Compliance

Managing a Contingent Workforce? Here’s Your Audit Prevention Checklist

Managing a Contingent Workforce? Here’s Your Audit Prevention Checklist 150 150 Alicia East

If you work with independent contractors, you know the draw. You get to tap into outside creative resources and outsource work that is not central to your main line of business. It often allows companies to better meet budget.

On the surface, the barometer for identifying independent contractors is easy. They are self-employed and hired to do a specific job. They receive payment only for the work performed. Unlike a regular employee, they pick their projects and regularly move from client to client and business to business. Also referred to as freelancers, consultants and 1099’s, they report their own business income and pay self-employment taxes. Easy enough until you remember that nothing that involves the IRS is ever quite that simple.

 

Is Your IC really an Independent Contractor?

The IRS has very strict guidelines that define true business-to-business relationships. These guidelines are meant to prevent firms from misclassifying would-be employees and thereby avoid, either knowingly or unknowingly, a bounty of state and federal taxes.

This is a deceptively complex question that’s important to answer “yes”, because the risk of your company facing an IRS audit has never been greater.

Best Practices to Prevent an Audit

• Work with contractors who have an established business entity, with a business name and EIN to which invoice payment is made.

• Make sure your contractor provides services to businesses other than your firm.

• Have workers provide certificates of insurance, including coverage for general liability insurance and workers’ comp insurance

• Have a signed per-project agreement for services between your company and the contractor. Each project should have a contract specifying project length, compensation and liability.

• Have workers include expenses such as reimbursements for travel, phone, meals and overtime wages in their day rate.

• An independent contractor’s services should not be integral to the day-to-day functioning of your business. They should not be functioning as a division of your company.

• Watch out for pen-ended, ongoing work. The longer a contractor is with you on a full time basis, the more they take on the role of an employee.

When working with your contractors

• Do not train a contractor, direct their work responsibilities or define their work schedules. Specific instructions on these aspects of a job imply an employee relationship.

• You cannot control any aspect of their work except the results.

• Independent contractors should, when feasible, be using their own equipment. This includes computers and phones.

• Do not provide any employment benefits. Independent contractor’s should have their own health insurance, pay their own employment taxes and not receive any corporate stock options.

• You contract on a per-project basis.

• Above all, keep in mind that this is a business-to-business relationship.

Prevent an Audit

Getting audited can be costly and time-consuming even for businesses that do everything by the book. How much are you willing to pay for employee misclassification? If you have any questions about independent contractor status, trust PayReel to help you make the determination.

What Do Fuel Shortages, Cryptocurrency, and Stolen Health Information Have In Common?

What Do Fuel Shortages, Cryptocurrency, and Stolen Health Information Have In Common? 2560 1765 Alicia East

To quote the Fiddler on the Roof. “That I can tell you in one word.”

Ransomware.

It’s an ever-growing global threat where the attackers hide behind computer screens and everyone from governments, industries, and individual private citizens is affected. It’s here and it goes way beyond the short-term inconveniences of skipping beef for Father’s Day or waiting in long lines for gas. It’s nothing short of a national security threat.

And as long as it’s profitable to the tune of billions of dollars, it’s not going anywhere.

How Did We Get Here?

According to the The New York Times reporting, the Facebook model of “move fast and break things” is catching up with us. Companies followed this model to build their systems quickly and beat competitors to the market. And now the age-old lesson that cutting corners ends up being worse for you in the long run? Well, here it is—hitting companies with painful consequences like like enormous ransom fees, loss of business operations, compromised data and damaged reputations.

While it’s a very rude awakening, it’s not a new problem. Attackers have been honing their skills and wreaking havoc quietly for years. What started with attacks on individual devices for a few hundred dollars at a time has grown into this current issue that puts billions of dollars on the line and includes national security risks.

What’s new about it is that people are feeling the effects personally.

? How?

Who Is Behind The Attacks?

