Liability and Maintenance

NARPM* 2015 Convention Workshop: Liability and Maintenance

Speaker:  C.R. Wright, Partner, Fisher & Phillips, LLP

It is always best to consult a lawyer before making changes to your company.  These notes were written based off the information provided by C.R. Wright, an attorney specializing in labor-related cases.  Please contact him if you have any further questions.  His web site is linked above.

• Hiring anyone under 18 that aren’t your kids opens you up to a lot of liability.  You need to be aware of a lot more laws so it is safer not to go there. 
• In agreements don’t refer to your independent contractor as an employee.
• An employee CANNOT waive their rights to overtime, etc. This law originated in 1930s when sweat shops were prevalent.  They took away the right to waive them so the businesses could not use it as a loophole.
• A W-2 is for an employee.
• Bonuses are included in court when calculating whether you paid correct overtime amount to your employee.
• Do you need to track salary employees hours?
  • Yes, the responsibility lays on the employer to prove they didn’t work overtime if the employee becomes disgruntled and sues you. The reason for this is because most salaried employees are not classified properly.
• Some exemptions for overtime payment:
  • Admin exemption: a person who can call shots without getting approval.
  • Executive Exemption: a supervisor who is over two or more full-time employees.
  • Professional Exemption: An indiviadual with a prolonged course of study that is more than a bachelors degree.  CPAs are an example.
  • Outside salesperson Exemption: a salesperson who calls on someone at their place of business.  They are not at the office calling people.
  • Highly compensated employee Exemption: An employee making over $100,000 who performs some of the duties listed above.
• Individual you pay and issue a 1099 to do work are considered independent contractors.
• Real estate agents usually treated as consultants/contractors.  The legal trend now is to call them employees. Brokers are the exception.
• Commission based property manager:  You need to show they are admin person in order to qualify for overtime exemption
• Federal contractors : go to fedspending.org to see if you are an federal contractor
• Vendors who are not a corporation will likely be considered an employee of your company.
• Vendor packets need to talk about business interactions.  The wording should not make it seem like they are your employees.  The wording should imply the vendor and property management office are independent.  Take out any rules that say “no ___” or “don’t do this” since that sounds like an employee handbook.
• To determine if someone is an employee of independent contractor, ask:
  • How much control do I have over this individual?
    • A lot is an employee; a little control is a contractor.
  • Are they are integral part of your business?
  • Do you affect their profit or loss?
  • Is there permanency to the relationship?
  • Are they economically dependent on your business?
    • If the answer is yes, then they are considered an employee even if you classify them as a contractor.
    • Vendors who do mostly your work (over 50% comes from your company) are usually classified as an employee in court
• FLSA is “at war” with people misclassifying employees
  • Targeted industries: real estate agents
• Individual can go back three years to claim wages
• If a violation is found, you need to pay back penalties and civil penalties and attorney fees.
• Even if you pay for job they can come after you for failure to withhold taxes.

* National Association of Residential Property Managers (narpm.org)