Classifying Your Workers and Why it is Crucial to Your Small Business

by | Jun 6, 2017 | Business News, Contract Law, Employment Law

Classifying Your Workers and Why it is Crucial to Your Small Business

This week, we are going to dive into some details on classifying your workers and why it is crucial to your small business. Why? Because it is important for all Colorado small business owners to understand when they can call someone a contractor, and when that person is really an employee. Without this understanding, it is fairly easy to wind up on the wrong side of the law. First, let’s define what we mean by Worker Classification and explain why it is important to all employers, not just small business owners.
Classifying your workers correctly means understanding if they are independent contractors or employees so that you can avoid breaking the law with regard to federal and state employment tax. It also means you can determine if you are following the Fair Labor Standards Act (FSLA) with regard to the individual worker.

Determine If Individuals Providing Services For Your Small Business are Employees or Independent Contractors

If individuals providing services for your small business are employees, you pay taxes on their earnings. If the same individuals are independent contractors, in most cases, you don’t. You may also have other obligations to employees that would not apply if the worker were an independent contractor. The temptation to call some one a contractor when he or she is really an employee is strong, but it is not worth it under any circumstance. Let’s take a look at the rules, so you can feel confident about when someone can legally be classified as an independent contractor. For the sake of brevity, we are going to focus on how the IRS defines an independent contractor vs. a common law employee. There are different classifications of employee, and you should consider speaking with a business attorney if you think you may have workers who fall under these other categories (ex: statutory nonemployee).

Classifying a Worker as an Independent Contractor

The IRS provides the following insight:
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
They recommend the following test to determine if someone is a common law employee, but maintain there is “no magic formula” for knowing if someone is an employee or independent contractor:
  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?
If you have tried to apply these test questions to your specific situation and are still not sure how to classify a worker, the IRS has a form you can submit and they will review on your behalf. Once they set the worker’s status, it becomes official, so you may want to ask a business attorney to review the form on your behalf before your submit it, if your goal is to establish that a worker is a contractor and not an employee.

What About the the Fair Labor Standards Act?

Most small business owners are at least aware that there are important differences between contractors and employees when it comes to paying State and Federal employment taxes, but many do not realize the classification of an employee also impacts the employer’s legal obligations under the Fair Labor Standards Act. First, a quick reminder of what the Fair Labor Standards Act is. Wikipedia gives a good explanation and some history:
The FLSA introduced the forty-hour work week, established a national minimum wage, guaranteed “time-and-a-half” for overtime in certain jobs, and prohibited most employment of minors in “oppressive child labor.”
If you have individuals who are performing work for you, you need to know if you owe them minimum wage, and time-and-a-half in compliance with the FLSA statute, or if you can claim an exemption. The easiest way to be exempt from the FLSA rules is to make sure the worker can be categorized as an independent contractor. That doesn’t mean calling someone an independent contractor when he or she isn’t. The IRS is not playing games when it comes to miss-classification:
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker.
If you think you may have mistakenly been paying someone as an independent contractor, you can qualify for forgiveness under a Relief Provision, but you have to do so before the IRS calls you out. If you think you may have made a mistake in this regard, talk to an attorney sooner than later. The expense of being caught is much greater than the expense of getting an attorney to help you now. If you need help classifying your workers or understanding why it is crucial to your small business to know if a worker is an employee or an independent contractor, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

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7 New Business Essentials in Colorado Employment Law

7 New Business Essentials in Colorado Employment Law

by | May 31, 2017 | Business News

7 New Business Essentials in Colorado Employment Law

Before you hire your very first employee, or think about expanding your newly growing empire, follow this checklist to ensure you are in compliance with the laws and regulations of the Colorado Department of Labor and Employment. A business attorney can add peace of mind and support during the start-up, expansion, and life of your business. This post includes seven essential items on your new business checklist.

  • Register for an unemployment account
  • Report new hires
  • Verify workers’ compensation coverage
  • Submit employment verification
  • Verify wage and hour law compliance
  • Ensure proper worker classification
  • Display workplace posters

Register For an Unemployment Account

As a business owner, you are required to register for an unemployment account with the Colorado Department of Revenue and/or Colorado Department of Labor and Employment. You will need to obtain an unemployment account number through the labor department and begin paying employer premiums through a quarterly premium- and wage-report process. This funds the payment of unemployment benefits, and random audits may be conducted to verify appropriate unemployment insurance. An attorney will represent and assist you through this process.

