<![CDATA[He Said, She Said, They Said]]>

8168765726661496010 <![CDATA[He Said, She Said, They Said]]> If you're like me, you've probably been bombarded by more independent contractor news than you brain can handle..make that, wants to handle. Yes, independent contractor misclassification news has hit the print media, the airwaves, specific industry websites, the blogosphere and the local community bulletin board. Heck, it's even infiltrated Youtube. Youtube? You betcha. Everywhere you read, someone has an opinion on the the whole independent contractor misclassification topic, including yours truly. These opinions seem to come from all forms of people. From the hard core wrestling fans, to industry experts, to politicians, to the girl next door, to the stay-at-home freelancing dad.
So what's your point you say? The point is that the independent contractor topic is really starting to snowball. It seems that everyday I come across at least a handful of writings that speak on worker misclassificaton. If everyone is writing about it, don't you think the folks who work for Uncle Sam are interested in the topic. If you don't think they are then how do you explain the 6,000 random audits that began in February? Their target, employment tax compliance and proper worker classification.
Whether you're an independent contractor, an employer, an HR professional, etc., take caution because this topic is not going to go away. As a matter of fact it's only just begun. I've been a complete 1099 homer for over a year now and looking back, I'm sure I was the chicken little of independent contractor misclassification. Well, my friends, though the sky may not be falling quite yet, the independent contractor landscape is looking quite dark and ominous.

Labels: proper worker classification

]]> 2:10 PM Tuesday, March 2, 2010 A. Chavez aaronrchavez@gmail.com 2010_03_01_archive.html#8168765726661496010 4920062046793093761 <![CDATA[Some For You and Some For You and...]]> So I'm in middle of this long line that's moving at a decent pace. From what I can see, a very distinguised looking gentleman at the front of the line appears to be handing out money. The line moves faster and before I know it, it's my turn at the front. I look at the gentleman's face and it's none other than President Obama wearing one of those tuxedo t-shirts. He notices that I'm staring and blurts out "it's formal but I want everyone to know that I still like to party." What? Before I can respond. He asks me "How much and what do you need it for?" As I'm trying to figure out what to say, my mouth decides to speak on my behalf, "Going to Vegas for a nice weekend so I'll need a million." What? I just told Barrack that I needed a million dollars to blow in Vegas. This is crazy! Faster than I can apologize for being a complete idiot, he's already handed me the money and instructed me to "throw some down on 8 the hard way". Next thing I know I hear a baby's cry and I come back to reality. I was just in a far away place, but boy was that place fun.
Now I don't consider myself the daydreaming type but something must have caused my brainwaves to go awry. Perhaps it's because I can't seem to get my head around the budget that President Obama recently signed. I mean c'mon, $25 million for employee misclassification?? It sounds as if President Obama is really bent on trying to tap a revenue stream that sits idle with many employers abusing worker laws. Though I applaud his drive, I can't come to trust the hands whom have been awarded with this $25 million bag o' money. Directing funds aimed at putting a stop to employee misclassification sounds like a good idea but is it really worth it if the infrastructure is already in place? Instead of handing over additional money for agencies to do their job, why not instruct them to direct more of their focus toward worker misclassification?
I may sound naive in saying this but if federal and state agencies really wanted to crack down on worker misclassification, how about if they start paying visits to construction sites. I'd be willing to bet that at least three out of ten sites would have a possible offender at that location.
I guess all that I really want out of this budgetary money is for progress to be made. Is that too much to ask? So far this administration has handed out money without the thought of how it will be spent. We don't need is another federal law aimed at curbing worker misclassification but instead let's spend the money to enforce the laws we currently have in place. If not, the next time you're in Vegas look for someone who spending money uncontrollably to see if they have the words "Vegas made possible by the federal government" on a name tag.

