Posts Tagged ‘employment compliance’

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Case Study, Part II – Medical Practice Reduces Risk Through HRO

Monday, February 22nd, 2010

Our last post introduced a growing medical practice with their share of Human Resource challenges. In this second and final post, we ‘ll look at the HR solutions offered by CPEhr and the concrete results they experienced.

HR Solutions

Upon entering the HR Outsourcing relationship with the practice, a CPEhr Human Resources Specialist immediately began to review their policies and employee documentation. Many gaps in employment protocol were identified. An array of new employment forms were created, compliant procedures were implemented and new guidelines were put into practice. The Director and Office Manager received training on proper employee review and termination procedures, and their designated HR Specialist was invited to attend exit interviews and assist in the termination process.

“I have run the office for more than a decade,” says the Director, “But knowing CPEhr is here to guide me through all employee matter offers tremendous peace of mind. Now, instead of being distracted by minor personnel issues, I can focus on the practice. CPEhr has truly become our partner.”

The most critical assistance occurred when the practice decided to outsource their billing function and to layoff the entire department. CPEhr assigned several HR staff to assist in the layoffs, with proper termination procedures, protocol and severance packages that were in the best interest of both the practice and the employees. The Director sums up the incident succinctly: “We could never have done this on our own.”

Real Results

Since joining CPEhr, he feels that the day-to-day protection he experiences in the area of employment exposures is immeasurable. “I now have tremendous peace of mind. CPEhr has become our ‘go-to resource.’ Without this type of relationship we end up making our own decisions, without proper knowledge of the law, and will ultimately make a mistake. You think you can use common sense, but common sense and the law rarely match!”

The Director says the benefits of CPEhr were immediately realized, as the new systems and processes were implemented and functioning within 30-60 days. “I recognize the reality that as the practice grows. So too would the need to hire an HR Manager. However, by outsourcing to CPEhr , we don’t need to spend the money on another hire and can use those funds to invest back into patient care and clinical research.”

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HR Outsourcing Case Study – Medical Practice Reduces HR Risks Through HRO

Thursday, February 18th, 2010

human resources outsourcingSometimes change is hard. But when this medical practice recognized their existing HR systems were inadequate in the face of rising employment challenges, they selected a HR Outsourcing and Professional Employer Outsourcing relationship to assist them in reducing their HR risks and exposures. Our next two posts will look at their challenges, and the solutions offered by CPEhr.

Company Background

This medical practice was founded in 1980 with the mission to provide the highest quality health care combined with clinical research and education. It is currently one of the few cardiovascular practices in the country that balances private practice with academic medicine, and runs one of the world’s largest cardiac transplant programs. They currently employ over 30 employees, but are opening two more locations and are expecting to significantly grow their employee base in the coming months.

It was obvious to the Executive Director of this prestigous medical practice that his time would be best spent on providing superior patient care and conducting scientific research. Managing employee issues should have been the last thing on his mind. Unfortunately, it wasn’t.

Business Challenges

As the practice grew in size and prestige, the Director recognized the critical role Human Resources played in his practice. “We do not have a dedicated HR staff,” he explains, “But I understand that human resources can’t be put on the back burner. HR is still a critical part of our practice.” With the lack of sufficient internal HR resources they struggled to standardize employee practices and stay abreast of changing employment regulations. While the Director and his Office Manager continued to personally handle the employee relations, an incident pushed them to consider outsourcing their human resources to a professional firm.

An argument ensued between two front office staff, and the altercation ended with one employee threatening to physically harm the other. The event was witnessed and the employee was let go. A short time later she sued the practice for race discrimination. Even though, at the time, the Director was sure he was doing the right thing, he ended up in an 8 month lawsuit with the EEOC that cost him hundreds of hours of time and distracted him considerably from running the practice. While he ultimately won the case, he realized it was time to work with human resource professionals. He needed a firm who would help him structure an HR system to prevent this from recurring, and to take over the administration of a lawsuit if one ever occurred again in the future.

