Challenges to Independent Contractor Mislabelling

11 January 2010 Publication
Authors: Carrie Hoffman

National Law Journal – Labor & Employment Special Report

With a weakened economy, employers are continually seeking new ways to cut costs. Although the reduction of employee headcount obviously can reduce the payroll budget, employers often still need people to perform the work. With that in mind, companies are more frequently turning to independent contractors to accomplish both goals—performing work at a lower cost and cutting down their payroll budgets. With independent contractors, employers have no obligation to withhold payroll taxes (or to fund the employer-matching portion of the Federal Insurance Contributions Act) or provide any benefits. Throw in the added advantage of having no overtime liability, and it is simple to see that the cost savings can be tremendous.

However, just as paying an employee a salary alone does not exempt the employee from overtime, merely labeling a worker as an independent contractor does not make one so. Increasingly, both government agencies and private citizens are fighting back against these misclassifications and seeking back taxes, benefits and other damages. Therefore, employers should use extreme caution when hiring workers solely as contractors.

Most employers realize that wage-and-hour collective actions dominate headlines and create significant problems for companies, regardless of their size. The U.S. Department of Labor (DOL) Wage and Hour Division’s statistics show that the agency recovered $185,287,827 in unpaid wages in fiscal year 2008—the most up-to-date report available. Department of Labor 2008 Statistics Fact Sheet, www.dol.-gov/whd/statistics/2008FiscalYear.htm. However, what cannot be told from those statistics is what percentage of the DOL’s cases involve misclassification of workers as independent contractors. Instead, the DOL classifies cases as minimum wage and overtime. Misclassification as an independent contractor would fit within the overtime category.

Read more.

Related Services

Insights

Hatch Comments on DNC-Related Construction Projects in Milwaukee
14 June 2019
Milwaukee Business Journal
Bernard Quoted on Debt-Relief Settlement with ITT Tech Lender
14 June 2019
Wall Street Journal
Dodd and Daughter Profiled in Wisconsin Golf
13 June 2019
Wisconsin Golf
Brinckerhoff Comments on SCOTUS Ruling in Patent Case
11 June 2019
Intellectual Property Magazine
Review of 2020 Medicare Changes for Telehealth
11 December 2019
Member Call
2019 NDI Executive Exchange
14-15 November 2019
Chicago, IL
Association for Corporate Counsel Annual Meeting 2019
27-30 October 2019
Phoenix, AZ
Foley's Government Contracts Annual Update
16 October 2019
Liviona, MI