Report New Hires

You have 20 calendar days to report new hires with the State Directory of New Hires (SDNH). This includes newly hired employees, rehired employees, and contractors. An attorney will further breakdown all of the steps and provide critical advice on employment laws from drafting employment or contractor agreements to hiring minors and out-of-state employees.

Verify Workers’ Compensation Coverage

Colorado law requires that you have workers’ compensation insurance as soon as you hire your first employee. Your insurance policy is meant to protect you, your business, and your employees when injury or illness takes place due to workplace circumstances, so the state requires you to verify workers’ compensation coverage. The expense and effort of meeting employment verification and examination requirements is an ever-present challenge. An attorney will provide representation in the event of any workers’ compensation audits, citations, or other liability issues.

Verify Wage and Hour Law Compliance

You can avoid penalties, damage awards, and litigation by understanding wage and hour compliance under the Fair Labor Standards Act (FLSA) and the Family Medical Leave Act (FMLA) among others. An attorney will help you verify wage and hour law compliance. Wading through the numerous laws and regulations associated with Colorado’s wage and hour laws, giving practical financial, tax, and benefits advice in order to best determine worker status, wages, minimum wage, overtime pay, record-keeping, and youth employment standards is more easily (and accurately) accomplished with the help of a Colorado small business attorney.

Ensure Accurate Classification

There are many issues to consider when classifying your worker as an employee versus an independent contractor under Colorado law. Whether or not the individual is free from control and direction in the performance of the service or is engaged in an independent trade/occupation/business related to the service are just two of the concepts used to determine the status of a worker. Accurate classification ensures that workers get the proper wages, benefits, and protections to which they are entitled.

Display Workplace Posters

It is mandatory that your business comply with state and federal regulations regarding certain rights and responsibilities, including minimum wage, child labor, worker’s compensation, equal employment opportunity, and unemployment insurance regulations and laws. Many agencies provide posters online for free. Be sure to display workplace posters with the required information in a clear, readable, and unobstructed way.

Whether it is reviewing a contract, hiring a new employee, or navigating state and federal compliance laws, I can guide your new business through the complexities of employment law. Please contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

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What Denver Small Business Owners Can Learn from Coach Kubiak

by | Feb 14, 2017 | Business News

What Denver Small Business Owners Can Learn from Coach Kubiak

The resignation of a leader, especially one who has been a team player and responsible for the team’s success, is always a blow. Denver small business owners may, on occasion, think about what would happen if they were no longer able to lead their team, but most of us prefer not to dwell on it. That is understandable, as long as you have a succession plan in place. This post will discuss planning for succession, and making sure your business can succeed without you, whether you step down by choice, or because you have to.

Small Business Succession

In football, there are many people other than the coach and players who are invested in seeing the team succeed. In fact, replacing the coach is a fairly common practice. Coach Kubiak, who is a former Bronco and helped lead the team to the Super Bowl, was not expected to leave at this stage of the game. Unlike the Denver Broncos, you may not have a general manager, other owners, or anyone who understands your business well enough to take over tomorrow if needed, so small business succession is a little more complicated (believe it or not) than changing coaches in the NFL. Plus, the legal form of your business may not support a smooth small business succession plan, even if you have a vague idea of who could or would step in if you couldn’t lead your team. What if you have to leave your team unexpectedly, and at a time when they need you? Is anyone prepared to take over in your absence? Is there a plan in place?

Succession and Business Form

You already know you had to choose the legal form your business would take when you started it. You may have decided on the legal form of your business based on tax strategy, or ease of formation, but you might not have considered succession and business form when choosing how to set up shop. Do you know what would happen if you or your estate needed to transfer the business to a new owner unexpectedly? The good news is, that regardless of how your business is structured (for the most part), there are ways to transfer it to another party if necessary. I cannot stress enough how far a little preparation now will go toward saving your loved ones a lot of grief and stress if you have a legal, written plan for the transfer of your business, no matter what the legal structure is. In coach Kubiak’s case, he was able to discuss the transition with his team, his General Manager John Elway, the other coaches, and the team’s owners, the Bowlen family. It’s also likely that his contract with the team described in detail what would happen if he resigned. While this is an ideal scenario in a less than ideal situation, this is not always how things go. An accident, or sudden, serious illness can leave you entirely unprepared to plan the transfer of your business. Why not take some time now to put a plan in place?