According to published sources most of the attackers have one thing in common: They originate in Russia. Attackers write code specifically designed to bypass Russian businesses and the government has given them a free pass. Putin will not prosecute cybercriminals or extradite them upon U.S. request. Experts believe that Putin operates under two unspoken rules:

  1. Don’t attack Russian businesses.
  2. Be ready to do favors for the Russian government upon request. (who? the attackers should be ready to do favors?

What If Companies Don’t Pay?

In 2019, cybercriminals attacked  the city of Baltimore and demanded $75,000. Baltimore decided not to pay it and ended up paying $18 million to rebuild the systems instead. The theory is that if all companies refuse to pay, hackers lose their leverage and incentive.

But the bigger the impact, the more leverage the attackers have. When you see hospitals turning away ambulances at the door because they have no way to intake new patients, it becomes really hard to ignore or take the time to rebuild systems altogether. It’s not illegal to pay the attackers and many companies find it much more cost effective just to pay up.

Hackers, then, are rewarded for their efforts and the cycle continues. The result? Companies spend millions in ransom to get their compromised systems running again, individuals have their personal information compromised regularly and governments are grappling with an issue they’re now ranking as dangerous to national security as terrorism.

&^$#! What Can We Do About it?

On an individual level, it really is as simple and unglamorous as brushing up on cyber hygiene. The Daily podcast cites the saying that,”security is only as good as your weakest link” and it usually ends up that the weakest links are employees and individuals. The Colonial Pipeline attack was traced back to a single employee with a compromised inactive account. What kind of account?

Josh Hornung at Hornung Technology Services, which specializes in IT Support and Cyber Security services said, “A good unique password for each site is step one. Enabling two-factor or multi-factor authentication everywhere you can is step two. Too many people use the same password across many accounts, which is how a lot of this stuff happens nowadays.”

Even the professionals aren’t immune. Hornung knew of an IT professional at a different company  who got hacked. He said the attackers “stole a spreadsheet where he kept all of his clients’ logins and security info.” From there, they “started logging into his clients and infecting them with ransomware.”

On a company level, you can either build your systems correctly on the front end and save yourself a world of hurt or you can fix the problem retroactively and pay dearly for it. And no matter what: the right time to start fixing what’s broken is right now. To quote Hornung, “It’s wild out there!”

How Does PayReel Keep Clients Safe?

With the mountains of personally identifiable information we handle each day, security is hugely important to us. We train our employees regularly on cybersecurity and we pay people to try to infiltrate our systems just to find vulnerabilities. At this point, such penetration tests might be a good idea for most companies—even those who only handle smaller scale data.

That might not seem very glamorous, but in this case, boring is exactly what you want. If your systems are secure, hackers may be inclined to move along to the low-hanging fruit and leave you alone. Either that or you can become fluent in Russian and start operating all of your business in Russian.  (in Russian or in Russia?)  нет? Okay, well then get on it.

Note: We relied heavily on The Daily’s June 8th podcast episode “Who is Hacking the U.S. Economy?” for this post.

How to Prevent a Security Breach And Stay Out of The Headlines

How to Prevent a Security Breach And Stay Out of The Headlines 7952 5304 Alicia East
You’ve added two-step verification to everything from your NestCam to your Einstein’s Bagels app. Maybe you’ve even frozen your credit (and your kids’ credit, if you’re super vigilant). You know a breach in your security plan could wreck your life. In business, your access to workers’ Personally Identifiable Information (PII) places an enormous responsibility on your shoulders. They may not think about it every day, but if there’s a breach, they certainly will.

Security is Everything 

Seriously.
When you’re thinking about hiring enough workers to get the job done, the last thing you want to be burdened with is integrating all the systems to make sure you get it done securely. Building the infrastructure to hire and deploy a contingent workforce takes time and serious expertise!
Can you think of many business functions in the world that access more priceless personal information and sensitive company information than hiring? I can’t! The best systems, software, and teams mean little if they are vulnerable to security attacks. You know the only time security makes the news? When it fails.

How Do You Prevent a Security Breach And Stay Out of The News? 

