employment presentation

Top Five Employment Law Issues for Accounting Firms

Laura FriedelLevenfeld Pearlstein, LLC

June 9, 2014

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Five Issues:1. Transition Planning While Avoiding Age

Discrimination Claims2. Technology in the Workplace3. Independent Contractor or Employee4. Restrictive Covenants – Recent Developments5. Compensating Employees Legally

Transition Planning

Two Topics:1. When is a partner protected by age

discrimination laws?2. What are you getting yourself into with

transition agreements?

Transition Planning: When are Partners Protected by ADEA?

Key Points:• ADEA doesn’t have a “partner exception”• ADEA only sees two groups – employers

(owners) and employees• If partner is to be considered outside

ADEA’s protections, the firm has to establish that he’s an owner rather than an employee

Transition Planning: When are Partners Protected by ADEA?

As the Supreme Court explained in 2003:“an [owner]is the person, or group of persons, who owns and manages the enterprise. The [owner] can hire and fire employees, can assign tasks to employees and supervise their performance, and can decide how the profits and losses of the business are to be distributed. The mere fact that a person has a particular title – such as partner … should not necessarily be used to determine whether he or she is an employee of a proprietor.”

Transition Planning: When are Partners Protected by the ADEA?

Key questions to ask:1. Can the firm hire or fire the individual or set the rules and

regulations relating to his work?2. Does the firm supervise the individual’s work, and to

what extent?3. Does the individual report to someone higher in the

organization?4. Is the individual able to influence the firm, and to what

extent?5. Was the intent that the individual be an employee (as

expressed in written agreements and contracts)?6. Does the individual share in the profits, losses, and

liabilities of the organization?


Look at structure of firm AND the role individual partners have in managing (as opposed to an executive or management committee)


No bright line test, but there’s a spectrum…• Managing Partner / Executive Committee

Members• General Equity Partners Members• Non-Equity Partners


For General Equity Partners:• How autonomous?• How much control over own career?• How much control over firm?• Financial stake in firm?

Transition Planning: The Transition Trap

What about “senior” or “retired” partners?

They aren’t on your list…


Even if a partner was legitimately an owner previously, if his compensation or responsibilities change as part of a transition to retirement, his “owner” status likely will as well…..


Tips for Transition Agreements that’s don’t violate the ADEA:1. Don’t think of them as extensions to partnership

agreement – think of them as employment agreements

2. Consider contracts with set end point to control expectations

3. Don’t apply age-based cut offs or requirements4. Tie benchmarks or triggers to facts and

circumstances (hours of work, client responsibility, etc.) rather than age

Technology in the Workplace

Two Topics:1. Social Media2. Bring Your Own Device (“B.Y.O.D.”)

Technology in the Workplace: Social Media

Why should we care about social media in the workplace?

• National Labor Relations Board (NLRB):- employees have right disparage the firm, coworkers

and supervisors- employees have right to discuss compensation- employees have right to take photos in workplace- employees have right to share information about other

employees (even if you consider it to be confidential)

Technology in the Workplace:Social Media

• Critical to client relationship development BUT makes it easier for individuals to take firm information and relationships- LinkedIn as a virtual Rolodex

• may render prohibitions on taking/using client information obsolete- No need to announce departure

• The fine line between monitoring and violating privacy- Civil and Criminal liability for accessing without authorization- Other exposure for violating privacy rights

• Blurring of line between professional and personal


….but mostly, because your employees – especially millennials – are making it part of your workplace whether you like it or not.

In a recent study, 75% of employees admitted to accessing social media on their mobile devices while at work and 67% do so more than twice a day


Key action point: Make sure you have a strong but compliant social media policy in place

• No expectation of privacy / right to monitor• All company policies apply on social media• Clearly provide for ownership of social media accounts,

handles and followers/friends/links• Prohibit statements on behalf of company without

authorization• Where permitted, consider requiring privacy settings


Social Media Policy Don’ts….• Don’t prohibit disparaging comments about supervisors,

compensation, workplace or other working conditions

• Don’t prohibit work-related posts

• Don’t prohibit employees from “friending” one another

• Don’t require that complaints/concerns first be brought to management

• Don’t forget to review your policy annually to incorporate any new legal standards and reflect new social media opportunities

Technology in the Workplace

Do you B.Y.O.D.?

Technology in the WorkplaceB.Y.O.D.

Things to think about in allowing individuals to B.Y.O.D.….

1. Further blurs personal/professional lines• off the clock work• personal activity infringing on work time• personal activity known to employer• who pays and for what?

Technology in the Workplace:B.Y.O.D.

2. Confidentiality of Information• Apps & Cloud based backups• Use by family/friends• Security requirements more difficult to implement

and enforce- Passwords- Virus and Malware protection- Lost device protocols- 3rd party technical support


3. Right to Access Device• Just because employer is paying for service, doesn’t

mean can access device• Need employee’s authorization (in advance or at time of

review) to review, even if legitimate reason to need review -- CFAA / SCA- Litigation or investigation- Repairs, updates- Backups and keeping data accessible

• Practical issue of how to respect privacy while reviewing


4. Post-Separation Issues• Who keeps the device and the information on it

- Client contact info may ONLY be on device- Can’t wipe without authorization or violate CFAA/SCA

• Who keeps the #?- Just because pay for service, doesn’t give company the right to the

number

- What happens when clients call?

