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HRMN_408 Assignment 1 Independent Contractor or Employee

Independent Contractor or Employee?

1. Summary

Relevant Facts of the Case

It is a fact that the Capital International Security Limited (CIS) and the Prince employed the agents on a joint basis. It is also factual that the work performed by the agents was in principal simultaneously beneficial to the CIS and the prince (, 2006). The arrangement that the Prince had with the CIS perfectly fits the bill on the requirements of the joint employment. Hiring duties were vested in the two parties: the Prince (who exercised this function through Abushalback) and the CIS. CIS carried out the advertisement of the jobs and the screening of the resumes that had been sent by the potential employees while Abushalback conducted interviews and did the actual hiring activity. This shows that the Prince, through his agent had greater responsibility and control of the overall employment decisions.

Employee handling was also a joint responsibility that was performed by the two, CIS and the Prince (through Abushalback). Abushalback handled issues involving the compensation of the employees and the designing of the work schedules. CIS was responsible for instilling discipline into the employees to ensure that they followed the set rules and regulations. Apart from discipline CIS also changed the terms of employment of the security agents. In my opinion, the agents should be liable to receipt of the overtime dues and compensation because they were employees and not contractors under the Fair Labor Standards Act. They were entitled to overtime pay (, 2006).

Actual Outcome

The appellate court's final determination was that the bodyguards or the agents were employees of the security company and they were not independent contractors. According to the Fair Labor Standards Act, the court also ruled that both the Prince and the Capital International Security Limited were liable for meeting the overtime payments and other benefits that accrued to the employees of the organization. Joint Employment and the regarding of the bodyguards as employees and not bodyguards were also necessary because there was a prior agreement to share the employees’ services between the company and the Prince. As a matter of the existing economic reality, the court also determined that the bodyguards were not in employment on their own accord but they were depended on the joint employers, that is the Capital International Security and the Prince, who as previously stated, exercised his control through his representative Abushalback. Their mode of operation and the nature of their duties did not permit them to be actively engaged in jobs for other companies and they had to follow the rules and regulations as determined by the company. For these reasons, the court, therefore, decided that they were employees under the FLSA ACT (, 2006).

2. Classification Test

One classification test that could be employed is the ADEA act of 1967. ADEA act means the Age Discrimination in Employment Act that was enacted in 1967 to reduce the level of discrimination against the older workers who were from time to time forced to go for involuntary retirement. Age discrimination in employment was also being used as an avenue to deny the youth viable job opportunities hence leading to unemployment, idleness, and the deterioration of the employability skills that these workers possessed (US Equal Employment Opportunity Commission, n.d.). Under the ADEA act, the legal knowledge of principal and agent applies in the use of economic realities criteria to assess whether an individual is an independent contractor or an employer. An examination of five factors is carried out by the courts in ADEA (US Equal Employment Opportunity Commission, n.d.).

They consider the extent of control that the employer has on his workers, the nature of supervision, how the payment is remitted to the workers, the person who bears the greatest responsibility in meeting the operational costs of the job duties, the rules in place, and whether skills are found in the employment area. Other considerations include how the employers have scheduled the type of work that is done and the procedures put in place to measure the performance of the employees. The above factors mirror and are similar to the facts of the case between Schultz Verses Capital International Security. As a result, the bodyguards that provided the security services will still be considered as employees whose rights to compensation are covered under the Fair Labor Standards Act.

3. Virginia State Law

Under the Virginia State law, the results would have been similar because of the following: The law states that an independent contractor is an individual who is offered work by the individual but the company does not determine the processes in which the work should be carried. The hiring company does not also determine the hours and exercises less control over the approaches taken by the employer to perform his duties. The Virginia Unemployment

Compensation Act borrows from the Federal Insurance Compensation Act and the Federal Unemployment Act to designate whether an individual shall be deemed to be an employee of an organization. It is only the Virginia Employment Commission that can determine whether an individual is not an employee based on the Federal Insurance Act and also based on the Federal Unemployment Act.

The factors that the Virginia State law considers are also related to the consideration of the Schultz Vs. Capital International Security Case and they include the following considerations: the level of instructions issued to the employee concerning the employment, the level of control if the employer has the power to do the actual hiring, and the facilitation of the remittances of the employee's dues. These factors are also found in the internal Revenue (IRS ruling) 87-41 on the Twenty Factors (Virginia gov., n.d.). Because of these legal Virginia law considerations, the verdict of the judges would remain the same under Virginia law.

Exemptions to Employment under the law in Virginia is about the following groups of workers: truck drivers, the real estate agents and the insurance workers who receive a majority of their payment in commission, workers on a piece of land, officials that have been selected by the people through an election, licensed people who work as counselors and private consultants, petroleum, taxi, the students who are mostly carrying out part-time work as they study, the court workers including reporters, people under an internship in a medical facility and the social workers. When you look at this list, the bodyguards are not found on the list of exemptions from classification under the law in Virginia. As a result of this, the exemption from the classification of employment of the state law in Virginia does not apply in this scenario (Virginia gov., n.d.).

4. Classifying Workers

Under the law in Virginia, the Independent contractors are not eligible for the employee compensation programs or benefits schedule. They are also not allowed to obtain unemployment insurance benefits. Laws concerning the wages that the employees receive and the number of hours worked do not apply to these types of employees. It is only the employees under the law who has specific employment protection and the employers sometimes can face a high labor cost because it is his responsibility to meet the employment requirements of the workers (Virginia gov., n.d.).

If an employer misclassifies an employee as an independent contractor there are fines that he will pay if he is found guilty of the offense. In the state of Virginia, the lawmakers in the House of Delegates made approved a law where the business that has found guilty of misclassifying the workers will pay a fine to the tune of $1000 per worker who is misclassified. If the business under consideration is a repeat offender, the amount of money that they will pay as fine can increase between $ 2500 to $ 5000 (Virginia gov., n.d.).

Misclassification of the employees can make the business or the employer have some illegal benefits such as the paying of low levels of tax than what is required in an actual case of tax avoidance because the employers are not supposed to pay taxes for independent contractors. Other benefits include a low level of responsibility and employment costs especially the labor costs (Virginia gov., n.d.). If someone is regarded as an independent contractor rather than being treated as an employee, he will not benefit from a range of employment protection laws, safety compliance, and the compulsion of labor payments for services rendered on an overtime basis.

Classification of the workers as independent contractors can also make the organization escape the hiring of the workers on a permanent and pensionable basis. The firm will deal with less union agitation issues for good terms of service and proper working conditions.

5. Three Preventive Steps

The company should have come up with a procedure for the identification and assessment of the classification status to ensure strict compliance. It would have been possible to outsource some of the functions from another organization so that the independent contractors are clearly defined and differentiated from the employees. The company should have used the existing economic realities test to comprehend the differences between the workers classified as independent contractors and the employees. This test is available on state legal documents and government resource facilities (Fournier, 2015).

References (2006). FindLaw's the United States Fourth Circuit case and opinions.

Retrieved 7 September 2020, from

Fournier, J. (2015). Misclassification: 5 Ways to Reduce Your Risks. Retrieved 7 September

2020, from

Virginia gov. IRS 20 Factors and Virginia Exemptions for Employee Classification | Virginia

Employment Commission. Retrieved on: 7 September 2020, from

US Equal Employment Opportunity Commission. The Age Discrimination in Employment Act of 1967 | U.S. Equal Employment Opportunity Commission. Retrieved 7 September

2020, from

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