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THE POWER OF "THANKS"
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Legally PINK PINK's regular "Legally PINK" column provides tips to keep you and your business out of hot water. Here are a few of our favorites: August.September 2005 Are your independent contractors truly independent? Can you defend successfully against a claim that your contractor is an actual employee? Dr. Deborah Brome, CFO of Global Evaluation and Research Solutions Inc. (GEARS) and head of the company's Boston office, can. GEARS uses independent contractors on various government and private-sector projects. According to Brome, the contractors prefer to be independent and to have the choice of working for various companies. By using independent contractors, GEARS lowers its operating costs because it does not have to pay employee benefits and payroll taxes. Furthermore, Brome explains, "because each contractor has a high level of expertise, we experience short learning curves and quick turnaround times on projects." The IRS and the courts consider the type of relationship and degree of the employer's behavioral and financial control when determining whether or not an individual is an independent contractor. So keep the following in mind: »» Have a written independent contractor agreement that spells out the terms of the employer-independent contractor relationship. »» The employer has control over only the end result of an independent contractor's work. »» The independent contractor controls the methods and means for getting the desired result. »» The independent contractor is free to market her services to other organizations. »» An employer's attempt to establish a long-term or exclusive relationship, or have financial control over the independent contractor's operations, likely will nullify the independent contractor status.
The Internet is loaded with boilerplate contracts for use by anyone willing to fill in the blanks with pertinent information about the contracting parties. To save time, contracting parties often use boilerplate language word for word, without stopping to read and understand the terms. Not all boilerplate language is applicable to every contract, however, and contracting parties may still need to tweak contracts to make them work for their particular needs. Without such editing, some boilerplate provisions may be unenforceable or may have no bearing on the contract at all. In addition to information describing the parties, length of the contract period, duties of the parties, contract price and payment terms, several boilerplate provisions are key to protecting the parties' interests: »» GOVERNING LAW, or CHOICE OF LAW, puts the parties on notice as to which jurisdiction's laws will govern the contract – usually the state where one or both parties reside or are headquartered. »» SEVERABILITY ensures that if one contract provision is found to be invalid or unenforceable, the remaining provisions will not be affected by the invalidity or unenforceability. »» WAIVER provides that a party's waiver of the breach of provision by the other party will not be affected unless in writing. »» MODIFICATION, ENTIRE AGREEMENT provides that the words in the written contract constitute the entire agreement between the parties. They cannot be modified or amended unless in writing and signed by the parties. »» DISPUTE RESOLUTION indicates how a dispute over the contract will be handled, through either litigation, arbitration, mediation or some other process.
When it comes to diversity, companies can pay now or pay later. Texaco. Coca-Cola. Morgan Stanley. As the result of discrimination lawsuits initiated by disgruntled employees, these companies have been forced to implement programs that will foster diversity in their respective organizations. In November 1996, in response to a class-action discrimination lawsuit filed by six African-American employees on behalf of 1,400 others, Texaco allocated $35 million of a total settlement of $176.1 million to create an "Equality and Tolerance Task Force" to revise then-current human resources policies and create an "environment of inclusion." As fodder for their complaint, the employees divulged a taped remark by a Texaco executive referring to "all the black jelly beans … glued to the bottom of the bag." Similarly, in 2000, Coca-Cola reached a settlement valued at $192.5 million in a class-action racial discrimination suit. The company agreed to be evaluated by an independent task force charged with overseeing Coke's diversity efforts and monitoring human resources practices with respect to its African-American employees. Then, in July 2004, Morgan Stanley settled a sex discrimination lawsuit for $54 million with a class of female employees from one division. The company signed a consent decree mandating it to appoint an internal ombudsman and an outside monitor of its programs addressing the promotion and retention of female employees. No federal or state law mandates "diversity" per se, but many laws prohibit discrimination based on race, sex and other protected classes. Each of the companies mentioned has employed thousands of people, both male and female and of various races. Yet only after some of their employees filed class-action lawsuits alleging discrimination, to the tune of millions of dollars, did the companies apparently see the need for the inclusion, training and promotion of those employees who look different than the average manager or executive. The cost of diversity can be devastating for companies that address the issue only after they are served with discrimination lawsuits. They will be exposed not only to the loss of corporate funds, but also to the negative scrutiny of insiders and outsiders for years to come. The best approach legally, financially and otherwise is to create an environment of inclusion before there's a lawsuit. Donna L. Johnson is an attorney who counsels small and medium-sized businesses on topics ranging from employment law to general corporate matters. |
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