Labels: budget, Employee Misclassification

]]> 8:19 AM Monday, February 15, 2010 A. Chavez aaronrchavez@gmail.com 2010_02_01_archive.html#4920062046793093761 6140492756710923304 <![CDATA[Kerry's At It Again]]> On December 15th, Senator John Kerry picked up where he left off in 2008 when he sponsored S. 2882, the Taxpayer Responsibility, Accountability, and Consistency Act of 2009. The new legislation is aimed at amending the Internal Revenue Code of 1986, which would make it more difficult and costly to misclassify workers as independent contractors. Senator Kerry's latest bill sponsorship should come as no surprise since he was a co-sponsor in 2008 on S. 3648, the Employee Mislcassification and Prevention Act which included sponsorship by then Senator Obama and the late Senator Ted Kennedy.
S. 2882 would essentially rewrite the Safe Harbor (Section 530) loophole that according to Kerry, "allows employers to treat a worker as an ‘independent contractor’ for employment tax purposes, regardless of the worker's actual status under the common law test, unless the employer has no reasonable basis for such treatment or fails to meet certain requirements”.
Senator Kerry's efforts appear to be a direct reflection of what's going on with his state of Massachusetts as it continues to be a leader in attempting to curb worker misclassification. Massachusetts has led the nation with implementing legislation, issuing advisories and taking the fight directly to the businesses who misclassify their workers.
Now I'm not sure what the end result of this bill will be but I can only assume that it won't be long until some piece of worker misclassification legislation finds its way to the President's desk for his approval.

Labels: Kerry, worker misclassification

]]> 3:34 PM Monday, January 18, 2010 A. Chavez aaronrchavez@gmail.com 2010_01_01_archive.html#6140492756710923304 6349190486064987116 <![CDATA[What Kind of Worker Misclassification Lawsuit Can Brown Settle for You?]]> A few weeks ago a settlement of courier worker misclassifcation lawsuit came through the newswire so I readied my pen....er keyboard for what I thought was surely going to be another Fedex ripping. Let me start by saying that I'm not some Fedex hater. They're just an easy misclassification target that provides good fodder for discussion. That being said, I was shocked to read that the courier in brown was the one opening up it's pocketbook.
On December 4th a federal judge approved a $12.8 million settlement in a class action settlement in which UPS couriers sued for being improperly classified as independent contractors. The couriers claimed that they were denied benefits and overtime yet UPS controlled all aspects of their employment relationship. The class action settlement is set to affect some 660 class members.
The latest settlement comes at a time when Brown is in the midst of a $100 million class action lawsuit that was filed in August over not paying OT to account managers who instead were classified as exempt. Up until now, Brown had done a good job of playing possum by allowing Fedex to shine in the negative workplace spotlight. Should there be a settlement in the $100 million class action suit, there stands to be negative marks on the courier that some people consider to be the model citizen of the courier industry. Meanwhile somewhere in Memphis, Tennessee, the folks at FedEx have to be sitting back and enjoying the fact that the spotlight is, for once, not on them. It has to be extra gratifying to know that all of the bad press is aimed at their chief rival.
Whether or not UPS is the new posterboy for worker misclassification is still too early to tell. If they're smart, they''ll apply the courts findings to their business model. Let's hope UPS decides to listed to the courts decision by admitting to their wrongdoings and working to correct the problems. It would be a far different approach than the one taken by their FedEx rivals.

Labels: class action lawsuit, improper worker misclassification

]]> 11:01 AM Thursday, December 31, 2009 A. Chavez aaronrchavez@gmail.com 2009_12_01_archive.html#6349190486064987116 104710065720958154 <![CDATA[Wishing Away an IRS Audit: 1099 Worker Misclassification]]> With worker misclassification issues at the forefront and landmark cases paving the way for added legislation, fines and penalties for improperly classifying workers, it’s surprising that intelligent business leaders still believe they can simply wish away federal or state audits.

And it’s alarming that many businesses are still operating without solid processes in place to ensure compliance when engaging 1099 independent contractors. Given the extreme tax liability of engaging 1099 workers, business leaders shouldn’t assume they’re safe from an audit.

Corporate counsel, human resources managers, procurement leaders, CFOs and others in a position of decision are constantly exposed to information on the risks of misclassifying workers as independent contractors. And still, there’s a propensity to believe they won’t be audited: “Yeah, it may be happening to others, but there’s no way it’ll happen to my company.”

