Is Your Company on the Independent Contractor Hit List?

Post date
June 18, 2015
Body

By Richard Reibstein, Forbes

The U.S. Department of Labor, the IRS and state workforce agencies have been cracking down on businesses that are believed to be misclassifying employees as independent contractors. The Labor Department has a Misclassification Initiative website and has entered into a Memorandum of Understanding with 21 state workforce agencies to detect and deter misclassification.

The IRS has a Questionable Employment Tax Program and has entered into a Memorandum of Understanding with the Labor Department and 37 state agencies to identify “employment tax schemes and illegal [tax] practices.” There are also more than a dozen states that have multiagency misclassification task forces aimed at the coordinated enforcement of state wage and hour and unemployment tax laws.

The Industry “Hit List”

Although companies in virtually every industry that use independent contractors are at risk if they have not structured, documented and implemented their independent contractor relationships in a compliant manner, the Labor Department, the IRS and state workforce agencies have targeted certain industries where misclassification is thought to be most prevalent.

Which industries are in the crosshairs of those regulatory agencies? Here’s a list based on public statements, press releases and congressional testimony by federal government officials over the last several years: janitorial services; construction; nursing; staffing; Internet services; transportation and trucking; cable companies; security; catering services; hotel/motel; oil and gas; landscaping; and car service/limousines.

The Labor Department itself has successfully investigated and prosecuted hundreds of businesses that it concluded were misclassifying employees as independent contractors and failing to pay them overtime or minimum wage. These include both small and large enforcement actions, some resulting in seven-figure settlements. Notable recent cases include:

  • A $1.075 million consent judgment against a cable company for allegedly misclassifying its cable installers;
  • A $277,000 assessment against a janitorial service subcontractor and its payroll services company found to be joint employers of low-wage custodians misclassified as independent contractors;
  • A $1.3 million consent judgment against a text message and Internet information provider for misclassifying its “special agents” who answered text messages from website users; and
  • A $395,000 consent judgment against a construction contractor for misclassifying carpenters, electricians, masons, laborers, painters and drywall hangers.

For the rest of the article, please visit the original post here.