New Restrictions in North Carolina

New Restrictions in North Carolina

Starting on Friday, June 26 at 5:00 PM, North Carolina Governor Roy Cooper’s Executive Order No. 147 goes into effect, extending Phase 2 until July 17, 2020 and imposing further restrictions. Specifically, beginning Friday June 26, people in North Carolina are required to wear a mask in any public area where a six-foot social distance is unachievable. This face mask requirement applies to all employees of retail stores, restaurants, personal care businesses, and others. However, you are not required to wear a face mask if you’re exercising, actively eating or drinking, under 11 years old, in a personal vehicle, and more. Law enforcement is authorized to write citations only to business or organizations that fail to enforce the face mask requirement. Law enforcement cannot criminally enforce the face mask requirement on any individual workers, customers, or patrons. 

If you want to learn more, click here for the full text of Executive Order No. 147. 

Employee or Independent Contractor?

What is the Difference Between an Employee and an Independent Contractor?

Knowing the difference between an employee and an independent contractor is not always easy. But employers must know the difference in order to have appropriate liability protection and to be compliant with labor and tax laws.

Employers sometimes try to classify their employees as independent contractors to avoid paying payroll taxes. They might think the IRS won’t notice, but in reality the employer’s classification is irrelevant to how the IRS determines if a worker is an employee or independent contractor. The IRS has a long list of factors to consider when they evaluate the relationship to see if your independent contractor is truly an independent contractor.

Some of those factors include:

•   How much control does the employer have over the worker’s behavior? Is the worker trained by the employer? Does the employer control how and when the worker does his/her work? Does the worker have to follow the rules that the employer sets for employees?

•   What kind of payment does the worker receive? Is the worker paid a flat rate? Is the worker paid hourly/have a salary? Is the worker reimbursed on expenses?

•   What is the relationship like between the employer and the worker? What type of relationship is described in the contract? Does the worker receive benefits from the employer?

All of these things are considered when looking into the relationship between a worker and an employer. If you think designating a worker as an independent contractor will allow you to avoid paying payroll taxes, you may want to think again. The IRS is extremely rigorous when it comes to this topic and there are financial and legal repercussions if an employee is misclassified.

Millions of employees in the United States are misclassified as independent contractors. If an employee feels that he/she is being misclassified as an independent contractor, they can submit a Form 8919 to the IRS. 

Not all employers misclassify their employees on purpose, but the mistake can be costly. In order for employers to avoid this, they can use a Form SS-8 to help evaluate the type of relationship they have with their workers. The Form 8919 and Form SS-8 can both be found on the IRS website.

Since the IRS makes resources available to better understand how to classify the relationship between employers and workers, there is low tolerance for misclassification.  Make sure that you understand the difference because the penalties, which can include prison time, are not worth it.

References: 

understanding-employee-vs-contractor-designation

consequences-misclassifying-workers-independent-contractors

*This blog is for informational purposes only and not for the purpose of providing legal advice.

Warren Buffett Gets Conned

Warren Buffet Gets Conned

Do you know Berkshire Hathaway? If you know them, then you know that they are owned by the legendary investor Warren Buffett, who is trying to collect companies like a regular person would collect stamps or coins.

Berkshire Hathaway was on a shopping tour around 2016/2017 and they identified a pipe manufacturing company named Wilhelm Schulz. The company was based in Krefeld, which happens to be the sister city of Charlotte, North Carolina. Schulz was interested in selling but was close to insolvency. A few days before they started to negotiate with Berkshire Hathaway, a local advisor concluded that Schulz should go the insolvency route. 

However, when Berkshire Hathaway was interested in the company, they received data that may have been photoshopped which showed purchase contracts which pushed the company’s value up significantly. Berkshire Hathaway bought the company for $800 million and now want to be awarded an arbitration to reclaim the funds lost in the purchase.

Two interesting concepts came from this. First, in parallel, Berkshire Hathaway filed a lawsuit in Germany for $800 million. This means that the court fees alone would cost them $380 thousand. This shows that Berkshire Hathaway is really out for the grabs. The second interesting concept is that Berkshire Hathaway won in arbitration but Shulz decided to file in the United States in accord against the arbitration award. 

Traditionally, we lawyers say that if you win an arbitration you cannot have this matter heard in court again. But, what we have now is that both parties, plaintiff and defendant filed parallel actions in court, so arbitration may be negotiated in a contract, but in reality, the courts may decide, or the courts may decide not to hear the case because they have a binding arbitration agreement. 

However it develops, it remains an interesting matter, and for those who are just interested in the very quick top view, maybe it is best not to mess with Berkshire Hathaway.

From: Morning Musing 206 

By: Reinhard von Hennigs, Chairman and Founder of BridgehouseLaw LLP

Published: June 9th, 2020