The IRS yesterday announced a new program to permit taxpayers to voluntarily reclassify independent contractors as employees for federal employment tax purposes.
The program, called the “Voluntary Classification Settlement Program” (VCSP), would allow businesses to voluntarily reclassify workers who currently receive 1099s from the company by making what is referred…
The Pennsylvania Construction Workplace Misclassification Act was signed into law on October 13, 2010. Also called House Bill 400 and Act 72 of 2010, the new law went into effect on February 10, 2011.
Earlier this month, the Pennsylvania Department of Labor and Industry published three documents on its website…
3P Delivery, Inc. provides delivery services for major retailers. It has historically classified its drivers as independent contractors and not employees. 3P Delivery was sued in 2008 by two drivers in Oregon and two drivers in Washington for misclassification, claiming that “3P engages in a fraud designed to make…
Yesterday, just outside Washington, D.C., state and federal workforce agency officials met to discuss their joint efforts to crack down on independent contractor misclassification. The forum, entitled “Worker Misclassification: Federal-State Perspectives and Initiatives,” was one of the opening day’s general sessions at the National Conference on Unemployment Insurance. (Click “More” for “Takeaways” below)
As noted in the preceding blog post on this site (see below), Congress has now introduced in this session of Congress two bills seeking to crack down on misclassification of employees as independent contractors: the Employee Misclassification Prevention Act (EMPA) and the Fair Playing Field Act of 2010. Although those two bills, if enacted, would dramatically change the landscape of federal IC legislation, neither should end the use of legitimate independent contractors. Rather, businesses would be able to continue to use ICs provided that the legal tests are satisfied for independent contractor status under federal and state laws. This blog post discusses the ways by which businesses can enhance their compliance with existing and proposed IC laws, including two alternatives to the costly and often unacceptable alternative of reclassifying independent contractors as employees.
As a regular subscriber to various alerts involving misclassification of employees as independent contractors, I see on a daily basis an array of articles by lawyers warning businesses of impending doom if they continue to use independent contractors. Consultants match these with advertisements and postings offering quick and guaranteed solutions to the misclassification dilemma. As is often the case, the answer lies somewhere in between.
No federal laws prohibit the use of independent contractors and only a few states limit their use. Therefore, there is no need for most companies to follow the ultra-conservative approach of discontinuing their use of non-employee contingent workers and reclassifying all 1099ers as W-2 employees – especially if your business structure relies in whole or in part on a contingent workforce. Reclassification of some or all of your 1099ers into W-2 employees, however, is one option that some companies may wish to consider among a range of alternatives, depending on a host of valid business and legal considerations. Some of the other alternatives available to companies include bona fide restructuring and employee leasing.
In addition to cookies that are necessary for website operation, this website uses cookies and other tracking tools for various purposes, including to provide enhanced functionality and measure website performance. To learn more about our information practices, please visit our Global Privacy Notice.
