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COVID-19 has caused many conflicts for Colorado businesses that have been largely unpreventable and also unavoidable. However, with advance notice and planning, the risk of litigation related to employee reclassification may be avoided.
In Colorado, many business owners are seeing transitions in their employee statuses as COVID-19 forces reimagined working environments. An increase in hiring contract, part-time, and freelance workers is being seen across many industries to save on wages and benefits while the economy recovers.
According to a new study by Upwork, 2 million Americans have started freelancing in the past 12 months.
If you are a business owner considering re-classification, or hiring a new type of workforce, consulting a business attorney to ensure your ducks are in a row may be the best first step.
Below are 3 hot tips to bear in mind as you shift elements of your employment structure that could help to ward off litigation and may keep your workforce happy.
1. Consider Focusing Efforts on Keeping Employees Whole
Reclassification to non-exempt status could raise questions and concerns with your employees. Addressing these concerns early may be your best bet when avoiding potential litigation. The three elements that could keep your employees “whole” are salary, health insurance, and PTO (or paid time off).
Salary
When you make the decision to re-classify employees it could mean you weren’t able to raise their salary. However, in order to try to prevent potential litigation, it may be crucial that this decision does not result in a pay cut for your employees. Opportunities for additional pay could be a good way to boost morale, as well as outlining the steps you are taking to ensure employees are receiving the same take-home pay they had before the reclassification.
Health Insurance
Health insurance is a necessity in today’s society. It is crucial that you assure your employees they will still have access to health insurance with the reclassification. Relay to your employees that under the Affordable Care Act, employees are still eligible for coverage as long as they are working a minimum of 30 hours per week. Having concrete answers and facts to back them up may help you to retain trust and openness with your employees.
PTO
Losing perks like PTO can be detrimental to the relationship you have with your employees. Your PTO policy determines whether a reclassified employee will retain these benefits. Revisiting your policy to ensure the PTO is applied to exempt and non-exempt status employees may create trust with your employees. Ensuring that all of your employees have access to these benefits could deter potential litigation.
2. Consider Keeping Communication Open and Honest
Your employees may confuse reclassification with demotion. Ensuring your employees that this change is happening to comply with government regulations and is not a reflection of them as an individual or their work could help you to ensure trust continues in the employer-employee relationship. Within this new status, an easy way to avoid litigation can be to require liability insurance from freelancers. Allowing your employee to name you on the policy may continue the fostering of trust.
Transparency may be the most important aspect of reclassification. Open and honest communication can ensure that your employees are not hearing rumors around the office and believing misinformation. Building on the trust you have with your employees and having these open conversations, either through individual or office-wide meetings, may only strengthen these relationships and could help you to avoid litigation in the future.
3.Consider Highlighting the Benefits of the New Status
Reclassification could be a positive change in many circumstances. Overtime pay may be a huge incentive. The guidelines, such as whether OT pay is available or limited, should be clearly laid out to your employees. Using a time-tracking reporting system may reduce confusion and could make it easier on you and your employees when identifying inefficiencies and tracking your labor costs.
Reclassification may also result in more time off or flexibility within one’s schedule. If overtime costs are limited, there may be less pressure on employees to stay late or work outside of the office. Knowing and understanding the parameters could lead to better work-life balance for your employees – which they may thank you for.
Developing a business contract with a qualified attorney that outlines the agreement between your business and your newly reclassified employees could be essential to the management of data, information and the employment relationship. A business attorney may be able to assist entrepreneurs who are creating new employment approaches avoid litigation and safeguard their assets with their knowledge of the relevant systems. Consulting an attorney before reclassifying may be your best defense against litigation due to reclassification.
Ellie Lockwood is a preeminent female commercial and business litigation attorney in the Denver Metro area with experience in commercial litigation and business disputes, intellectual property litigation, and environmental and natural resource litigation. She is the commercial litigation practice group leader for Snell & Wilmer L.L.P.’s Denver office, and an instant resource to business owners and other legal professionals on risk mitigation strategies throughout the Mountain West.