From the hiring process to termination, there are countless hazards that even conscientious and responsible condominium board members should be aware of concerning their employees. I have compiled below a few answers to certain questions that I have received over the years concerning hazards that are not easily recognized because they are concealed in the matrix of statutes, regulations, and case law.
1. Is our maintenance person an independent contractor?
Workers who provide day-to-day, or even part-time, services for a condominium (e.g., maintenance workers, common area cleaning workers, and concierge workers) will most likely be considered employees. The classification of a worker as either an employee or independent contractor is a critical decision that must be made at the start of every working relationship and revised, if necessary, to reflect both the true nature of the relationship and to ensure the condominium’s compliance with the law. While it is attractive for a condominium board to classify a worker as an independent contractor in order to avoid (a) paying payroll taxes, (b) withholding the appropriate amounts for Social Security and other necessary withholdings, (c) making unemployment contributions, (d) or offering certain benefits, failure to properly classify a worker can have significant adverse consequences. A condominium employer deemed to have misclassified an employee as an independent contractor may be liable for, among other things, back taxes, wages, benefits, and possibly even civil or criminal sanctions and penalties.
Workers who provide day-to-day, or even part-time, services for a condominium (e.g., maintenance workers, common area cleaning workers, and concierge workers) will most likely be considered employees.
In recent years, the issue regarding whether an individual is an employee or an independent contractor has become a hot topic in employment law, and courts are paying closer attention. Generally, in order to determine if a worker is actually an independent contractor, condominium employers should look to the below three-step test, which provides that a worker is presumed to be an employee unless all three of the following prongs are satisfied:
(1) The individual is free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact;
(2) The service is performed outside the usual course of the business of the employer; and
(3) The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.
Thus, if your condominium hires a worker whose job duties are under the control and direction of the condominium board, and/or the board’s property management company, and that worker is not customarily engaged in an independently established trade, occupation, profession or business, such a worker should be classified as an employee. I strongly advise each condominium board faced with such a situation to consult with its accountant and attorney to determine whether its workers have been accurately classified.
2. Do we need to document the provision of on-site housing to an employee as a benefit of his or her employment?
Yes. If your condominium owns a unit and is able to provide on-site housing as a benefit, the board should make sure to enter into an occupancy license agreement at the time of hiring an employee that will be provided housing (i.e., an agreement to allow the employee to use the unit during their employment only). The reason for this is simple. At the termination of such an employee, whether it be voluntary or involuntary, the board will want to legally be in the best position it can be in order to require the departing employee to vacate the unit within a reasonable amount of time so that the board can provide the on-site housing benefit to a new hire.
Absent a fully executed occupancy license agreement, the employee can be considered a tenant, which designation would require a board wishing to reacquire the unit to have to proceed with a potentially lengthy Summary Process action in order to legally evict the employee. If a proper occupancy license agreement is entered into, and the employee refuses to vacate the unit after the board terminates the agreement, the board will only need to seek injunctive relief from a court requiring the employee to vacate the unit, which is generally a quicker and much more cost-effective legal action available to a board in such a situation.
Thus, it is recommended that an occupancy license agreement containing terms specifying the on-site housing arrangement as a license and not a tenancy be entered into prior to providing such benefit to an employee. Typical terms that are contained in such an agreement include: (1) the granting of a license that is terminable at will by either party, (2) terms that pertain to restrictions placed on the employee’s use of the unit, (3) terms regarding the employee’s responsibility for any damages to the unit, and (4) specific terms regarding the board’s legal remedies in the event the employee fails to vacate the unit upon termination of the license.
This article is, by no means, an exhaustive list of employment issues that boards should be aware of; rather, it should be looked upon as a starting point by every condominium board employer to take a closer look at its working relationships and determine whether professional advice from both the condominium’s attorneys and accountants should be sought to assist the board in ensuring compliance with the law.