Employer Responsibility for Gig Workers Evolves with Safety Concerns

If you pay for services from independent contractors, your legal obligations to those individuals are far more limited than those involving statutory employees. But the growing importance of so-called “gig” workers in today’s labor force is changing the legal landscape for some businesses.

Evolving Marketplace

The term “gig workers” refers to people who an employer would contract with directly, through agencies, or using a professional employer organization. The growth of the gig economy is fueled by variable demand for manpower and new enabling technology for some categories of work. But employment attorneys warn that aggressive plaintiffs’ lawyers are chipping away barriers to employer liability for gig workers in the areas of accidents and injuries.

Meanwhile, the Occupational Health and Safety Administration (OSHA) is also paying more attention to contract workers. On its website, OSHA has outlined employer duties to protect temporary workers. It states, “OSHA has concerns that some employers may use temporary workers as a way to avoid meeting all of their compliance obligations.” Employers “should consider the hazards it is in a position to prevent and correct.”

OSHA’s website also asserts that “Host employers must treat temporary workers like any other workers in terms of training and safety and health protections.”

Warning Shot

OSHA’s policy statement is focused on employers’ use of temp agencies in “joint employment” arrangements, rather than the standard gig worker/independent contractor relationship. But it appears that a warning shot has been shot across employers’ collective bow.

A study recently published by the Journal of Occupational and Environmental Medicine notes “increased rates of fatal and non-fatal injuries” among “traditional contingent workers,” and explores potential causes. Differences in training was a potential culprit.

As a result, one employment law firm warns that “safety, training, culture, practices, supervision and enforcement must be adapted to meet the new economy.” Even without the threat of litigation, only the rare employer would be indifferent to potential hazards facing anybody performing work for them. Besides, accidents caused by independent contractors at your worksite can also hurt regular employees and your customers.

Naturally, hazards faced by gig workers vary according to the nature of the work they perform. “On-demand jobs are among the most dangerous in the country,” asserts the worker legal advocacy group National Employment Law Project. This organization wants states to mandate workers compensation coverage for all “on-demand workers.” It lists the three most common job categories — transportation, delivery and home services — as “among the most hazardous in the country.”

Vulnerability to Injury

Outside of the transportation, delivery and home services sectors, attention generally focuses on gig workers who spend a lot of time on your company’s premises, where they might be vulnerable to accidents or injuries. Worksite injuries don’t always involve hazardous equipment or materials.

Experts calling attention to the safety issue point to the demographics of gig workers, particularly the fact that they tend to be young. “Younger age is a well-known independent risk factor for occupational injury,” according to a recent study by the Journal of Occupational and Environmental Medicine.

In addition to their relative youth, gig workers often work for a relatively short time periods for one company or in one industry sector. That inexperience also can put them at greater risk for accidents.

Protecting Workers

Meanwhile, OSHA has recently focused on worksite risks for younger workers. It’s identified the following steps to employers should take to protect full-time and temporary workers under age 30:

  • Ensure that young workers receive training to recognize hazards and are competent in safe work practices.
  • Implement a mentoring or buddy system.
  • Encourage young workers to ask questions about tasks or procedures that are unclear.
  • Explain to young workers what they need to do if they’re hurt on the job.

In addition, OSHA has informed employers of their duties to try to protect workers from workplace violence. The agency highlighted a case in which a social services contractor was held responsible for ignoring safety concerns expressed by a worker who traveled outside the workplace to visit clients and, while conducting a visit, was killed by a client.

The worker was an employee of the contractor. However, the case highlights employers’ obligations to provide for the safety of individuals who provide services in a gig-like environment.

Toeing a Fine Line

In attending to the safety needs of independent contractors, employers should avoid tipping the scales toward establishing an employer-employee relationship with individuals who it classifies as independent contractors.

The law in this evolving area of employment law involves subjective assessments, and the nature of gig work arrangements varies widely. So, the advice of an employment attorney could prove invaluable as you weigh your workplace safety maintenance obligations.

How Much Can Businesses Deduct for Vehicles Placed in Service in 2019?

