Companies can save substantial money and limit headcount by using independent contractors instead of employees, but this business strategy is under vigorous attack by the Internal Revenue Service (IRS), the Department of Labor (US DOL) and state governments. Federal and state governments estimate that they are losing hundreds of millions of dollars from companies’ failure to withhold taxes, failure to pay into unemployment and workers’ compensation funds and failure to pay into Social Security.
Download: "Independent Contractor Misclassification: 2016 Legal Analysis"
Staffing agency and vendor-supplied worker relationships are under fire as well. These workers can be considered joint employees under many laws, creating potential liability under tax laws, employment laws and benefits laws, including the Affordable Care Act.
Million-dollar verdicts, fines and settlements have become commonplace as compliance efforts intensify. Are you protected?
Independent contract misclassification analysis crosses several practice areas and cannot be evaluated purely as an employment law issue. The question of “Who is an employee?” requires analysis under employment law, tax law and benefits law, with varying standards applicable to different laws, different states and different industries. The same relationship can be deemed an independent contractor relationship under some laws but an employment relationship under others.
BakerHostetler’s Independent Contractor Misclassification Team takes a multidisciplinary approach to evaluating these relationships. We rely upon the collective experience of practitioners across Employment, Tax, Employee Benefits and other disciplines to help companies evaluate the risks of existing independent contractor relationships and to devise strategies for minimizing those risks. Our interdisciplinary team works seamlessly and collaboratively to help employers stay one step ahead of the game when retaining independent contractors and when litigation does arise, we are prepared to counter with a strong defense.
We help companies by:
- Evaluating the risks in existing independent contractor relationships, taking into account the multiple legal standards that are applied under tax, employment and benefits law, as well as the varying tests applied by states in their unemployment, workers' compensation, wage and hour and tax laws. Industry-specific tests in several states must be considered as well.
- Providing advice on Affordable Care Act compliance, including evaluating whether non-employee workers may be subject to the coverage requirements. Risk areas for companies extend beyond individuals treated as independent contractors and may include vendors, such as staffing agencies, who supply labor through contractual service agreements.