Independent contractors, marijuana users, and those with criminal records are a few of the human resource issues collision repair shops need to pay attention to in 2024, according to Cory King, Constangy, Brooks, Smith & Prophete partner.

King spoke during a meeting of the Collision Industry Conference in Palm Springs, California on Wednesday. 

Under the Biden Administration, the U.S. Department of Labor (DOL) issued a new final rule on independent contractors on Jan. 9, King said. It will go into effect March 11, unless challenged in court, he said. 

“How many of you, at some point in your business, use independent contractors to perform some services for you? Probably quite a few,” King said.

Independent contractors currently used in the industry to do jobs such as replacing glass or fixing an air conditioner unit in a vehicle likely wouldn’t be considered independent contractors under the new law, he said. 

There are six factors the DOL will look at when determining if a worker is an employee or an independent contractor, King said. If determined an employee, the worker is entitled to benefits such as overtime. 

The six factors include: 

• • Opportunity for profit or loss depending on managerial skill;
  • Investments by the worker and the potential employer;
  • Degree of permanence of the work relationship;
  • Nature and degree of control;
  • The extent to which the work performed is an integral part of the potential employer’s business; and 
  • Skill and initiative.

The DOL could include other factors when reviewing a case if the factors are relevant to the overall question of economic independence, he said. 

“The Department of Labor is going to be judge, jury, prosecutor, and executioner on these situations,” King said. “Whenever you hear me talk about a situation where the prosecutor is also the judge, jury, and executioner that’s a signal to be very careful. Stay far away from that line.” 

Independent contractor was redefined twice under the Trump Administration, King said. As soon as he was in office, Biden pulled back Trump’s definition, ultimately leaving no definition for the past three years. 

King said there’s been an uptick in the use of independent contractors because of the lack of a definition. With the new definition set to take effect, businesses should reevaluate these practices, he said. 

It will likely take multiple lawsuits and lots of money before the DOL provides a more precise understanding of the definition, King said. 

Shops should consider if the work being completed by an independent contractor is integral to their business, he said. 

“You fix cars and put cars back on the road after they’ve been repaired and cleaned up,” King said. 

Glass being repaired or a car being detailed is a part of that business and, therefore, would be an employee, he added. 

“Now, if you’re hiring a plumber to come in and they are fixing your drains, they can be an independent contractor,” King said. 

Those who mislabel an employee as a contractor could face up to $500,000 in attorney fees, backpay of overtime fees to the worker, and DOL financial penalties, he said. 

The DOL also could shut down a business as it investigates the claim. “This is serious stuff,” King said. 

King said that plaintiff attorneys will likely capitalize on the law change via aggressive marketing campaigns targeting workers labeled as independent contractors. The attorneys will specifically seek out industries, such as the collision repair industry, known to use independent contractors, he said. 

Businesses should also know that the Internal Revenue Service (IRS) has its definition of independent contractor, he said. He said the test is separate from the DOL’s definition. A business could be in compliance with the IRS test and still face penalty for being out of compliance with the DOL test, he said. 

The federal law will not replace state laws already in place, King said. However, most state laws follow the federal law, he said. He said businesses already following California independent contractor laws will likely fall in compliance with federal laws. 

Another human resources issue that could see significant changes this year is a business’ stance on marijuana users, King said. 

Some states, including California, label marijuana users as a protected category, he said. Users are protected in the same way others are protected for race, religion, gender, and LGBTQ, he said. 

“If you’re a California employer and you have not updated your drug and alcohol policy to account for any changes in cannabis in the state of California, you need to do that. You’re out of compliance, and you are at significant risk,” King said. “If you don’t have a policy, you’re in even more risk, because you can’t even get out of the box to defend yourself on different things.” 

King said businesses won’t be able to sidestep the law because a position requires driving. 

Other states, which have legalized marijuana, could be following behind California, he said. 

Federal legislation legalizing marijuana could be near and that would mean changes for human resources throughout the nation, he said. 

The Equal Employee Opportunity Commission (EEOC) also announced it will release a targeted enforcement plan in 2024, King said. 

“They’re actually sending people out and interviewing vulnerable and underserved workers,” King said. 

The EEOC has identified those workers as individuals with disabilities or criminal records; the LGTBQ community; those who are affected by pregnancy, childbirth, or related medical conditions, and long COVID sufferers, he said. 

“If you have employees who fall into any of those categories, there’s a very realistic chance they will get interviewed and contacted by the EEOC to see if they’re being treated properly,” King said. “And if they’re not, the EEOC will file a complaint on their behalf against you.” 

Treat your employees with respect and in non-discriminatory ways, he said. 

Other changes human resource departments should pay attention to include increases in minimum wage throughout many states and a movement to require paid sick leave in states, cities, and counties. 

Images

Featured image: Cory King speaking at the Jan. 17, 2024 meeting of the Collision Industry Conference (CIC) in Palm Springs, California. (Teresa Moss/SCRS)