Editor’s note: Christine Taylor, a Principal Partner at The Towne Law Firm, P.C. in the firm’s Albany, New York, office, who focuses her practice in the areas of Hospitality Law, Business Law, Labor and Employment Law, Real Estate Law, Trusts and Estate Law and Litigation, writes this column as a place for campground owners to get answers to their legal questions and a better grasp of industry issues. Park owners can email firstname.lastname@example.org for a chance to have their questions answered in future columns.
Do I Have to Pay Salaried Workers Overtime?
Typical Lawyer answer — it depends! This is a very state-specific issue and also implicates Federal law. At the federal level, we have to look to the Fair Labor Standards Act (FLSA). When we talk about overtime we need to think about exempt and non-exempt employees.
Generally, you must meet a certain threshold monetarily for the salary and some other standards, including independence and responsibilities of the individual, to be free from the overtime laws. However, the FLSA gives some exemptions to an “amusement or recreational establishment” that does not operate for more than seven months in any calendar year. Whether a campground is “operating” in their off months is sometimes hard to determine and where some people might run into issues. Maintenance and ordering supplies are not enough to tip over into “operating” but taking reservations might be enough — especially if that employee’s role is to take reservations during the summer as well!
Additionally, some state wage laws may not recognize or permit the application of this exemption, and since an employer must comply with the most stringent of the state or federal provisions, the exemption in the FLSA might not be available to campgrounds in those stricter states.
For example, although there is a whole host of exemptions in New York state there is not a provision similar to the federal one for seasonal employees! Lawyers, doctors, event workers for events lasting eight days or less all have exemptions but not strictly seasonal workers. What does this mean? Well to be an exempt employee in New York State you would have to pay the worker a weekly wage between $937.50 and $1,125.00 (depending on location in the state – downstate is higher). The worker would also have to meet the executive or administrative exemption which includes specifics regarding their duties, level of supervision and independence.
Additionally, as campgrounds often employ family members you should know that generally if you work directly for your spouse, parent or child, you do not have the right to overtime, but would if your familial relationship was uncle, aunts or siblings. An important distinction to know is that if you work for a corporation or a limited liability company that is owned by your spouse, parent or child, you are entitled to overtime protections because you work for the company, not the individual.
So, what does all this mean? Just because you pay an employee a salary does not mean they are an exempt employee and you need to check federal and state law to make sure you are meeting both the monetary thresholds and the responsibility thresholds such that you do not have to worry about paying overtime.
Can I just “1099” my employees?
First – if they are going to be hired under 1099 then they are not employees, they are independent contractors. The “fake” independent contractor is one of the many issues campground owners have when hiring help that can expose them to liability. Just because you call someone an independent contractor in name and even if you pay them pursuant to a 1099 – they still might not be an independent contractor. As per usual, this implicates federal and state law.
There are a variety of “tests” you need to consider depending on your location, but generally, the overall idea is the same for all branches of federal and state government and can be boiled down to one word: control.
For example, Sam cuts the grass and does the landscaping on the property every Wednesday from 10 a.m.-2 p.m., I provide the equipment, is he an independent contractor? Mary runs ceramics every other Saturday, she brings all the paints, ceramics and chooses how long she runs the event, I provide the space, is she an independent contractor? Regardless of whether I paid them both according to a 1099, Sam is likely an employee and Mary is more likely an independent contractor. Why?
Using the IRS test, it determines if someone is truly an independent contractor by looking at behavioral control, financial control and type of relationship. When it comes to the behavior of the person – who gives the instructions? Are you telling Sam how to cut the grass? When to cut the grass? Did you train Sam how to do it? If you answer yes to those questions, then he is more likely an employee. Next, financial control. Did you provide the equipment to Sam? Do you reimburse him for business expenses? Do you pay him an hourly wage? If you answered yes to these questions then once again, he is most likely an employee. Sam should be more like the independent landscape company. A company that has its own equipment, realizes its own profit and loss, and worries about its own expenses – in essence a completely separate business from your own. Lastly, we look at the type of relationship. Are Sam’s services a key aspect of the business? The more integral he is to the operation of the business, the less likely he is an independent contractor.
Receiving a 1099 does not automatically qualify someone as an independent contractor under the FLSA. You must apply defined factors to determine if someone is an independent contractor under the FLSA. These are similar to the IRS test and center around your control over the individual and their independence from you behaviorally and financially. There are additionally a variety of factors that are non-persuasive, including lack of a formal agreement, whether they qualify as an independent contractor under another law, where the work is performed or the method of payment.
The states employ their own tests which can be either of the above tests directly or a variation of the same. They might also have differing tests depending on the different branches (tax, workers’ compensation, unemployment…etc.). This means that the state might determine that the individual is an independent contractor when discussing if you need worker’s compensation insurance, but the state might still determine the individual is an employee when it decides you have to pay them unemployment. Ultimately, it is easiest to remember that the crux of each test has to do with the businesses’ control over the individual, the less control you have, the more likely the individual is an independent contractor.
Why do we care about all of this?
Misclassification of employees can lead to severe fines from multiple branches of federal and state government. It can also leave you open to liability for not putting them through worker’s compensation insurance, which acts as a limit in recovery for the individual (more on that another day). When violating the FLSA, employers may face a civil penalty as well as criminal prosecution and additional hefty fines. The IRS can impose a penalty on federal income tax, Social Security and Medicare taxes. As our industry gets more attention due to the increase in interest and new owners, more lawsuits begin to surface. If you remember nothing else, be cautious knowing that your plan to save yourself money upfront can, unfortunately, lead to higher costs later.
The advice in this column will differ varying on a reader’s location and state of residence. It is important to seek the legal advice of a lawyer that works in your state.