Total Articles: 33
Employee Or Independent Contractor: One Way Of Thinking It Through
Deciding whether an individual is an employee or independent contractor is becoming an ever more important question. Employers should carefully scrutinize each and every independent contractor relationship which exists within the business before the Labor Department, the IRS, or a state agency does it for you.
Timeshare Sales Force? Employees, Of Course
Lots of comments sent in regarding yesterday's post about California's penalties regarding intentional misclassification of workers. Now, onto timeshare sales people.
Gambling on the Employee/Independent Contractor Issue?
Welcome to the Worker Classification Casino!
First, the IRS is scrutinizing the employ/independent contractor issue -- and offering a very nice settlement program to encourage companies to prospectively classify as "employees" workers who they improperly classified as "independent contractor." See our earlier blog piece about the IRS's new program at 2011 Voluntary Amnesty Employee Classification.pdf.
IRS Voluntary Compliance Program for “Misclassified” Employees...PROCEED WITH CAUTION
The IRS has recently announced a new voluntary compliance program providing employers the opportunity to prospectively reclassify as employees workers erroneously treated as independent contractors. To encourage such voluntary reclassification, the program offers generous settlement terms and, according to the IRS, provides audit relief for previous years.
IRS AMNESTY FOR MIS-CLASSIFIED INDEPENDENT CONTRACTORS
There are lots of reasons employers like to hire “independent contractors” instead of employees. A company’s budget may limit headcount, but allow for hiring “consultants.” Independent contractors do not require company-provided benefits. There is less chance of employment related litigation. Most wage-hour laws do not apply. And, yes, the employer does not have to pay its share of social security tax or withholdings.
DOL/IRS Collaboration Memo Makes For Interesting Reading
We wrote previously about the announcement of a cooperative alliance between the U.S. Labor Department and the U.S. Internal Revenue Service aimed at ending what the Secretary of Labor called "the business practice of misclassifying employees [as independent contractors] in order to avoid providing employment protections.
Employers, don't be too quick to take that IRS "independent contractor" deal
You know the old saying, "If it seems too good to be true, it probably is"? Well, it appears that this may be the case with the new "sweet deal" the Internal Revenue Service is offering to employers who agree to reclassify their "independent contractors" [sic] as "employees" in exchange for some admittedly generous breaks.
Employers Get Misclassification Tax Relief
The Internal Revenue Service (IRS) announced a new voluntary correction program to allow employers to reclassify workers who are improperly classified as independent contractors as employees for employment tax purposes. The Voluntary Classification Settlement Program (VCSP), announced September 21, 2011 in IRS Announcement 2011-64, permits employers to voluntarily reclassify workers for future tax periods with limited federal employment tax liability for past non-employee treatment. The VCSP is similar to the current Classification Settlement Program which allows employers under examination to resolve classification issues discovered by an examining agent with reduced federal employment tax consequences. The VCSP, however, is available to employers outside of an IRS examination. In general, the program allows employers to eliminate years of past employment tax liabilities for “pennies on the dollar”: an amount equaling just over one percent of the wages paid to the reclassified workers for the past year. To participate in the VCSP, an employer must meet certain eligibility requirements, apply to participate in the VCSP and enter into a closing agreement with the IRS.
Employee Misclassification Relief?
Executive Summary: The IRS recently announced a new "Voluntary Classification Settlement Program" (VCSP), which allows employers to correct worker classification errors and pay significantly reduced penalties, without having to go through either an examination or complicated administrative procedures.
IRS Launches Voluntary Compliance Settlement Program for Misclassified Workers
On September 21, 2011, the Internal Revenue Service (IRS) announced that it was launching a new Voluntary Compliance Settlement Program (VCSP) that will enable employers to resolve past worker classification issues by paying a small amount of tax in exchange for reclassification of contractors as employees on a forward-going basis. See IRS Announcement 2011-64.
IRS Offers Limited Amnesty Program for Employee Misclassifications; Agency Agreements and President's Deficit Reduction Plan also Focus on Issue
Employers that voluntarily reclassify their independent contractors as employees for federal tax purposes and pay a fee covering a portion of their past payroll obligations can escape certain tax liability for improper misclassification under the IRS’s new Voluntary Classification Settlement Program (VCSP). In a statement announcing the program, IRS Commissioner Doug Shulman said: “This settlement program provides certainty and relief to employers in an important area,” adding: “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”
An IRS Discount...
A devotee of Groupon and Living Social, I am a tax/ERISA geek at heart. . .and this offer from the IRS is the best discount that I have seen in a verrrrry long time. . .
Federal/State Cooperation on Independent Contractor Issue
It does not seem very often that any headline that involves government can properly use cooperation these days, but yesterday's story on NPR, Labor Dept. Expands Enforcement Of Wage Violations, indicates that the Department of Labor is signing agreements with various state agencies to share information that will allow both to go after companies which "mis-classify" individuals as independent contractors.
Government Agencies Are Going After Employers Who Wrongly Classify Employees As Independent Contractors
Today, National Public Radio (NPR) reported that the United States Department of Labor (DoL) is signing agreements with state agencies to share information regarding employers who have erroneously categorized employees as independent contractors. The DoL is also sharing this information with the Internal Revenue Service (IRS). As I noted in my August 15, 2011 Blog, wrongly classifying employees can result in significant penalties and costs to employers.
DOL Adds Budget Dollars for Independent Contractor Misclassification Enforcement
Do you have independent contractors? The federal government may soon come a knockin’. The U.S. Department of Labor has highlighted its ongoing and increased enforcement in the area of independent contractor misclassification.
Misclassified Maintenance Worker Figures to Clean Up
Misclassified Maintenance Worker Figures to Clean Up: Judge Holds He Was Not an Independent Contractor
Are Your Independent Contractors Really Independent Contractors?
Employers that hire independent contractors must be extra cautious to ensure that these workers are classified correctly, because federal and state governments have signaled their intent to more seriously investigate misclassification issues. Employers that run afoul of the relevant statutes and regulations will face regulatory fines, back tax implications, wage and hour claims, workers' compensation issues and a host of other problems.
Ninth Circuit Finds Insurance Agent is Independent Contractor, Not Employee.
The Ninth Circuit recently held that a "career agent" who sells the financial products and services of a group of financial services companies is an independent contractor and, accordingly, cannot sue the companies for sex discrimination under Title VII because that statute only covers employees. See Murray v. Principal Financial Group (9th Cir. June 17, 2010). In reaching this decision, the court noted that it and "virtually every other Circuit to consider similar issues, have held that insurance agents are independent contractors and not employees for purposes of various federal employment statutes."
20 Ways Your Subcontractor Might Be an Employee
Quite often, companies in the construction industry hire subcontractors and classify them as independent contractors. However, these companies should take caution in proceeding with such classification. In February, the IRS began its first comprehensive audit of employment tax issues in over 25 years. The main issues to be examined in these audits are worker classification, executive compensation and taxable fringe benefits. (For a broad discussion of all of these issues, please see our Firms November 2009 Tax alert IRS Will Audit 6,000 Companies Make Sure Your Employment Taxes Are in Order.) Because worker classification is an issue that arises often for construction companies, this article focuses solely on worker classification and the factors involved in making an accurate determination.
Misclassifications Matter.
As businesses look for ways to save money without lowering productivity, the benefits of hiring an independent contractor can be appealing for several reasons. Businesses who hire the services of properly classified independent contractors avoid many of the monetary responsibilities that attach to hiring employees: worker's compensation insurance, employment tax, and wage withholding responsibilities, amongst others.
Employer Liability: Will 'Misclassification Initiatives' Reduce Employers' Use of Independent Contractors?
Employers' use of independent contractors instead of traditional
employees has steadily increased over the past 20 years. Some employers
feel they can save money by using independent contractors instead of fulltime
employees. The contractors themselves may value the autonomy and
economic perks that independent contractor status provides. Also, the
specific skills and knowledge that independent contractors can bring to a
short-term project can be critical and therefore worth a premium,
albeit one that isn't sustainable in the long term. But the use of
independent contractors isn't as perfect as these mutually beneficial points
may make it seem.
Will "Misclassification Initiatives" Reduce Employers' Use of Independent Contractors?
Employers' use of independent contractors instead of traditional employees has been on a steady incline over the past 20 years. Some employers feel that they can save money by using independent contractors instead of full-time employees. The contractors themselves may value the autonomy and economic perks that the status provides. Also, the specific skills and knowledge that independent contractors can bring to a short-term project can be critical and, therefore, worth a premium but not sustainable in the long term. But the use of independent contractors is not as perfect as these mutually beneficial points may seem.
The Independent Contractor Conundrum.
As the recession lingers on,
employers continue to search for
ways to manage operating costs.
One common (but increasingly
risky) cost-cutting measure is the
use of independent contractors in
positions that are normally fi lled
by employees.
Use of Independent Contractors May Create Unexpected Liability.
With a struggling economy, many businesses may be tempted to classify their workers as independent contractors rather than employees because of the benefits this classification provides to employers. For example, many federal antidiscrimination laws do not apply to independent contractors, since they only cover "employees." Additionally, a company may be shielded from certain other types of liability to which it would be subject if the individual was an employee.
U.S. Department of Labor Pursues Employer of Misclassified Independent Contractors.
The U.S. Department of Labor is one of several government agencies that may take issue with improper classification of workers. A recent case illustrates how the Department may hit employers hard for misclassification.
Employers Should be Prepared for an Outbreak of Swine Flu.
Most employers probably are aware that incidents of swine flu have been reported in numerous states, including California, Texas, Ohio, Kansas, and New York. Although the World Health Organization has indicated that it does not have enough information regarding the strain of influenza to raise the global pandemic level alert, the Department of Homeland Security has declared a public health emergency in the United States. This allows funds to be released to support the public health response. Homeland security officials reportedly are responding aggressively with the expectation that the outbreak will spread.
Court Designates Sales Managers as Employees Because Company Controls Distribution of Sales Leads.
A group of insurance sales leaders who filed for overtime wages under the Fair Labor Standards Act (FLSA) have been deemed by the 5th U.S. Circuit Court of Appeals to be employees rather than independent contractors, and therefore eligible for overtime pay. Hopkins v. Cornerstone America, No. 07-10952 (5th Cir. October 13, 2008). The court based its decision on the economic realities of the situation, and determined that the managers were economically dependent upon the company for which they worked, instead of being in business for themselves.
Tax Risk Related to Independent Contractors (pdf).
Independent contractors are a
growing segment of the retail
workforce. Lower costs,
reduced liability, and hiring
fl exibility are just a few reasons
that retailers fi nd hiring
independent contractors to be
so attractive. While these
benefi ts are alluring, retailers
need to be aware of the risks
involved when engaging
independent contractors.
Courier Found To Be Independent Contractor.
Weighing in on the ongoing controversy regarding the proper classification of workers, the federal court here held that a driver working for a courier service was an independent contractor, not an employee, and thus, not entitled to protection under Title VII, the NJLAD, the Fair Labor Standards Act and the State Wage and Hour laws.
Independent Contractors: A Dying Breed?
The employer-employee relationship is fraught with legal obligations: workers compensation, complex wage and hour rules, paid and unpaid leaves of absence, payroll filings, sexual harassment training, benefits, etc. At times, employers may wish to engage temporary services without some of the entanglements associated with adding employees. Workers, too, may wish to avoid obligations such as tax withholding and exclusive employment relationships. For these and other reasons, employers and workers enter into independent contractor relationships.
Independent Contractor Status: Useful In The Right Circumstances.
Many companies have discovered the administrative and other advantages of engaging the services of certain individuals as independent contractors rather than employees. The independent contractor relationship is definitively less complicated. Independent contractors are not covered under company benefit plans. Payroll withholdings and deductions do not apply. They are not entitled to statutory benefits and protections afforded employees such as unemployment compensation and worker's compensation. Independent contractors in most instances cannot take advantage of the various anti-discrimination protections of the federal, state and local human rights laws, and normally cannot bring an action against the company for the familiar employment-related legal claims.
Independent Contractor or Employee.
The tax law covering independent contractors is very complicated. Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services.
Independent Contractors vs. Employees.
Are you or your help independent consultants or employees? Before you can know how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services.