Planning for an Unplanned Succession

Most of us have a vague idea of what we would like to sell our business for someday, or which of our children we think would enjoy running it for us when we are ready to retire, but we see that plan getting put into place down the road. If you are reading this post, it is possible you have not done much preparation for an unplanned succession. As an attorney, I see this scenario more often than not. Here are a couple of things to ask yourself about an unplanned succession:

  • What if you couldn’t make your wishes known?
  • Are your wishes in writing somewhere? Are they current, and properly structured?
  • Are there people who may argue (specifically, in court) about what your wishes are, if you are unable to make them 100% clear?

The legal expenses that can accompany arguments about who was supposed to do what with your small business should you pass can destroy not only the business, but personal assets and family relationships as well. The best thing you can do is sit down with your Colorado small business attorney and ask what would happen tomorrow if you had to announce to your team that you were leaving, effective immediately. Or worse, what would happen if you passed due to an accident or sudden, unexpected illness. As an attorney, I don’t like asking people to think about these scenarios, but I like it even less when a I see a family trying to figure out how to hold a business together while they are grieving.

Denver small business owners can learn from Coach Kubiak; you may not want to stop leading your team, but there might come a time when you have to. None of us like to plan for the worst, but when we do, we make things much easier on ourselves, our families, and our successors. If you need help thinking about succession and planning for the smooth transfer of your Colorado small business, please contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Small Business Fraud in Colorado

by | Oct 26, 2016 | Business News, Misc. Legal Tidbits

Small Business Fraud in Colorado

We hear stories and hope it never happens to us, but when we step back a moment and think about how often small business fraud occurs in Colorado, we quickly realize that we need to be vigilant. As a small business owner, there are a couple of types of fraud you are particularly vulnerable to. I will address a three common types of fraud here, all of which have happened recently in Colorado. I invite you to ask questions about any additional types you’d like me to comment on:

Employee Theft

This is perhaps the most difficult to experience, especially if the employee is a friend, or someone you’ve come to regard as family (or, in the most unfortunate cases, the employee is family). Unfortunately, being regarded as family is a designation deceivers work hard to achieve because of the access it affords them. Staying later, taking on extra duties, and helping out without asking for additional compensation may all be indicators of a bad apple, according to Entrepreneur. It might also just mean you have an employee who is trying to make a good impression, but it is important that you put checks and balances in place in case there is more going on. You can have the employee share responsibilities with someone else – it’s harder to hide deception when there are two people sharing a task. You can also insert an accounting procedure or accountability audit that can be verified by some other means than the employee’s word, for example. Think about how a bank or retailer counts out a cash drawer – there are always two people present and both must sign off on the amount. Come up with a similar means of vetting the work or tasks your most trusted, hardest working employee is engaged in, especially if you are relying exclusively on his or her word to confirm numbers or data being provided to you.

Trusted Advisor Theft

Many of our business advisors have certifications, credentials, and excellent references but those credentials don’t guarantee we will never experience trusted advisor theft. Case in point; a Colorado attorney was recently sentenced to six years in prison for for bilking the company he worked for out of nearly 5 million dollars. A Colorado finance firm owner pocketed fees that were paid to help source loans for his clients. He has been sentenced to prison as well. The prison sentences are reassuring, and hopefully act as a deterrent to would-be thieves, but they don’t erase the stress and financial turmoil these types of thefts cause a business owner. In the instances of employee theft and trusted advisor theft, trust is the door the thief enters through. Jonathan Marks, a partner at Crowe Horwath LLP, provides excellent guidance on observing tell-tale behavior, and reminds us that trust is one side of the coin when deception is the other.

“Fraud is not about obstruction. It is about deception,” Marks said. “In other words, trust is a professional hazard. If you trust someone, you’re at risk of being deceived, so you must verify, verify, verify.”

If your employee or trusted advisor has demonstrated a willingness to deceive, even if it appears the other guy “deserved” it, or if he or she is remarkably arrogant or braggadocios, you may need to do some digging to determine if these behaviors extend to a belief that he or she is “above” the law.