“As our firm continues to grow and we open new offices, managing the staff in multiple worksites is only going to become more complicated,” he says. He invited CPEhr to present their outsourcing HR solution, and quickly engaged their services.

Our next post will review the HR solutions implemented by CPEhr.

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Employee or Independent Contractor – Would Your Company Pass an IRS Audit?

Tuesday, February 16th, 2010

According to the U.S. Government Accountability Office (GAO), the IRS claims to lose millions of dollars in uncollected taxes each year due to independent contractor misclassification by employers. As such, as part of a national research project on employment taxes, the IRS is scheduled to audit 6,000 randomly selected companies ranging from large to small firms and even non-profits. The goal of the program, which is scheduled to last from 2010 to 2012, is to create a scoring system for employment taxes. The audit will focus on the following items: failure to file, fringe benefit issues, executive compensation (including stock options) and employees misclassified as independent contractors.

The IRS sets forth clear eligibility guidelines for what determines independent contractor status. The following is taken directly from the IRS website:

Common Law Rules

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Facts that provide evidence of the degree of control and independence fall into three categories:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Understanding the Implications of Misclassification.

Employers should understand the implications of misclassifying employees as independent contractors.  Employers who misclassify employees as independent contractors may find themselves responsible for employment taxes and penalties, as well for various benefits that the misclassified employee may be eligible for such as health insurance, pension, vacation and sick benefits, worker compensation, unemployment, etc.  It is important for employers to review their 1099s, identify independent contractors who may be misclassified and reclassify them appropriately.

The “Twenty Factor Test”

Perhaps the most famous determinant of independent contractor status is the IRS’s 20 Factor Test. The IRS created the test as a tool to help employers identify if their worker is an independent contractor or employee. Although, a worker does not necessarily have to meet all 20 factors to be considered either an employee or an independent contractor, it is important to view the circumstances of each individual case. You can download a copy of the 20 Factor Test here.

For more information on independent contractor classifications, please contact CPEhr for a complimentary qualification consultation.

Thi Ha, HR Account Manager at CPEhr, contributed to this post.

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Increased Litigation and Enforcement Predicted for 2010

Monday, January 25th, 2010

Guest post by: Stephanie R. Thomas, Ph.D.

According to Fulbright’s 6th Annual Litigation Trends Survey Report, companies are seeing a litigation wave that is expected to continue to swell in 2010.  That expectation is based on experiences during 2009, when 83% of respondents reported that new litigation has been commenced against their organizations, up from 79% in 2008.  Stephen C. Dillard, head of Fulbright’s global litigation practice, states:

Generally, litigation rises in an economic downturn as regulators tend to step up enforcement, laid-off workers head to court, and companies need to file more suits in order to collect money owed.

Employment litigation is expected to increase in 2010.

The poor economic conditions and increased layoffs, coupled with new laws and expansion of existing laws, are likely to lead to an increase in claims filed.  According to Rich Meneghello, the managing partner in the Portland, Oregon office of Fisher & Phillips, “all signs point to the trend [of increased litigation] continuing into 2010, especially as job growth remains stagnant and out-of-work individuals seek rewards through litigation”.

Increased enforcement by the Department of Labor.

Experts are also anticipating an increase in enforcement by the Department of Labor.  Secretary Solis said in a release, “In early 2010, the department will launch a national public awareness campaign titled ‘We Can Help’ to inform workers about their rights…  We will not rest until the law is followed by every employer, and each worker is treated and compensated fairly.”  The Department of Labor is scheduled to receive $13.3 billion in funding for 2010, an increase of $121 million from the previous year.  According to a DOL press release, “with these increases, [DOL’s] worker protection agencies will be able to vigorously protect wages and working conditions of the 135 million workers in more than 7.3 million workplaces.”