Does your business need to add one or more vehicles? If so, the purchases may qualify for tax breaks under current tax law. Here are the details.

First-Year Depreciation Breaks

The Tax Cuts and Jobs Act (TCJA) allows unlimited 100% first-year bonus depreciation for qualifying new and used assets (including eligible vehicles) that are acquired and placed in service between September 28, 2017, and December 31, 2022. However, for a used asset to be eligible for 100% first-year bonus depreciation, it must be new to the taxpayer (you or your business entity).

Spotlight on Leased Vehicles

Business use of a leased vehicle may be   tax deductible. If a leased vehicle is used 100% for business purposes, the full cost of the lease is deductible as an ordinary business expense. However, lessees of more expensive vehicles must include a certain amount in income for each year of the lease to partially offset the lease deduction.

The income inclusion amount varies based on the leased vehicle’s initial fair market value and the year of the lease. The IRS recently published a table to help taxpayers determine the inflation-adjusted lease inclusion amounts for vehicles with lease terms starting in 2019.

For example, suppose your business leases a light truck with a fair market value of $66,500 on January 1, 2019, for three years. It’s used for business purposes only. According to the IRS table, your income inclusion amounts for each year of the lease would be as follows:

  • $72 in 2019,
  • $160 in 2020, and
  • $236 in 2021.

The lease inclusion table is designed to help balance out the tax benefits of leasing a luxury car compared to purchasing it and taking the expanded first-year depreciation tax breaks.

Contact your tax advisor to discuss the pros and cons of leasing vs. buying a business vehicle. Taxes are just one consideration in this critical decision. The TCJA also permanently increased the Section 179 expensing limit for qualifying asset purchases from $500,000 in 2017 to $1 million for tax years beginning in 2018 and beyond. However, this break is phased out for qualifying purchases over $2.5 million in 2018 (up from $2 million in 2017).

For tax years after 2018, these amounts will be adjusted annually for inflation. The inflation-adjusted figures for 2019 are $1.02 million and $2.55 million, respectively.

Sec. 179 expensing for qualifying asset purchases is phased out on a dollar-for-dollar basis for purchases that exceed the threshold amount. So, no Sec. 179 deduction is available if your total investment in qualifying property is above $3.57 million for 2019.

Heavy Vehicles

Heavy SUVs, pickups and vans are treated for  tax purposes as transportation equipment. So, they qualify for 100% first-year bonus depreciation and Sec. 179 expensing if used over 50% for business. This can provide a huge tax break for buying new and used heavy vehicles.

However, if a heavy vehicle is used 50% or less for business purposes, you must depreciate the business-use percentage of the vehicle’s cost over a six-year period.

To illustrate the potential savings from these first-year tax breaks, suppose you buy a new $65,000 heavy SUV and use it 100% in your business in 2019. You can deduct the entire $65,000 in 2019 thanks to the 100% first-year bonus depreciation privilege. If you use the vehicle only 60% for business, your first-year deduction would be $39,000 (60% x $65,000).

To qualify as a “heavy” vehicle, an SUV, pickup or van must have a manufacturer’s gross vehicle weight rating (GVWR) above 6,000 pounds. You can verify the GVWR of a vehicle by looking at the manufacturer’s label, which is usually found on the inside edge of the driver’s side door where the door hinges meet the frame. Examples of suitably heavy vehicles include the Audi Q7, Buick Enclave, Chevy Tahoe, Ford Explorer, Jeep Grand Cherokee, Toyota Sequoia and lots of full-size pickups.

Garden-Variety Passenger Vehicles

The tax breaks for passenger automobiles (defined to include light SUVs, pickups, and vans) are less generous than for heavy vehicles. The inflation-adjusted depreciation limits for passenger vehicles that were acquired before September 28, 2017, and placed in service during 2019 are:

  •  $10,100 for the first year ($14,900 with bonus depreciation),
  • $16,100 for the second year,
  •  $9,700 for the third year, and
  •  $5,760 for each succeeding year.