The most secure organizations partner with and employ several internal and third-party resources to protect PPI as fiercely as possible.
At a minimum, we recommend you: 
• Encrypt everything and at multiple levels
• Treat all sensitive information as Personally Identifiable Information (PII) and in accordance with HIPAA recommendations
• Don’t allow any sensitive data to go offshore
• Have third parties perform monthly security checks and an annual penetration test
One of the biggest benefits of working with an Employer of Record (EOR) like PayReel is that we’ve already built the infrastructure to follow all of the above recommendations. We protect clients’ resources, contracts, and data at all times with multi-leveled security systems.
Hey, you can let your PR company keep you in the news for good reasons. At PayReel, we specialize in keeping you out of the headlines you don’t want to be saddled with. Bottom line: You better check yourself before you wreck yourself.
Contact us for a business partner that takes security as seriously as you do.

What Employer of Record (EOR) Means And How it Can Cover Your Butt (CYB)

What Employer of Record (EOR) Means And How it Can Cover Your Butt (CYB) 2560 1710 Alicia East

Anyone else have a whole folder dedicated to CYB? How about a whole company dedicated to doing that on your behalf? That’s basically what an Employer of Record (EOR) is.

Clients usually come to us with three main CYB dreams for payroll

  1. Keep workers happy with on-time, accurate payroll.
  2. Keep the government happy with accurate worker classification and compliant practices.
  3. Keep our lawyers happy knowing numbers 1 and 2 are happening seamlessly and consistently.

Within those dreams lie many other goals

  1. To be able to hire quickly without changing headcount
  2. To be able to hire freelancers for special projects
  3. To hand off the legal risks of payroll and compliance to someone with the tools to get the job done right
  4. To be able to onboard quickly
  5. To be able to do business in multiple states without having to know all the rules of each of them 

In order to accomplish all of these goals, companies without a highly specialized internal team (nearly everyone except the really big companies) outsources payroll with either an Employer of Record (EOR) or a Professional Employer Organization (PEO). 

What does an EOR do?

An EOR handles payroll and takes on the paperwork and associated legal risks of employing people. It also allows businesses to add workers without changing their headcount. While an employee performs work for your business, the EOR serves as an employer for tax purposes and handles all personnel functions, including payroll processing, taxes, contracts, benefits, employment termination, background checks, worker performance issues, Certificates of Insurance, workers’ compensation, data security, and more. 

What does a PEO do?

A PEO partners with a business as a co-employer to provide HR services and allows a company to outsource some of the HR load. The business still holds all related liabilities and responsibilities and is also still required to carry its own insurance. PEOs are a good option for companies that need to outsource some services without handing off legal liabilities. 

We are in the business of protecting your business. 

Payroll is very complex and is one of the riskiest aspects of doing business as a highly-specialized process of doing payroll in a timely, secure and compliant manner. Payroll is also really easy to mess up. Errors are not just inconvenient and embarrassing, they are sometimes also incredibly costly due to IRS fines and other costs associated with righting a wrong.

Outsourcing payroll means outsourcing risk and makes business sense to most organizations and keeps the company in good standing with the people on the front lines as well as government agencies. 

Ready to CYB with an EOR? Well, here we are

 

video coding - PayReel

Audits suck: Are your independent contractors putting you at risk?

Audits suck: Are your independent contractors putting you at risk? 830 845 Alicia East

There’s a battle playing out in court over which workers can be classified as independent contractors versus employees. The legal wars demonstrate one important fact for employers: The IRS takes the practice of hiring independent contractors very seriously. That means you should, too.

Independent Contractors (ICs) are self-employed and hired to do a specific job. They receive payment only for the work performed. Unlike a regular employee, they pick their jobs and regularly move from client to client, business to business. Also referred to as freelancers, consultants and 1099’s, they report their own business income and pay self-employment taxes.

Hiring an IC is attractive to those companies looking for outside creative resources, and who want to outsource work that is not central to their main line of business. The work is project-oriented and is typically completed in a short amount of time. It’s also easier on the budget to pay your IC as a vendor, not as an employee.

Sounds nice, right? But there’s a big catch.

The IRS has very strict guidelines that define true business-to-business relationships. These guidelines are meant to prevent firms from misclassifying would-be employees, thereby avoiding a bounty of state and federal taxes.

