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T-1 TABLE OF CONTENTS SECTION 1: THE EMPLOYER-EMPLOYEE RELATIONSHIP 1.1 Importance of the Determination......................................................................................................... 1-2 1.2 Employee vs. Independent Contractor. ................................................................................................ 1-2 1.2-1 Common Law Test............................................................................................................... 1-3 1.2-2 Reasonable Basis Test........................................................................................................... 1-6 1.3 Employment Status Determined by Law. .......................................................................................... 1-11 1.3-1 Statutory Employees. ......................................................................................................... 1-11 1.3-2 Statutory Nonemployees. ................................................................................................... 1-12 1.4 Temporary Help Agency Employees.................................................................................................. 1-12 1.5 Other Third-Party Arrangements – Leased Employees, PEOs, Statutory Employers, Payer Agents....................................................................................................................................... 1-13 1.6 Employees Under Other Federal and State Laws............................................................................... 1-17 1.6-1 Fair Labor Standards Act. .................................................................................................. 1-18 1.6-2 State Wage-Hour Laws...................................................................................................... 1-21 1.6-3 State Income Tax Withholding Laws................................................................................. 1-21 1.6-4 State Unemployment Insurance Laws................................................................................ 1-21 1.6-5 State Disability Insurance Laws. ........................................................................................ 1-23 1.7 Worker Misclassification: Enforcement and Penalties........................................................................ 1-23 1.7-1 IRS Penalties. ..................................................................................................................... 1-23 1.7-2 IRS Enforcement Efforts. .................................................................................................. 1-24 1.7-3 FLSA Complaints Filed With the Department of Labor.................................................. 1-28 1.7-4 State Unemployment Agencies. ......................................................................................... 1-28 1.8 Proof of the Right to Work in the U.S................................................................................................ 1-28 1.9 New Hire Reporting........................................................................................................................... 1-44 1.10 Review Questions and Exercises. ....................................................................................................... 1-56 SECTION 2: FEDERAL AND STATE WAGE-HOUR LAWS 2.1 Fair Labor Standards Act. .................................................................................................................... 2-3 2.2 Federal/State Relationship. .................................................................................................................. 2-4 2.3 Employer and Employee Coverage....................................................................................................... 2-4 2.4 Exempt and Nonexempt Employees. ................................................................................................... 2-5 2.4-1 White Collar Exemption...................................................................................................... 2-5 2.4-2 Retail and Service Industry Exemption.............................................................................. 2-31 2.4-3 Public Sector Exempt Employees....................................................................................... 2-33 2.4-4 Other Exempt Employees. ................................................................................................. 2-33 The Payroll Source®