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Contract to waive rights provided by personnel policy?

I'm working with a difficult situation of independent contractor versus employee and have been asked to see if I can find anything about an employment contract whereby the employee waives rights under the personnel policy? These would be things like grievance, leave accruals, health insurance. Of course overtime rules would still apply.



  • rrupert
    rrupert ✭✭✭
    edited June 2017

    My first question is the "why?" one of course. But I will leave that 'til the end. LOTS OF PITFALLS!!!!
    (You say a union CBA involved here? if so, and the person is potentially part of the bargaining unit, this is a whole can of worms you need to avoid)

    My second thought is that there are some benefits that either:
    (1) can't be waived (just one example on leave accrual is FMLA leave is dependent on very specific eligibility rules written into law and may not be waived: "The FMLA prohibits employers from interfering with employees' rights under the law and authorizes the U.S. Department of Labor (DOL) to investigate and enforce its provisions (See Investigative Authority). Employees cannot waive, nor may employers induce employees to waive, their prospective rights under the be waived" ) or
    (2) can possibly be waived at hire but if it is, it can never picked up again and you would need to fully explain that to the signer of the contract for your protection (401k participation is a one time waiver - can depend on the plan language and how 'safe harbor' plays into that waiver- needs further research) or
    (3) those that can be waived and then picked back up some other time even if a waiver occurs. For example, not sure an employment contract could stop someone from stating they aren't going to defer into a 401k plan (but don't fully waive forever) from then using their rights under the eligibility in the 401k plan document to get the match (safe harbor or not). You would need to find a way to class out (if even possible) this group of employees and still pass nondiscriminatory coverage testing.

    I hope I have proven that you'd really have to look at each specific benefit and accompanying laws to see if it could be waived under a contract. FLSA is just one of the laws you have to be concerned about (This is not just a payroll question, but a full on HR/payroll/benefits/legal question). You need lots of consulting and legal help -- this would be NO DIY!

    My third thought, even if you can, is what are you going to offer to get the employee to waive? You have to be careful under PPACA that you aren't incentivizing them to NOT take the employer coverage, right? Here's just one article talking about the pitfalls and it does state you shouldn't allow the choice to "opt out" to some and not all and also the employer cost for doing so -- not just the cost but possibly employer penalties : and here is another that is more recent and talks about the pitfalls :

    It sounds like that you are trying to create something in between IC and employee and there are probably many good reasons where it is a bad idea and why more employers do not do it (or they choose to outsource the need if it is only temporary). But I get back to the "system of 5 whys root cause analysis" used in Six Sigma -- keep asking why until you get to the most basic of reasons... You might find there is another path...

    I am assuming that the employer doesn't want to pay the full costs of the employment relationship but the relationship would not fall under an IC under the law.

    Maybe consider job sharing/PT positions that keeps that group of people from falling under the FT benefit eligibility (some benefit plans require # hours per week or 1000 hours per year to get eligibility) for those laws and benefits. Although you still have to be careful about purposefully discriminating to keep from benefits. And you get into morale and motivation issues.

    Honestly, I've been studying too hard for the SPHR but this is the perfect case study for a strategic plan (long term) vs a tactical one (short term). If this is just for one person, the employer would be better served to come up with a better solution.

  • JJacob
    JJacob ✭✭

    I know you didn't ask but here is more....

    HR is attempting to fill an anticpated 2 year position with an independent contractor. This sole proprietor does offer services to the public at large. However the "services agreement" that was written by an attorney (and HR attempted to approve) came back with "duties", "salary", "benefits" listed. To which I said, Nope, he needs to be an employee or a contractor.

    I feel that I am clear on what defines the difference between an employee and an IC. I'm understanding that this person WANTS to be an IC for reasons of continuing to service his other clients. However, HR wants to provide supplies, space, training and control/direct him like an employee, but pay him like an IC (no benefits, employer fica, med etc).

    HR asked us for solutions. I feel like I'm hearing a repeat of what I screamed internally. Either bring him in as a full fledged employee and provide all the benefits, training, supplies, space you want. OR accept the revisions I made to the contract (with attorney approval), charge him rent for space, cost for supplies and don't try to control/direct him like an employee.

  • rrupert
    rrupert ✭✭✭
    edited June 2017

    totally agree with you. Never the twain shall meet on EE and IC -- no salary (could do a per hour billing rate though), no benefits. I am surprised HR is asking you for solutions. They should be asking legal counsel familiar with employment law and FLSA/DOL issues! Sounds like this attorney that drafted the agreement was not! (Not all attorneys are created equal!)

    It does sound like IC is actually a better fit if they can get over the training/control part beyond a basic level.. Just providing space and supplies isn't too big of a deal as long as he is providing those things for his other service to other clients -- they can't be doing 100% of it. It's controlling details rather than latitude to complete goals within a larger project that will be the issue. Duties need to be grouped together into goals/project needs with details like scope, formats, timing/penalties/rewards, delivery schedule, etc. You can control some, you just have to think differently. I do wonder what training they think he needs -- does his company have insurance that covers EPLI/E&O/liability for his work product? I would want to make sure it did and that should be something an IC would have over an EE.

    I know lots of long term ICs that were implementing SAP at a large petrochemical company in Houston....for multiple years without issues. There was direction and control but again more at the level of goals/timelines etc than specific what you are doing today.