Is your IC really an independent contractor?

This is a deceptively complex question. It’s important to confidently be able to answer “yes”, because the risk of facing an IRS audit has never been greater.

Best practices when working with an independent contractor:

  • Contractor has an established business entity, with a business name and EIN
  • Your contractor provides services to other businesses outside your firm
  • IC provides certificates of insurance, including at the least coverage for general liability insurance and worker’s comp insurance
  • You have a signed per-project agreement for services between your company and the contractor
  • Independent contractors work for multiple clients
  • Projects have a contract specifying project length, compensation and liability
  • Independent contractor does not function as a division of your company

When working with your contractors:

  • Do not train a contractor, direct their work responsibilities or define their work schedules
  • Independent contractors should use their own equipment
  • Do not provide any employment benefits, such as health insurance and corporate stock options
  • Contract on a per-project basis
  • Keep in mind that this is a business-to-business relationship

Prevent an audit with contractor payroll solutions

Audits are costly and time-consuming even for businesses that do everything by the book. How much are you willing to pay in time and hassle for employee misclassification? If you have any questions about independent contractor status, trust PayReel to help you make the determination.

We screen each employment situation carefully to assess the entire relationship to make sure you are in complete compliance.

Let us save you years of headaches

PayReel and sister company Crew Connection have a 40 combined years of experience helping companies navigate the complex issue of compliance and working with independent contractors. Call us at 303.526.4900 or email info@payreel.com.

photo of Elizabeth - Payreel

Meet the team: Elizabeth Lewis

Meet the team: Elizabeth Lewis 2163 2727 Alicia East

Elizabeth Lewis is a client relationship manager. If you have a problem, she has a solution.

Before joining the team at PayReel, Elizabeth spent seven years working with a diverse set of clients and organizations at The Kimmel Center for the Performing Arts in Philadelphia. She has a natural passion for building relationships and spreading joy to those around her. This has become a cornerstone to her commitment to excellence in customer care.

A native of The Garden State, Elizabeth will grow things wherever she can find the space. She also loves animals, especially horses, and is looking forward to fishing in the mountains of Colorado.

Something else: Elizabeth thinks there’s nothing tastier than steaming hot fries dipped in a vanilla milkshake!

Give our client relationship team a call at 303-526-4900. Elizabeth or one of the other team members will help you find solutions for your worker classification or payroll challenges. Go ahead. Try us.

ABOUT PAYREEL:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risks associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes video production, live events, media, and entertainment payroll easier, faster, and seamless

Cyber security - payreel

Cybersecurity—protecting company and customer information

Cybersecurity—protecting company and customer information 5760 3840 Heidi McLean

As children, we learn to keep our valuables under close watch when we are in public. In the cyberworld, it’s harder to keep our most valuable assets protected. Unlike a wallet, our identity, data, and customers’ personally identifiable information (PII) are not tangible items that we can keep in our sight, knowing that as long as it’s in our hands, it’s not in someone else’s. Cybersecurity then, requires a different approach.

It seems every week, a major company, city, or hospital experiences an alarming security breach. The breaches may compromise privacy (hacked laptop/phone cameras, for example), data, or PII. Credit monitoring companies, phones, hospitals, and even entire cities have been compromised or even taken hostage. Last week, it was Zoom, which left cameras vulnerable to being activated without permission (more about that problem as well as the fix here). This NPR piece offers a terrifying read on the fifth domain (after land, air, water, and space) of the cyberworld.

Businesses and consumers increasingly rely on apps and software to get their everyday work done. For companies, this comes with a responsibility to protect customers, employees and sometimes patient information. So what’s a company to do?

Okay, so it’s a real problem. Now what?

We’re not here to scare you without offering solutions. While we’re talking about what businesses can do, we would be remiss not to address one important aspect of how you can protect yourself on a personal level. You can freeze your credit as well as that of your minor-aged kids. Here’s an article from the USA Today with more about how and why to take this step.

