Independent Contractor Compliance Blog

The New York Times is now reporting about the government crack down on misclassified workers.

I’ve been reporting for the past couple years that the federal government, and most states, are cracking down harder on worker misclassifications. I’ve told you it is a politically correct way to increase revenue for any government agency that needs money now (which is pretty much all of them!). Doing so is easier than passing a new law to raise taxes. The government can take the position it is only enforcing the existing laws and ensuring everyone is paying their “fair share.” Politicians call it “leveling the playing field” and “protecting the individual workers rights.” They talk about protecting the worker who just wants to earn a living for his family. There have been dozens of bills submitted at the state and federal levels to both make it more difficult and to charge heavier penalties for businesses that misclassify workers. Even President Obama, when he was a US Senator, co-sponsored such a bill. Recently, he publically stated he’d like to see that bill reintroduced and passed into law. Over the past year I’ve referred to this developing trend of tougher misclassification enforcement as the approaching “Perfect Independent Contractor Compliance Storm.”

Now that the “Perfect Compliance Storm” has arrived the New York Times reports on it.

An article published February 17, 2010 in the New York Times, reports that “Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.” The article continues that, “President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years.”

Misclassification:  Is it about cheating or is it an honest mistake?

The Times article states, “Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees…”

The article continues, “Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes…”

It’s also about income taxes. 

The article cites, “…several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.”

If you would like to read the full article go to: 

http://www.nytimes.com/2010/02/18/business/18workers.html

Don’t wait-protect yourself now.

Remember it is too late to avoid the fines and penalties after the state or federal auditors are knocking on your door. Take proactive steps by consulting with an expert, like Collabrus, to learn how to mitigate your risks and protect yourself from a government agency employee classification audit.