Additionally, the EEOC is slated to receive $367 million in funding for 2010.  This represents an increase of $23 million from the previous year.  The increase in funding may lead to more lawsuits alleging discrimination based on age, gender, race, color, national origin, religion, or disability.  The EEOC’s proposed regulation to implement the ADA Amendment Act of 2008 would make several significant changes to the definition of ‘disability’, greatly expanding who is covered by the statute’s provisions.


Be proactive to reduce the risk of lawsuits.

While no one can be certain what 2010 will bring, employers should prepare for litigation and for increased enforcement actions.  Experts are recommending a proactive approach.

  • Employers should have a thorough understanding of what laws and regulations apply, and review their policies and procedures to ensure they are in compliance.
  • Internal audits should be conducted to identify any potential problem areas, and corrective action should be taken where appropriate.
  • Revisiting documentation and document retention practices is vital; having appropriate documentation can, in some circumstances, prevent litigation, and will be critical should the employer be faced with litigation.

For more information on protecting your company, contact CPEhr, a Human Resources Outsourcing and Professional Employer Organization.

Guest post by Stephanie R. Thomas, Ph.D.

Dr. Thomas heads the Equal Employment Advisory and Litigation Support Division of Minimax Consulting. The Division provides consulting services, dispute resolution support, and expert testimony to Fortune 500 companies, major law firms, and local, state, and federal governments and agencies.  The Division specializes in labor and employment issues in both advisory and litigation contexts.

Website: Minimax Consulting

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Government Announces Plans to Crackdown on Illegal Independent Contractor Usage

Monday, December 7th, 2009

If you are like most employers, the chances are you use Independent Contractors. Employers engage the services of Independent Contractors (IC’s) instead of employees for numerous reasons. Mostly, to save money on a range of employment costs, such as:

  • federal and state tax,
  • workers compensation insurance,
  • unemployment insurance,
  • employee benefits,
  • overtime, vacation and sick pay.

However, now more than ever, employers must be aware that federal and state lawmakers are beginning to crack down on employers who hire ICs that do not meet the strict IRS requirements.

What are the guidelines to be an Independent Contractor?

The following are excerpts from the IRS website, Section 762 – Independent Contractor vs. Employee:

  • Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means.
  • Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. This includes:
  1. The extent to which the worker has unreimbursed business expenses
  2. The extent of the worker’s investment in the facilities used in performing services
  3. The extent to which the worker makes his or her services available to the relevant market
  4. How the business pays the worker, and
  5. The extent to which the worker can realize a profit or incur a loss
  • Type of Relationship covers facts that show how the parties perceive their relationship. This includes:
  • Written contracts describing the relationship the parties intended to create
  • The extent to which the worker is available to perform services for other, similar businesses
  • Whether the business provides the worker with employee–type benefits, such as insurance, a pension plan, vacation pay, or sick pay
  • The permanency of the relationship, and
  • The extent to which services performed by the worker are a key aspect of the regular business of the company

Government crack-down

As the government is looking for ways to bring in revenue in a down-economy, they are paying serious attention to the losses incurred by the usage of ICs. Reports estimate the misuse of ICs lowers income tax revenues by about $4.7 billion annually. In Illinois, for example, the  University of Missouri–Kansas City Department of Economics estimates that from 2001 through 2005, the state lost $124.7 million PER YEAR year in income taxes as a result of IC misclassification by employers.

In August, Congress began reviewing several bills that tighten restrictions on the use of ICs and exact tougher penalties on employers who bend the rules. The IRS also announced plans to randomly audit six thousand businesses nationwide to curb abuse.

Don’t take shortcuts

If your company engages the use of ICs, don’t let the lure of bypassing a few tax and insurance dollars distract you from the real-life risks at hand. You should take the time to seriously review your IC relationships and determine if they do, in fact, match the IRS guidelines. If you are uncertain where to begin, there are professional human resource outsourcing and consulting firms that specialize in these employment relationships and can guide you to make the right decision for your company.

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