Independent Contractor Compliance Blog - by Collabrus™

According to a recent survey by the law firm Fulbright & Jaworski, L.L.P, 79% of companies surveyed experienced new litigation last year.  The study’s universe was responses from 251 U.S. companies. Possibly more important to California employers, the study showed in the last few years there has been a 36% increases in wage-and-hour, multi-plaintiff cases in California.

Not only are there more lawsuits, but they are getting more expensive.

The study indicated that 26% of U.S. firms experienced new lawsuits with claims above $20 million.

The more costly lawsuits are forcing companies to beef up their legal staff at a significant additional cost. The study reported, by a five-to-one margin, businesses are more likely to add to their staff of in-house litigation attorneys.

It is not just civil law suits.

During tough economic times, when workers are making claims for unemployment insurance benefits, the government actually increases the number of employment tax audits looking for misclassified workers. The resulting tax assessments help pay for the increased benefits being paid out.

Uncover potential problems and fix them before the government knocks on your door or before you are slapped with a class-action lawsuit.

You need to conduct an honest, detailed review of your HR and IC procurement practices to find and correct your areas of high risk. Your areas of high risk make you vulnerable to attack from both inside and outside your company. It’s better you identify and fix the weak areas on your own than wait until you are attacked and forced to pay for your procrastination.

Pretending the problem doesn’t exist, or thinking your company will not fall victim to these actions, is very dangerous. Not taking action now exposes you to expensive consequences in the future.

The odds are not in favor of unprepared companies.

• There are private law firms who build their entire practices representing workers (both those classified as employees and those who are misclassified as IC’s) against their employers. These are specialty law firms that have sharpened their labor law and IC compliance tactics against unprepared businesses to a razor’s edge. They have represented hundreds, if not tens-of-thousands, of individuals and have the experience to win against companies that are not prepared.
• Both the federal and state government enforcement agencies, such as EDD, Department of Labor and the IRS have full time staff, whose only job is to identify businesses that appear ripe for an audit and subsequent tax assessments, penalties and fines. Both federal and state governments are increasing enforcement staff during these tough economic times to target any company not in compliance.

You need to employ experts to defend your company.

An expert can conduct an objective review of your company using the same standards the government enforcement agencies and courts will use.

Some companies decide to do this by assigning the task to internal staff.

If you utilize staff from within your own company be sure they can objectively judge the company’s practices and have the skill, knowledge and independence to make the right determinations. Typically, the internal self-review is not sufficient. The person chosen for the job either:

1.       Does not have the time to conduct the review because of other competing responsibilities.

2.       Does not have the experience and expertise to make the right determinations.

3.       Does not have the true independence of management’s influence and outside objective point of view to make accurate determinations.

4.       Is too close to the organization to see it clearly as an outsider would.

5.       Does not have the ability, or authority, to design and implement a corrective action plan.

Any one of these factors can cause the internal review to be incomplete or inaccurate. You will not get a true picture of your company’s risk or be protected against attacks.

I recommend you engage a true outside expert

A true independent expert can conduct a confidential, objective review and identify your areas of risk then lay out a program to shore up your areas of vulnerability and help you implement the change process. The expert will be able to do this in an efficient and risk free environment, preparing you to defend against the predators searching for companies who have not protected themselves.