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Tagged ‘Employee vs. Independent Contractor‘

Self-Help for Employers with Worker Misclassification Issues

Employers often struggle with the question of whether an individual worker is an employee or an independent contractor.  This issue is sometimes brought to the employer’s attention by the Department of Labor or Internal Revenue Service.  There are, however, many instances in which the employer becomes aware that a worker has been misclassified as an independent contractor and really should be treated as an employee.

Under the Internal Revenue Service’s Voluntary Classification Settlement Program (VCSP), an eligible employer may voluntarily reclassify workers as employees and agree to comply with requirements for withholding federal income tax and making appropriate contributions under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA) during future tax periods.  In addition, the employer must pay ten percent of the employment tax liability that would have been due on the compensation paid to the reclassified workers during the most recent tax year if they had been properly classified as employees.  In exchange, the employer is relieved of liability for interest and penalties and will not be subject to an employment tax audit for prior years. Read More →

DOL Misclassification Initiative

In September 2011, the Department of Labor announced an initiative designed to identify and correct the misclassification of individual workers as independent contractors rather than as employees. The initiative is gathering steam. The DOL has already entered into partnership with the IRS and fourteen states and actively seeking alliances with additional state agencies. DOL Misclassification Initiative website.

The stakes are high. In December 2013, the Department of Labor brought suit against a Georgia restaurant to recover $1,997,726 in back wages and liquidated damages for 84 employees who were allegedly misclassified as independent contractors. Hibachi Grill & Supreme Buffet sued by U.S. Labor Department. Read More →