Customers trust companies with priceless personal information and sensitive company data daily and since that’s our main focus, here are some business-oriented tips. 

Password management: There are tools that offer super-secure ways to make sure your company passwords are accessible only to whom you want them to be. If you’ve ever tried to access a company account after the person who managed it is no longer with the company, you see the value here. Aside from the convenience, it’s a way to keep information super secure.

Policies and procedures: Make sure you have policies and procedures in place to prevent attacks. Train employees on good security etiquette. For most organizations, human error is by far the most likely source of mistakes that lead to breaches.

Insurance coverage: Should you experience a breach, having solid insurance coverage in place can make it a lot less painful by covering the financial loss. This article provides a lawyer’s guide to cybersecurity insurance coverage.

Penetration tests: Have third parties perform monthly security checks and an annual penetration test. 

Customer encryption: Encrypt all information at multiple levels. Encryption scrambles data so that it’s unreadable without the encryption key. This article on business cybersecurity says: 

“There are three ways to encrypt data: at rest, in motion and in use. Small businesses should be encrypting customer data at all three points, especially if those companies have e-commerce capabilities. Some of this is simple, like making sure your website is set up to allow only HTTPS transactions, a protocol that activates encryption. Other forms of encryption require expertise or support from a company that provides point-to-point encryption and tokenization technology, like Elavon.”

Conclusion

Any investment in your security is a wise investment indeed.

 

 

Dynamex decision - PayReel

A Dynamex Decision newsflash: It’s about to get real with Assembly Bill 5

A Dynamex Decision newsflash: It’s about to get real with Assembly Bill 5 6000 4000 Heidi McLean

If you’re paying attention to the world of independent contractors (ICs), you’re already familiar with the Dynamex Decision (which we covered here). So what makes the recent Assembly Bill 5 news flashy? It’s that this bill approves codifying the ruling. That means the decision is one step closer to being iron-clad law (along with all the usual associated legalese and fines, of course).  

What are the arguments?

Reclassifying many ICs as employees protects workers

Supporters of the bill, such as San Diego Assembly member Lorena González said, “Big businesses shouldn’t be able to pass their costs on to taxpayers while depriving workers of the labor law protections they are rightfully entitled to.”

While it certainly affects many more industries than the ride-hailing apps Lyft and Uber, those companies do often end up at the center of the debate. Multiple class action lawsuits prove that plenty of drivers are fighting for the labor protections that come with being employees.

It’s not really about the workers

California frequently passes laws claiming to support the workers, but company representatives for the ride-hailing apps are quick to say workers like the freedom to create their own schedules. You’ll find many independent contractors (drivers as well as those in other industries) who agree. They like being able to choose compatible clients and projects and build a business for themselves instead of feeling like a cog in a corporate wheel.

Some workers could end up making less as employees. Employers don’t pay ICs the same taxes and benefits as they do employees and may start negotiating lower hourly rates for workers in order to keep their profits strong. That means newly-minted employees may make less even as they get access to benefits such as unemployment insurance, health care subsidies, paid parental leave, overtime pay, workers’ compensation, and a guaranteed $12 minimum hourly wage.

What is it most certainly about?

Money, cash, and dollar dollar bills

This goes for all parties. This New York Times article says companies like Uber and Lyft would have to raise their labor costs by 20 to 30 percent if they reclassify drivers as employees.

Big-time tax dollars (as in billions with a B)

According to the court’s ruling on the Dynamex decision, “the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue.”

Small businesses can avoid certain taxes with fewer employees and independent contractors can write off business expenses and may also underreport their income. Hence the resulting “deprivation.”

What about exemptions?  

Not all ICs want to be employees

Many hairstylists, for example, benefit from the “booth rental” model. As part of the salon, they get the benefit of the establishment’s marketing as well as possible walk-in clients. Still, they set their own schedule, manage their own business, and keep any earnings beyond their rent.

The bill seeks to accommodate such industries, hairstylists included, by exempting them from the ruling. There are plenty of other exemptions (such as doctors, dentists, lawyers, architects, insurance agents, accountants, engineers, financial advisers, and real estate agents) in the bill for professionals deemed true independent contractors who negotiate their own contracts.