Worker Misclassification Under Scrutiny

The IRS announced it will conduct 6,000 additional audits in 2010 starting in February. What’s the motivation? It’s estimated that the government is losing billions and billions of dollars in unpaid taxes due to the misclassification of employees as independent contractors.

As a senator, Barrack Obama co-authored legislation to remove the last loophole in the IRS tax code, Section 530 of the Internal Revenue Service Act of 1978—a clause the IRS must consider in a 1099 audit that can potentially preclude an employer from paying back taxes, penalties and fines for misclassifying workers.

Currently, there is no reason to think that our new president will move away from this effort given three primary drivers:

1. The government wants and needs the unpaid tax dollars
2. The belief that misclassified workers are not afforded the same rights under Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, Family and Medical Leave Act and more
3. Misclassifying employees and independent contractors is an unfair business practice

There has been more legislation proposed or passed in the past two years regarding worker misclassification than ever before. And conventional wisdom suggests that the effort to crack down on employers will continue to escalate. Recent legislation has significantly increased the penalties and fines associated with misclassification and in some cases, include felony charges and losing the right to operate a business.

A plethora of court rulings exist against employers who misclassify employees as ICs. While many employers are unintentionally misclassifying workers, they still face stiff punishment from failing an audit. Those found to be intentionally misclassifying workers can face even greater consequences.

Elevated Risk for All Businesses

There is far too much evidence that the misclassification issue crosses all segments of business regardless of industry, geography, size and position. It also crosses all divisions of organizations, ranging from customer service, marketing and sales to engineering, information technology and even human resources.

Companies should be taking the proper steps in 1099 risk assessment, especially in this economy. The recession has increased an employer’s risk. Why? There are several reasons:

• Independent contractors who finish a job or are no longer needed in a market where unemployment is at its highest, file claims for unemployment insurance naming the company they were providing services to as their employer
• Laid off workers are rehired as independent contractors performing the same tasks under the same control
• Independent contractors concerned about continuing to provide services file IRS Form SS-8 (or state equivalent), claiming to be an employee
• Independent contractors cannot afford health insurance and file for workers’ compensation

Creating a Proper Worker Classification Process

Many companies attempt to build a 1099 process but typically don’t have the expertise. Or they simply cannot stay current with ever-changing legislation. To complicate this further, the various state and federal agencies that audit an employer’s 1099 relationships use different tests. They can range from the IRS 3 factors/20 questions test to common law, ABC, relative nature of work, FLSA’s economic realities test and many more.

The issue of employee misclassification is clearly approaching top of mind with legislators, government agencies, courts and ethical businesses. The use of independent contractors is growing as well. The combination of the two will inevitably result in greater scrutiny, audits, penalties and fines.

Business leaders: It’s time to stop wishing and take action before action is taken on you. Create your corporate 1099 compliance plan before it’s too late.

Labels: audit, employee miscalssification, independent contractors

]]> 4:25 PM Tuesday, December 22, 2009 Secure Talent eplicatravis@gmail.com 2009_12_01_archive.html#104710065720958154 8948025719402616288 <![CDATA[Worker Misclassification and The Debates That Ensue]]> About a month ago in the SFGate (San Francisco Chronicle) a blog post seemed to conjure up some heated emotions on my favorite topic, worker misclassification. It all started with a response to a blog that ran in the Wall Street Journal, which in turn the SFGate published: http://www.sfgate.com/cgi-bin/blogs/gettowork/detail?entry_id=50533. I'll admit that when I first started reading the comments, I got all geeked up that people were so passionate about worker misclassification as much as I and my fellow Secure Talents colleagues. It was like having your children all grown up and making you proud ... so I've heard.
Anyways, when I continued reading the comments from some readers I realized that these folks were getting themselves all worked up over the "temporary worker" tag more than the actual worker misclassification. Could this small population of blog readers/commenters represent a much bigger number? Chances are that's probably the case.
It seems that one half of the people felt that worker misclassification is wrong because you're an independent contractor performing the same job as an employee. Another half felt that being a temporary worker was wrong because you perform the same duties as an employee for a company what can cut you loose at any time. So who's right?
Those who work through temporary agencies are typically paid on a W-2 therefore they're someone's employee. Granted co-employment may exist in many of those situations, it can be remedied. The same cannot be said for employee misclassification since the worker is not anyone's employee therefore treating him/her as a W2 without paying benefits or employer taxes is illegal.
Now I'm not insinuating that bringing temporary workers onboard as a long term remedy instead of hiring them as W2's does not go without it's own shame (can you hear me Redmond, Washington?). I myself was a long term temporary straight out of college when I was working for a telecom firm through a staffing agency for a long period of time. Back then I wondered if a permanent position was ever possible. Lucky for me my temporay status ended after a lengthy 3 year tenure. In fact, the landscape for long term temporaries changed after a very well known software giant found had to pay out on a lawsuit filed by so-called permatemps.
I guess what I am trying to say is that even though both temporary workers and independent contractors fill a short term role and both appear to be utilized by companies as cost cutting measures you cannot compare the two. Simply put, worker misclassification is illegal.

