We’ve been reporting since at least 2004 on the dangers of categorizing regular workers as independent contractors. This spring, there’s even more reason to care.
The federal Department of Labor and the Internal Revenue Service (IRS), as well as several states, have stepped up their campaign against employee misclassification. In April, the U.S. Labor Department sued several Salt Lake City companies, one of them named Mountain Builders, on charges of violating the Fair Labor Standards Act’s overtime and record-keeping provisions.
That same month, NPR reported on a study by academics and a pro-worker group in Texas that estimated 41% of the state’s construction workers “were found to be victims of payroll fraud, misclassified as independent contractors, or paid off the books in cash.”
The IRS, meanwhile, is working with 14 states that have signed a memorandum of understanding to share information on possible violations of fair labor laws. One goal: Collect several billion dollars’ worth of currently unreported income, payroll, and unemployment taxes. New Jersey may sign the memorandum next, and Nevada’s legislature is reported to be thinking of creating a task force on employee misclassification. The IRS is reported to already have audited 6,000 companies for possible violations.
You can help avoid trouble at your company by checking out IRS’ recently updated memo giving seven tips for distinguishing between employees and independent contractors. See also our November 2011 story, “Contractor or Employee?”