The bottom line

It’s hard to overstate the potential impact of this subject. These headlines (from this week) demonstrate that this isn’t the last we’ve heard on the subject:

California bill advances, could shape battle in other states

This bill could make Uber drivers employees in California

Just can’t get enough of Dynamex?! We promise to cover everything you’d ever want to know about it and maybe a few things you wish you didn’t need to know.  

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with contingent workforce management and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

 

E-verify - PayReel

Immigration in the workplace: What you need to know to get it right

Immigration in the workplace: What you need to know to get it right 3916 2769 Alicia East

Immigration is one of the hottest topics in politics and much of the White House’s rhetoric on the subject (including the latest announcement) centers around employment. While employers may not make the policies, they do carry a great deal of responsibility in ensuring their employees are eligible to work in the United States.  

Let’s start with The Immigration Reform and Control Act (IRCA):

This is the foundation for the rest of the article. I-9 and E-Verify are simply tools to support compliance with the IRCA. Read the government info for the definitive legalese, but in a nutshell, this act prohibits employers from:

  • Knowingly hiring unauthorized employees
  • Keeping an unauthorized person employed once they know
  • Knowingly falsifying an unauthorized individual’s paperwork
  • Knowingly accepting falsified documents
  • Discriminating against authorized workers due to national origin or citizenship status
  • Refusing to honor appropriate documents

According to the U.S, Customs Control and Immigration, penalties for knowingly hiring or continuing to employ an unauthorized foreign national range from $375 to $16,000 per violation. 

Notably, these sanctions, as well as the burden to supply an I-9, do not apply to independent contractors (ICs). Since inappropriately classing workers as IC’s can lead to hidden immigration risks, we’ll do our customary shout-out to proper worker classification here.   

Form I-9

Form I-9 is a federal mandate for all employers. “Mandate” is short for: we’ll make you sorry if you don’t comply. An employer must submit the I-9 in accordance with the government’s guidelines. 

It has three sections. In the first, the employee confirms that he or she is authorized to work in the U.S. 

The second section is where employers confirm that they’ve examined the required documents to verify the employee’s identity and eligibility and that the documents appear genuine. This employer must be complete and sign this section within three days of the employee’s start date. 

Employers complete the third section if they need to reverify an employee’s work authorization status or if an employee is rehired within three years of when the Form I-­9 was originally completed.

Additionally, forms must be meticulously completed. Any inaccuracy can cause a fine. And yes, there are I-9 audits and they are on the rise.

Meeting the requirements of Form I-9 makes up the lion’s share of the administrative work when onboarding new or returning employees.

How does E-Verify work?

E-Verify is an additional tool to support employers with IRCA compliance. For certain federal contractors, using E-Verify is mandatory, but employers outside these parameters may choose to use E-Verify voluntarily in conjunction with Form I-9. 

E-Verify allows employers to enter information into an online system and then compares the employee’s identification with government databases including the Department of Homeland Security and the Social Security Administration. 

When everything matches, the employee gets confirmed. If something doesn’t match, it comes back with a tentative non-confirmation (TNC). From there, the employee can follow a process to update the information that caused the mismatch. Even when everything checks out, there is a formalized process to update everything within the government records. If something doesn’t check out, it can trigger loss of employment or an immigration event. 

What are the challenges of using E-Verify?

Employers who choose to use E-Verify should know it increases the administrative burden within the company. Appropriate company representatives must be very knowledgeable and pass a test before implementing it in the workplace. Once implemented, it must be used consistently across all employees. This burden was particularly notable during the government shutdown, when E-Verify was inoperational, causing additional delays and headaches. 

Additionally, President Trump expressed concern that it may be too tough for some employers. On a Fox interview (around the 5-minute mark) on Sunday, he discussed the possibility of using E-Verify as part of his immigration plan, but said, “The one problem is E-Verify is so tough that in some cases, like farmers, they’re not – they’re not equipped for E-Verify. […] I used it when I built the hotel down the road on Pennsylvania Avenue. I use a very strong E-Verify system. And we would go through 28 people – 29, 30 people before we found one that qualified.”