Labels: improper worker misclassification, temporary workers

]]> 10:06 AM Monday, December 14, 2009 A. Chavez aaronrchavez@gmail.com 2009_12_01_archive.html#8948025719402616288 3796551370818381761 <![CDATA[Maine's Interesting Approach]]> Tonight is my first meeting and the room is abuzz. The chairs in the room are arranged in a circle. A table near the door offers participants donuts and coffee. I've arrived just in time to hear a voice ask everyone in the room to take a seat. After everyone is seated, we begin to go around the room, one by one, stating our names and why we're here. It's my turn now. I get up and say, "Hi, my name is Aaron". The group responds with a "Hi Aaron!" I continue by saying, "I'm here because I'm a misclassified worker." I get all choked up.
Not quite what you were expecting? As a reader, I wouldn't have expected it either but that was the exact image that came to mind when I read a blurb on Maine's new tactic in attempting to curb worker misclassification.
It appears that Maine's labor commissioner is urging Maine workers who have been misclassified, to share their stories at public hearings next month. The hearings, set to be conducted by Maine Governor John Bardacci's Worker Misclassification Task Force, are being used as means to magnify the real issue of worker misclassification through real life stories. Instead of just spewing out numbers on worker misclassification which typically include percentages and large dollar amounts, Maine has taken an interesting path by trying to associate faces with worker misclassification.
Now the way I see it, this can go one of two ways. Let's look at the positive side first. This approach provides a human element that is rarely seen outside of worker lawsuits. Whether it be state or federal agencies, misclassification always seems to be about how much money the government is losing in potential employment taxes. Rarely is the case when we actually hear about the lives affected when a worker is misclassified. Perhaps the stories of the misclassified workers will tear at the heart strings of the task force in an effort to bring the problem to the forefront of today's news
As for the negative side, Maine needs to try and avoid looking like a Jerry Springer circus. What they don't need is for workers, who feel like they've been wronged, to come forward in hopes that it leads them to a quick and easy pay day. The last thing they need is an episode of Someone Misclassified My Baby's Momma. I don't believe that's what the labor commissioner had in mind.
Regardless, it will be interesting to see how many workers show up to give their story. Without that human aspect, Maine's new tactic will not be successful.