The depreciation limits for passenger autos acquired after September 27, 2017, and placed in service during 2019 are:

  •  $10,100 for the first year ($18,100 with bonus depreciation),
  • $16,100 for the second year,
  •  $9,700 for the third year, and
  •  $5,760 for each succeeding year.

If the vehicle is used less than 100% for business, these allowances are cut back proportionately.

Important: For a vehicle to be eligible for these tax breaks, it must be used more than 50% for business purposes, and the taxpayer can’t elect out of the deductions for the class of property that includes passenger automobiles (five-year property).

Limited-Time Offer

The Sec. 179 limits were permanently expanded by the TCJA. But the first-year bonus depreciation program will gradually start phasing out 20% per year, beginning with tax years starting in 2023. And the bonus depreciation program will expire after 2026, unless Congress extends it. If you have questions about depreciation deductions on vehicles, contact your tax advisor.

Should You Offer Employees Paternity Leave?

Although maternity leave for new mothers has become more common in U.S. workplaces than it used to be, fathers don’t always receive the same benefits. Most new fathers aren’t granted any time off — let alone paid time off on the birth or adoption of a child. However, as the labor market tightens, employers are starting to recognize that paternity benefits can help attract and retain employees.

According to Mercer’s Survey on Absence and Disability Management, about 40% of employers now offer paid parental leave for both parents, compared to 25% in 2015.

Here’s what you need to know if your organization is thinking about adding paternity leave to its employee benefit package.

Know Their Rights

Under the Family and Medical Leave Act (FMLA), the controlling federal law in this area, there is no nationwide right to receive paternity leave. However, six states and all 20 of the largest U.S. companies mandate some form of paid parental or family leave. Although fathers have no federal right to be paid during paternity leave, the FMLA requires that the employee’s job be protected for up to 12 weeks after the birth or adoption of a child. In other words, the employee is entitled to return to his job without penalty in pay or position. To qualify, the employee must have worked at a company with more than 50 employees and have logged at least 1,250 hours on the job the previous year. Other requirements may apply.

In addition to federal law, workers may have rights under state law. As of this writing, 25 states supplement FMLA protection by either providing longer leave time (for example, 16 weeks), lowering the minimum employer size or even requiring private employers to pay for a leave, up to a dollar cap. Six states — California, Massachusetts, New Hampshire, New Jersey, New York and Washington — plus the District of Columbia, have passed family leave legislation that extends paternity leave rights to fathers.

Typically, employers providing leave to a birth father offer the same or similar benefits to fathers adopting a child. The FMLA states that employees may take 12 weeks of unpaid leave for an adoption and some individual states offer time off to adoptees under the umbrella of family leave (which can also include leave to care for sick children or elderly relatives).

Decide on the Details

If you’re thinking about making paternity leave benefits available to employees, discuss your intentions with legal and financial advisors. Although some companies offer unofficial benefits on a per-employee basis, you’re generally better off putting everything — including whether paternity leave is paid or unpaid — in writing. This includes updating employee handbooks and new employee orientation materials.

Most employers that offer paid paternity leave continue to cover full-time employee benefits such as health and life insurance during the leave period. However, you may want to reserve the right to be reimbursed for insurance premiums if the employee doesn’t return to work when the paternity leave period ends.

Employers typically suspend the employee’s right to other benefits temporarily — including their ability to:

  • Accrue seniority benefits,
  • Earn vacation and sick time, and
  • Receive 401(k) matching contributions or advance the vesting schedule.

And, of course, employees on parental leave can’t contribute to their 401(k) on a pre-tax basis because they aren’t receiving a paycheck.

Handle Leave Requests

Under the FMLA, employees working for employers that offer paternity leave must make a leave request at least 30 days in advance. The employee can take the leave any time during the spouse’s pregnancy or within one year of the child’s birth. It’s important to stress that this decision is made by the employee — not the employer —  and usually is influenced by such personal factors as the employee’s finances and the mother’s health during pregnancy.

An employer can require the employee to use up vacation, personal or sick days before being taking official FMLA leave. However, in many organizations, the employer and employee discuss and negotiate these issues to arrive at a mutually agreeable decision.