- Even if have policy saying company keeps number, difficult to implement because all personal contacts have it too (and for many, it’s only phone #)


To B.Y.O.D. or not to B.Y.O.D.…. a VERY firm-specific decision

Key = consider whether cost savings and personal preferences outweigh the risks we’ve discussed.


If you decide to allow B.Y.O.D., make sure you have those using personal

devices sign an agreement.


Key provisions for the agreement include…• Ownership of device, information and number• Application of all company policies

(harassment/discrimination)• Employer’s authorization to access/wipe and to obtain info

from 3rd parties- Security requirements- Passwords- Firewalls

• Lost device requirements


• Limitations on use- Friends & family- Cloud backups- Apps that allow access- Technical support obligations

• Reimbursement policy• Off the clock work policy• Expectations on separation

- what happens to phone number- wiping- receipt of calls- requirement to provide phone records

Independent Contractors

IRS 20-factor or 3 Category test isn’t the only one out there.

• Different tests apply on the particular statute at issue

• Perhaps most different is “ABC” Test


“ABC” Test used by many states: A. The individual is free from control or direction over the

performance of the services, both under his/her contract and in fact.

B. The service is either: - Outside the usual course of business for the company; or - Performed outside the place of business.

C. The worker is engaged in an independently established trade, occupation, profession or business.

Note: Must establish A, B and C to establish independent contractor status


Some states are particularly focused on independent contractor status.


Why should accounting firms care?• If you have any independent contractors, make sure

you’re considering whether they’re properly classified under applicable tests

• Misclassification opens your firm to overtime and exempt status claims, among others

• If you’re advising clients, it doesn’t hurt to point out that just because they are ok under IRS test, doesn’t mean there’s no risk

Restrictive Covenant Agreements

Law varies significantly from state to state.

Here are some recent highlights…


Massachusetts:• Major effort from legislature and

governor to ban many non-competition agreements

• Proposal is modeled on California’s approach EXCEPT would allow forfeiture of incentive compensation if violate

• Will know more July 31st• STAY TUNED!


Illinois:• Appellate Court held that at will employment

is not sufficient consideration for restrictive covenant agreement unless employee is employed for 2+ years

• Some case law challenging, but remains good law in Cook County (Chicago area)

• To avoid: provide consideration other than employment or continued employment

• signing bonus• notice of termination without cause (or pay in

lieu of notice)• other tangible consideration


Wisconsin:• Supreme Court is currently considering whether

at-will employment is sufficient consideration for a non-compete

• Similar to recent case law in Illinois• STAY TUNED!


Connecticut:• Law was passed in 2013 providing

that any “non-compete” agreement entered into after October 1, 2013 would only be enforced if employee is given the agreement in advance and at least 7 days to consider

• Version that ultimately passed only applied in context of M&A

• Governor vetoed citing uncertainty and sent back to legislature for further consideration


Georgia:• New employer-friendly law became

effective May 11, 2011• New standards only apply to

agreements entered into on or after that date

• If have agreements from earlier, enter into new ones!


Oklahoma:• New law explicitly permits

restrictions on soliciting employees and independent contractors

New Jersey & Maryland:• Proposed legislation would prohibit

enforcement of non-competes, non-solicits, and non-disclosure agreements against those who can claim unemployment compensation

Compensating Your Team Legally

Two areas to highlight:1. Exempt status (overtime eligibility)2. Compensation for hours worked


Exempt Status High-Risk Areas for Accounting Firms:

• Staff accountants- junior level, non-CPAs who are heavily supervised or whose duties

don’t actually require advanced, academic knowledge- some good case law, but still unclear

• Administrative Staff- key = discretion & independent judgment with regard to matters of

significance

Compensating Your Team Legally:Exempt Status

Accountants:Certified public accountants generally meet the duties requirements for the learned professional exemption. In addition, many other accountants who are not certified public accountants but perform similar job duties may qualify as exempt learned professionals. However, accounting clerks, bookkeepers and other employees who normally perform a great deal of routine work generally will not qualify as exempt professionals.

Compensating Your Team Legally:Exempt Status

A few notes on staff accountant cases:• limitations imposed by accounting rules and internal

policies procedures can suggest lack of discretion and independent judgment

• these are very expensive and distracting cases• reality is that Staff Accountant cases are starting to turn in

firms’ favor, but that doesn’t mean they won’t keep coming….

Compensating Your Team Legally:Overtime

It’s the week before April 15th. The whole team is pitching in and putting in extra hours. Your admin ends up working 60 hours that week.

Compensation Quiz:

Compensating Your Team Legally:Overtime

What are ok ways to compensate your admin for this added time?A. Give her a day or two off the following weekB. Pay her time and a half for 20 of those hoursC. Give her a gift card as a thank youD. Give her a bonus as a thank youE. Nothing’s required, there are plenty of weeks during the

year when she only works 25 or 30 hours

Compensating Your Team Legally: Overtime

B. The only way to compensate non-exempt employees for overtime is to pay them for it.

General requirement is 1 ½ time for all hours over 40 hours a week, but some states have additional requirements.


Why should accounting firm management care about exempt status and overtime?

• These are HUGE cases - losses on technicalities are the norm- concepts of fairness don’t apply- a real cottage industry for plaintiffs’ lawyers- very expensive to litigate- enormous damages

• Change in this area has large impact on culture, so needs to be managed and led from the top

Questions?

(your free employment law advice opportunity)

Thank You!Laura B. Friedel

Levenfeld Pearlstein, [email protected] / 312.476.7510

http://lpemploymentlaw.com

mailto:[email protected]

http://lpemploymentlaw.com/