Labels: employee miscalssification, Maine, misclassified workers, task force

]]> 10:33 AM Wednesday, November 4, 2009 A. Chavez aaronrchavez@gmail.com 2009_11_01_archive.html#3796551370818381761 5436573579757062231 <![CDATA[Fedex Up Ahead. Be On Lookout For Rubberneckers]]> You're driving to work on the freeway and all of a sudden you hit traffic. You can see some flashing light activity in the distance and you become a little annoyed that the traffic mess you're sitting in is a result of so called rubberneckers. Well my friends, I am a rubbernecker. Now before you blame me for all traffic related messes on the way to work today, let me clarify by saying that I'm not a traffic rubbernecker. What I am is a FedEx rubbernecker. What? Well let me explain.
I've been making an attempt to distance myself from the poster child of worker misclassification. However while on the misclassification news highway, I can't seem to take my eyes off of the FedEx related incidents occurring on the shoulder. This time, the incident is in the form of three Attorneys General for the states of New York, Montana and New Jersey declaring that they're prepared to sue FedEx Ground unless the courier giant can explain why there shouldn't be a lawsuit. The lawsuit that the AG's are referring to would center around the worker model that FedEx has taken on, which classifies it's ground drivers as independent contractors rather than employees. This type of model provides Fedex with an unfair advantage since they do not have to pay employment taxes or provide benefits.
Now I applaud the 3 AG's for their mighty talk but what took them so long to go after FedEx? And why not file a lawsuit rather than asking FedEx to provide a reason why they should not be sued. If the AG's can initiate a lawsuit fast enough, then perhaps they will take the lead in attempting to bring down the FedEx driver model. Though a nationwide class action lawsuit still lingers in Indiana, there's a good chance that the outcome of an Attorney General led lawsuit will provide a faster end result. An AG lawsuit decision could set precedence for future courier lawsuits.
In the coming weeks, be on the lookout for signs indicating Attorney Generals at Work There's a good chance that the misclassification highway will detour directly to Fedex.

Labels: attorney general, class action lawsuit, Fedex

]]> 10:03 AM Monday, October 26, 2009 A. Chavez aaronrchavez@gmail.com 2009_10_01_archive.html#5436573579757062231 5312335698933867678 <![CDATA[Shenanigans in Staffing]]> Last week, Tennessee's Attorney General filed a lawsuit against four staffing agencies for their wrongdoings. The staffing agencies promised workers jobs at extraordinary pay rates, career development, job placement services and perhaps the worst of the them all, charging an up-front fee. Just today, the Minnesota Attorney General filed a lawsuit against a staffing agency for fraud and deceptive business practices of which also included false job openings, advanced interview training(which never occurred) as well as an upfront fee. Have staffing agencies become a new breed of shark in the water?
Though I've never performed the duties of a staffer, I worked in a staffing office for more than 7 years. During that time, I saw staffers casually continue to advertise for positions that were once available, but now filled, in order to build their candidate database or perhaps replenish certain skill sets that were lacking in their candidate pool. I'm sure most staffing agencies at one time or another have participated in this type of practice. As for the other allegations, I'm in disbelief over the complete lack of common sense generated by these agencies regarding the promises of career development and interview training. I know staffing agencies don't always deliver on promises made but didn't these agencies know that all bets were off the minute they started charging candidates up-front fees?
What I don't get is how these agencies could have cheated job candidates out of money during a time when people are desperate for a job. I'm sure most of the people who were the victims of these wrongdoings went to these staffing agencies with the hope that they would find an opportunity. What they received in return was a lighter wallet with a side of lies.
Hopefully these instances of staffing industry trickery are isolated incidents. If not this could potentially bring negative publicity to an industry that is seeing tough times. Let's hope the outcome of these lawsuits provide potential job candidates with the authority to issue a DNU to agencies who do not play fair.

Labels: attorney general, lawsuits, staffing

]]> 10:26 AM Friday, October 16, 2009 A. Chavez aaronrchavez@gmail.com 2009_10_01_archive.html#5312335698933867678 4036435559419498792 <![CDATA[Allstate Settles...For Now.]]> Allstate has settled an age discrimination lawsuit that has been going on since 2004. The lawsuit stems from Allstate's actions in 2000 in which the company was attempting to convert is 15,000 employees to independent contractor status. Allstate settled for a sum of $4.5 million to be paid to 90 employees who were part of the discrimination lawsuit.
It's going to get interesting. For the last few months, the Allstate agents have been clamoring for someone,...anyone to review their worker status. Within the last year, yours truly has written a few tidbits about how Allstate agents have felt wronged over their worker classification. Just this week, an association of Allstate professionals submitted a petition to the IRS to have a peek at the relationship between Allstate and their agents.
Does Allstate think that by settling the discrimination lawsuit, the relationship between them and their agents will be one of peaches and cream? Highly unlikely. The petition sent to the IRS referenced a ruling issued by the IRS in 1989. The ruling provided Allstate with a tax advantage in return for Allstate promising that the agents would be treated as independent contractors. I think you know how the agents feel about their status now.
Allstate has managed to elude any sort of worker misclassification issues up to this point. If the petition letter to the IRS is taken seriously then there's a good chance that one of the surprise audits taking place next March might be to the Allstate corporate offices. Something tells me that the last pair of hands Allstate wants to be in, are those of the IRS.
Stay tuned for more....

