. The training should start by defining and discussing the basic legal concepts - sexual harassment as gender discrimination, practical perceptions and the two (2) distinct types of sexual harassment (quid pro quo harassment; hostile work environment harassment). It should also discuss the philosophy, elements, legal consequences and reasons for the employer’s policy and instruct the participants in the proper handling of sexual harassment complaints and methods of prevention. Such training is often done in conjunction with a review and update of the existing sexual harassment policy, especially if changes are being made. The program can then be conducted on the revised policy and can provide the perfect vehicle for publishing and disseminating the new policy to the employees. While it is ideal to implement a new sexual harassment policy (or to restate an existing policy) through a mandatory session for all managerial and supervisory personnel, natural turnover in employment and the normal modification and procession of the law in the area make it important that such training be repeated on a regular, periodic basis. A recent article in the New York Law Journal cautions: Companies should train employees in policies and procedures at the outset of employment and periodically throughout the employment relationship. In particular, employees must be sensitized to diversity issues and trained to avoid, and recognize, conduct which may be perceived as inappropriate in the workplace and which can serve as a basis for claims of sexual and other forms of harassment and discrimination. A properly crafted sexual harassment policy, coupled with specific training and education, can go a long way toward eliminating the problem of sexual harassment in the workplace. They provide an added benefit of helping an employer properly defend itself if charges and suits do get filed. Every employer should consider this important, and cost-effective, method to limit its liability from potentially devastating sexual harassment charges. Douglas J. Paul, Esq. is a Shareholder and member of the Litigation and Employment Law Practice Groups. He can be reached at dpaul@bdblaw.com or 216.615.7340.
On The Ohio Health Care Association Annual Convention in On On Out and About - Recent Presentations: Gerald B. Chattman
and Dale A. Nowak
(Buckingham ClevelandSM) presented
at a Risk Management Training Seminar designed for companies who
use temporary employees; sponsored by The Reserves Network on Tod T. Morrow (Buckingham
CantonSM) spoke on “Avoiding
Liability for Employment Discrimination” at the Tuscarawas County
Society for Human Resource Management Chapter on
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