Employers aren’t the only ones affected, this Washington Post article claims E-Verify may hurt legal workers. Here at PayReel, we’ve seen legal workers end up with a mismatch through the system. It takes at least one live visit to the Social Security Administration to clear it up. 

What now?

As long as we have people entering the country, we’ll be discussing the economics and ethics around immigration. 

Employers must develop an effective compliance program to minimize liability or hire a partner to take on the liability. 

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with contingent workforce management and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

Cannabis, workplace impairment, and 5 questions to consider

Cannabis, workplace impairment, and 5 questions to consider 3438 5157 Heidi McLean

workplace impairmentWhat used to be black and white, and is now suddenly gray all over? When marijuana use was simply illegal, employers could legally make employment decisions based on use alone. As states decriminalize the use of medical marijuana, recreational marijuana, and CBD oil, the conversation gets much more complicated. Nowhere is it more important to pay close attention than in the workplace.

What are some of the complicating factors?

Marijuana products are increasingly finding their way legally into workers’ lifestyles. While marijuana’s presence in the workplace isn’t new, several factors complicate today’s iteration of the conversation:

What do we do about workplace impairment?

Even in a world where some marijuana use is legal, employers are still required to manage impairment. Trends show a push toward treating cannabis more like alcohol and focusing efforts on impairment rather than on use.

For example, while employers can’t tell employees not to drink, they can require employees not to be drunk at work. Even if the drinking happened outside of the office, drunkenness in the workplace hinders workers’ ability to do their job. To varying degrees, and depending on the role (operating heavy machinery, for example), workplace impairment could affect the employee, company equipment, and the public.

Can we talk about legal stuff for a minute?

For every case that rules in favor of the employee, there’s one that rules in favor of the employer. As individual cases play out in the courtrooms, time will tell which ones set the precedent as the law of the land.

In California’s Ross v. Ragingwire case, the courts ruled in favor of the employer, citing the California Fair Employment and Housing Act (FEHA), which does not require employers to accommodate medical marijuana use.

On the other end of the spectrum, in Whitmire v. Wal-Mart Stores, Inc., the court sided with an employee with a medical marijuana card. It determined that Walmart could not fire her simply for testing positive for marijuana metabolites. She was a legal user who claimed not to smoke at or before work. To justify her dismissal, Walmart would need to prove she was impaired at work—a much harder task. 

How do we update our policies to evolve with the times?

Black and white “zero tolerance” statements may not serve employers’ best interests anymore, but that doesn’t mean it’s a free for all. It’s really about updating your workplace policies and complying with best practices. Know the rules in your state and update your policies and procedures accordingly. Consider including a definition of workplace impairment and detailing progressive discipline policies to address the behavioral challenges.

Should employers identify signs of impairment (glassy eyes, changes in behavior, etc.), well-written policies and procedures can guide the response and remove as much subjectivity as possible.

What about hiring and firing?

Hiring and firing bring up challenges from both legal and operational standpoints. First, a note on the legal side: in most states that have decriminalized marijuana use, businesses are still legally able to fire workers who test positive. This is the case here in Colorado. On the other hand, in Maine (another state that has legalized recreational use) companies are no longer able to fire or refuse to hire someone for using marijuana outside work.

Even where employers can legally make hiring and firing decisions based on use, the same article indicates that some companies are still testing for other drugs but dropping marijuana in the pre-screening tests. The article quoted James Reidy, an employment lawyer, saying that some companies have a hard enough time filling positions and “don’t want to exclude a whole group of people.” Instead, “companies are thinking harder about the types of jobs that should realistically require marijuana tests. If a manufacturing worker, for instance, isn’t driving a forklift or operating industrial machinery, employers may deem a marijuana test unnecessary.”

The bottom line

Regardless of anyone’s personal feelings about cannabis, the conversation around marijuana use and workplace impairment is changing. This affects businesses whether they want to think about it or not. As always, there is no gray area in this simple fact: addressing changes proactively makes life better later.  

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