Pressure Is Growing

Smaller employers aren’t covered by the FMLA, and even large employers aren’t required to offer family leave benefits to part-time employees. But you may want to consider offering paid paternity leave anyway — particularly if you already offer maternity leave. Pressure is growing on lawmakers to address the issue and legislation could require more from employers in the future. In the meantime, offering paternity leave can give your organization an edge in the search for new talent.

Are Pop-Ups a Fresh Marketing Concept or Merely a Fad?

Pop-up retail stores, restaurants and events promise numerous benefits. They can be less  expensive and more flexible to operate than traditional brick-and-mortar operations. And they may appeal to consumers who crave fun, memorable events. They’re also great for seasonal retailers and online boutiques that want to expand or unload inventory.

But will the here-today, gone-tomorrow trend last? Here’s what you should know before opening or investing in a pop-up shop.

Reinventing Pop-Ups

The concept of pop-ups has been around for decades. Think of ice cream trucks that cruise down suburban streets during the summer. And don’t forget costume retailers that drop anchor in vacant strip malls in the fall, and flower kiosks that appear in train stations for forgetful spouses on Valentine’s Day.

In the 21st century, however, the pop-up concept has transitioned. It’s evolved from a seasonal sales model into a marketing tool to:

  • Test innovative consumer products and services,
  • Build awareness for established brands, and
  • Create buzz about trendy consumer “experiences.”

Modern pop-ups — like nightclubs in vacant warehouses, food trucks at local breweries and vintage jewelry displays at boutique hotels — offer fun, lifestyle events that are typically spread via word-of-mouth and social media (rather than radio or print ads). They give people the opportunity to touch, taste or try products and services before making a purchase.

Building Popularity

The pop-up market is currently valued at roughly $50 billion. (See “Pop-Up Stores” below.) And it’s expected to continue to grow as Millennials and Generation Z gain even more purchasing power. Younger generations have a different approach to shopping than previous generations. They tend to be more brand loyal, budget-conscious and linked by social media. And these characteristics lend themselves to today’s pop-up model.

What makes a pop-up successful? Value drivers for pop-up shops include:

Costs. Countless brick-and-mortar stores have shuttered in recent years, often due to burdensome overhead costs and emerging competition from online stores. Temporary pop-up locations don’t require long-term leases, costly build-outs or substantial inventory investments.

Pricing strategy. Often, a pop-up storefront allows customers to physically interact with the merchant or service provider, and then make purchases online. This distribution model requires minimal investment in inventory, which, in turn, helps pop-up merchants charge a lower price than traditional brick-and-mortar stores.

Conversely, the novelty of a pop-up concept may enable a merchant to charge a premiumprice. With a limited supply of inventory on hand, consumers may be willing to pay extra for impulse purchases at a pop-up location — or to be seen as trendsetters.

Location. It’s important for pop-ups to identify their target market and understand its habits and needs. When and where will customers shop? In most cases, pop-ups need a visible space with significant foot traffic. But sometimes, a hidden location can create brand magic. For example, foodies might track a well-known food truck to its latest spot across town using Twitter or Instagram.

To maximize headcount, coordinate your pop-up’s appearance based on favorable weather conditions and local events that will be attended by your target market. You also might consider joint venturing with another vendor who offers a complementary product or service. For example, an activewear clothier might share space with a smoothie vendor to help lower lease costs and leverage off each other’s customer base.

Downsides of Pop-Ups

There are limits to the value of the pop-up concept — and, like anything trendy, the novelty may eventually wear off. Because it’s hard to maintain a creative edge, many pop-up shops are used to test, grow or supplement an existing online or brick-and-mortar business.

Pop-ups also face capacity issues. That is, they’re small and can serve a finite number of customers. To fully serve your target market’s needs, you may need to open additional pop-up locations or settle down in a permanent location.

Ready to Join the Bandwagon?

If you’re interested in opening or starting a pop-up shop, contact your financial advisors to evaluate your business plan, estimate costs and develop pricing strategies. An experienced professional can help you work through the logistics and maximize your venture’s potential long-term value.

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