91视频

Federal and state government agencies have been increasing enforcement efforts to address misclassification of workers as contractors rather than employees. The U.S. Department of Labor has added 250 investigators to aid with compliance efforts, and the IRS also has been transparent in its intent to step up audits and enforcement efforts to combat misclassification. Meanwhile, the state of Oregon created an Interagency Compliance Network to proactively educate businesses and coordinate enforcement activities between key state agencies.

Courts, too, are being asked to opine on worker classification more than ever, and some decisions totally contradict what had been traditional business models in certain industries. This includes a 2014 decision by the U.S. Court of Appeals for the Ninth Circuit, which held that under Oregon law, a class of 363 full-time FedEx delivery truck drivers were employees and thus entitled to additional wages and overtime.

So, why is misclassification such a big deal?

Well, for taxing authorities, classifying a worker as a contractor rather than an employee results in lost tax revenue. For others, it means the worker will not receive the benefit of employment-related legal protections and benefits that the worker may otherwise be entitled to.

For businesses that incorrectly classify employees as independent contractors, scenarios can be 鈥渕ake or break.鈥� That’s because getting it wrong can mean the business may be on the hook for a host of additional unplanned costs, including:

鈥� Payment of back wages and benefits that were neither anticipated nor budgeted for;

鈥� Employment-related taxes on all wages owed to the misclassified worker(s);

鈥� Fines, interest, and/or other penalties, including attorney fees, if the mistake is uncovered by the regulatory agency, or in connection with a civil claim brought by the worker;

鈥� Additional workers’ compensation insurance premiums and potential claims for workplace injuries; and

鈥� Liability for employment-related claims by the misclassified worker, including anti-discrimination, anti-retaliation, wage and hour, workplace safety and health, and protected leave laws.

These amounts can be staggering for even a single misclassified worker. Where there are multiple workers, the figures grow exponentially. This can also occur where an otherwise properly classified contractor employed its own workers to perform services, but didn’t follow the requisite formalities.

Isn’t this as simple as looking at whether the business issued a 1099 or a W-2 at the end of the year?

Unfortunately, no. Instead, a patchwork of fact-specific tests need to be considered. There are no fewer than three multi-factored tests that could apply under federal law. In Oregon, four tests may apply. Just as Oregon has its own tests, so do other states. If a worker performs work in other jurisdictions, the business must also consider the tests applicable in those states.

What generally isn’t relevant to any of the tests is what the business or the worker intended or often even what the paperwork says. Instead, the best practice is to consider the applicable tests before commencing the work so that the relationship can be properly structured to comply with the applicable legal standards.

Given the inherent risks of misclassification, the complexities and fact-specific nature of the proper determination of each of those issues, and the increased enforcement efforts at every level, it’s easy to see how a mistaken misclassification has the potential for a huge negative impact on a business. For these and other reasons, I typically recommend that the proposed relationship be evaluated, with advice of qualified counsel, and structured so that all of the potentially applicable tests are met, and then memorialized in an appropriate written agreement, before any work commences. By properly and proactively applying the appropriate standards in advance, businesses can best avoid the foreseeable risks.

Hopefully, this brief summary has been useful. Of course, it is merely intended to highlight the issues and legal standards, and point out some common risks and pitfalls related to misclassification. This synopsis should not replace independent legal advice for any particular situation.

Amy Robinson is an attorney in Jordan Ramis PC’s labor and employment law practice group. She has experience with a full range of employment issues. Contact her at 888-598-7070 or [email protected]. This article is intended to inform readers of general legal principles; they should consult with competent counsel when addressing specific situations.