Small Business Credential Theft

By credential theft, I am talking about the credentials you use to access your business banking accounts or business funds, as well as data that could be useful to a thief attempting to pose as you. First and foremost, don’t engage or allow any employee to engage in the Employee Password Worst Practices as outlined in the 2015 Password Workplace Report. The report is worth a read and offers good tips such as requiring complex passwords, and requiring passwords to be changed often. And absolutely make sure that anyone making multiple attempts to access information with the incorrect password is locked out.

If you don’t currently route your company network through a secure collocation data center (or don’t even know what that is) or aren’t sure just what sort of shared access employees have to your computer network (meaning can employee A access the computer of employee B via your network?) you should consider hiring an expert to evaluate your situation. If you don’t know one, I can refer you. If you think you are doing alright with regard to network security, take a moment to read this article with tips on boosting your workplaces network security, just to be certain.

If you need legal help or want to talk over ways of securing your interests against small business fraud, feel free to contact me at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com.

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Denver Startup Week is for You

by | Aug 18, 2016 | Business News

Denver Startup Week is for You

Nirvana for the Denver Small Business Owner

Ever wondered what goes on at the Denver Startup Week, and if you should attend? Powered by the local community, Denver Startup Week is “[t]he largest event of its kind in North America, [and] is the summit of entrepreneurial energy, innovation, and connection.” And it’s free!

Because the mission of Denver Startup Week is “to foster an environment where every member of a team, in every industry, can come to learn, grow, and prepare for their next challenge,” organizers are careful to include a broad variety of topics and business models. If you’ve already got your new business startup list (even if it’s just in your head), or you are an established small business owner and you want to learn more about tech, design, DIY-making, marketing, or leadership, there will be good information available for you and your team.

Education for Business Owners

At Denver Startup Week, you won’t just get advice on achieving balance between work and life: the event offers good education on a variety of topics and is designed around tracks. The tracks are based on the role you play in your business; founder, developer, designer, marketer, maker, etc. If you wear several hats, you can wear them all during Denver Startup Week.

Startup Week Tracks

FOUNDER
Whether you’re just dreaming about starting a business, on your first, or a seasoned entrepreneur, the founder track will provide you with the skills and knowledge you need to found a company. Initial product development, go-to-market strategies, finding funding, and building a team are just some of the topics that are covered. Start down the path of creating your startup!

DEVELOPER
Frontend, backend, full stack, big data, APIs, architecture, methodologies, junior, senior, we have it all. Learn new technologies, refine your skills, or just check out something completely different. Walk away a better engineer than you were before!

GROWTH
No matter how good it is, no product sells itself. A team that markets, sells, and supports the product well is a huge advantage for any startup. Every aspect of digital marketing, inbound and outbound sales, and customer experience is going to be covered at Denver Startup Week. Growing a startup depends on these skills, don’t miss your chance to improve them!

PRODUCT
Product management, development, and marketing, all different sides of the same coin that somehow bridges the gap between building the product and delivering it to the market. Product skills are in huge demand but there aren’t very many places where you can go to acquire them. Come improve your product game at Denver Startup Week!

DESIGNER
Seeing things others do not see is an art and our design track is packed with creative outlets to expand your thinking and ability to design. From fashion to architecture to breakout digital design and artwork – the design track is focused on the critical elements of design. Learn new skills, hear from those responsible for some of the best projects in Colorado, and let your creative juices flow. Enjoy connecting with fellow design leaders and leave the week with fresh inspiration!

MAKER
From craft skis to craft beer, robots to 3D printing – the experience of ‘making’ physical products is totally unique. Through the lens of physical goods across multiple industries, hear the stories behind breakout brands, learn about new technologies in manufacturing, and dig into the micro-production concepts needed to get started. Connect with the best craftsmen and makers in Colorado and see how they create their work – all in one week!

Still wondering if you’ll find something useful for your business? Take a look at some of what’s available from last year’s event. You will learn something new from Chris Frank’s presentation, The Art and Science of Finding Customers for Your Startup, within the first five minutes of his video, and that was last year! In fact, several excellent past presentations that are well worth your time can be found on the website.

The excitement, energy, and renewed vision that the event generates for local business owners and hopeful entrepreneurs who are testing the waters could easily produce an uptick in the GDP! If your business could use a little uptick, or a big boost, make sure you make the time to be at Denver Startup Week 2016. If you need startup legal help, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at: