Category: IC Compliance

A Solution to the “Five Degrees of Independent Contractor Misclassification”

“Independent contractor misclassification” is a phrase that is misunderstood, misapplied, and misused – constantly. Why? It is a phrase used to cover an array of disparate situations.  It covers companies that engage in indefensible and inexcusable conduct, such as when a construction worker, custodian, or restaurant worker is paid in cash under the table or when an administrative assistant is wrongfully paid on a 1099 basis.  But the same term is also applied in a few states to de-legitimize IC relationships that are legitimate and lawful in almost all other states and by the federal government.  When used in that context, such as where ICs have some of their own customers but also choose to supplement their income by using a referral company that sends them additional customers seeking the types of services they provide, the phrase “IC misclassification” can justly be regarded as legally unjust to both independent contractors and businesses.  And there are at least three other types of so-called IC misclassification somewhere in between.  Thus, the phrase is best understood in the context of a spectrum, with five degrees of independent contractor misclassification: unpardonable; uninformed; unprepared; unintentional; and unjust. [1]

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January 2020 Independent Contractor Misclassification and Compliance Law News Update 

While selected states are in the midst of trying to crack down on independent contractor misclassification, the federal government is trying to clear a path and clarify the tests for independent contractor status under various federal laws.  As reported below, New Jersey last month enacted a series of laws that, among other things, increases the penalties for IC misclassification under that state’s current “ABC” test for IC status. The existing “ABC” test in New Jersey was not amended by the Legislature, despite a strong push by some legislators in New Jersey to do so, but it remains a challenging test to meet for some companies using ICs in that state.  Meanwhile, the U.S. Labor Department issued its new joint employer regulation in January 2020, explaining and clarifying that some of the factors previously used by courts and administrative agencies to establish joint employer status are irrelevant to that issue but highly relevant to determinations of IC status.

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New Joint Employer Rule Will Impact Independent Contractor Misclassification Claims

Many companies that operate their businesses on an independent contractor model or supplement their workforce with ICs may be wondering if they will be impacted by the U.S. Department of Labor’s final rule on joint employer status, which was informally released today.  They are likely asking, “Does this final rule have any bearing on independent contractors?”  The answer is yes.

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About The Publisher

Richard ReibsteinRichard Reibstein is the publisher of this legal blog, which has been, since its inception in 2010, the only legal blog in the country dedicated exclusively to the subject of independent contractor compliance and misclassification. Read more

JDSupra The publisher of this blog, Richard Reibstein, was named “Top Author” in JD Supra Readers’ Choice Awards (2016, 2017, 2019 and 2020) for his thought leadership on the topic of “Employer Liability” issues as well as “Top Author” on “Class Actions” in 2016 and 2020.

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Locke Lord LLP

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