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Do any of your employees send personal e-mails or other messages that are written and sent on company equipment?
Are you trying to save money by classifying
some workers as independent contractors instead of employees?
It's always wise to review employment practices
and, if needed, amend
the employee manual.
This year, because of recent court rulings and activity at the federal level on the above topics, we thought it would be a good idea to take a fresh look at them:
- THE EXPECTATION OF PRIVACY in personal communications using the employer's computer and other communication systems can be tricky.
In the past, employers have had the right to any material, such as e-mails, written or received on any office equipment. But a few recent court opinions have veered away from this—and, you might think, away from common sense and conventional wisdom. The courts seem to be looking for any reason to protect an employee's expectation of privacy in personal communications.
One such case, Quon v. Arch Wireless Operating Co. Inc. (http://tiny.cc/3jlcm and http://tiny.cc/6ny8x), involved an allegation of a warrantless search and seizure of private text messages by a government employer. Although several of the issues related to the employer as a municipality (as opposed to a private sector employer), we will highlight one important aspect of the decision that applies to all employers.
The employer issued to the employee, a police officer, a pager that doubled as a text message device. The employer used a typical employment manual provision that states that all information stored in the employer's computer system was considered employer-owned property, with no expectation of privacy for the employee. There is an indication in the opinion that the employment manual provision preceded the purchase and distribution of the pagers.
The employer had an unwritten practice and policy that permitted employees to use the text message devices for personal communications, no questions asked, as long as the employees reimbursed the employer for the cost of excess text messages. The employee in this case had taken advantage of this policy on several occasions and had paid the excess charges. The court pointed out that the employer had never checked any of the private messages.
In other words, the employment manual said one thing, and the employer did something differently.
In the matter at issue, the employer decided to look at the text messages for reasons that the U.S. Court of Appeals (9th Circuit) ultimately decided were unreasonable.
The court found that the employee had an expectation of privacy in the text message data, even though the employment manual said otherwise. It cancelled the effect of the employment manual because the employer did not act consistently with this provision.
Lesson learned: Be careful about establishing unwritten practices and policies that differ from those in the written employment manual. Update the manual if needed.
Another aspect of the Quon case and at least one other case, Stengart v. Loving Care Agency Inc., involves the detail needed to create an enforceable electronic device policy.
The employment manual in the Quon case did not specifically mention a text message device or a pager. The court suggested that a general description of electronic equipment in the employment manual might not have been specific enough. The New Jersey court in Stengart also refused to enforce a vague employment manual provision and protected private e-mails between a former employee and her lawyers.
Lesson learned: Be as specific as possible in identifying the electronic devices provided to the employee.
- OVERTIME AND INDEPENDENT CONTRACTOR STATUS require careful review.
Both the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) have recently put into place aggressive programs to enforce federal laws relating to employee status and overtime. The federal government has identified ample funding for this purpose.
The DOL enforces the Fair Labor Standards Act, the federal statute that governs minimum wage and overtime pay.
An employer's risk can be substantial if a worker's status is misclassified. Say, for example, an employer treats an individual who works in excess of 40 hours per week as if he or she were an independent contractor. The employer pays the individual a flat rate. If the DOL determines that the individual is not an independent contractor but rather an employee, the employer will owe overtime back pay at the rate of time and one-half, plus penalties, interest and possibly attorney fees. The limitation period is generally two years, so the employer may owe up to two years' worth of overtime pay, penalties and interest for one or more employees in the same situation.
The IRS may have an interest in the same case in that the employer will have failed to pay the so-called employment tax, including Social Security, employer withholding tax and state charges. Again, a finding of delinquency may result in back tax awards, plus penalties, interest and attorney fees.
Determining whether an individual is an employee or an independent contractor is a complicated analysis. For more information, visit the IRS page titled
"Independent Contractor (Self-Employed) or Employee?"
The basic concept is whether the employer controls the individual. If so, the conservative advice is to treat the individual as an employee and not an independent contractor. The exposure to liability—back charges, penalty, interest and attorney fees—is usually not worth the risk of stretching the definition of independent contractor in a borderline case.
In conclusion, look carefully at your employment manual in order to bolster the provisions about expectation of privacy in employer-owned equipment, and make sure your actual practices follow the provisions in the manual.
Also, be careful about trying to save money by treating an individual as an independent contractor. It could backfire.
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