Labels: Allstate, employee miscalssification

]]> 5:56 PM Friday, October 9, 2009 A. Chavez aaronrchavez@gmail.com 2009_10_01_archive.html#4036435559419498792 2394580843784767737 <![CDATA[Now appearing on stage.... Miss Classification!]]> Whenever you hear the words worker misclassification, what comes to mind? Microsoft, Fedex, Nationwide? These names are just a few that have made national headlines. Most people assume that worker misclassification takes place within big companies or specific industries. What people don't realize is that worker misclassification can happen just about anywhere.
Imagine a room that is dimly lit. A handful of attractive women are parading around divulging Victoria's secret. Just then, music starts playing over the loudspeaker and you hear a voice asking you to give a warm welcome to the stage for Candie. Out comes a female, twenty- something, spirited dancer who's an independent contractor (record scratch). What????
Wait! What does an exotic dancer(aka stripper) and an independent contractor have in common? Believe it or not, they have lots in common since they are essentially one in the same. In what is turning into a developing trend across the U.S., strippers are filing lawsuits against the gentlemens's club owners over how they are classified. In gentlemen's clubs throughout the country, strippers are being paid as independent contractors.
With most clubs, the women are paid a small salary, if any. Most of their money is made from tips. In return, the women find it mandatory to tip out the club for letting them perform(the house's cut) along with the DJ and sometimes even the bartender. How does that song go, "She works hard for the money"? I bet when that song was written, no one ever considered her an independent contractor.
OK, so I've frequented a gentlemen's club or two in my time and during those visits, I always assumed they were employees. Let's look at the details. First...the club controls the hours that they work. Second...they're typically supervised by management and sometimes provided with instructions for performing work. Third...though most of these ladies do have some athleticism, coordination and dance experience, would you consider their profession a specialized expertise? Finally...the last time I checked strippers were integral to a gentlemen's club core business. Without the ladies, I find it hard to believe that men are going to shell out $8 for a Miller Lite on a daily basis.
At the end of the day, the business of gentlemen's club entertainment is no different than that of the courier or the construction industry. It still boils down to the owners of these companies cutting worker benefits and skipping out on paying employer taxes to make a few extra bucks. The only difference is that these workers are prettier. If the courts can't see that these women are employees then maybe they've had a few too many of those $8 Miller Lites.

Labels: strippers, worker misclassification

]]> 11:04 AM Monday, September 28, 2009 A. Chavez aaronrchavez@gmail.com 2009_09_01_archive.html#2394580843784767737 3307814850130550075 <![CDATA[Labor Day Reflection]]> Ahh Labor Day! A day that's often spent camping, frolicking in the water, bbq'ing, gathering with friends or all of the above. For most people, Labor Day is a day when performing labor takes a back seat to everything else. As I join the thousands of other Americans on this day, I can't help but wonder if Peter J. McGuire would have considered a creating a Labor Day in this day and age. McGuire was a carpenter/labor union leader who proposed the Labor Day concept to New York's Central Labor Union in early 1882. The union loved the idea so much that they named September 5th 1882, Labor Day and that's how it was conceived.

Fast Forward to today and I'm not sure if someone like McGuire would have suggested the idea of having of a day off. If he was exposed to what the current workforce is facing, my bet is that he might have petitioned for a week off instead . Today's workers are at the mercy of employers who stoop to new lows by trying to cut costs of bringing workers on board. Throw in today's economy and employers are purposely misclassifying workers as exempt from overtime or independent contractors in an effort to save a few bucks. Few workers speak out for fear that they will be replaced by another worker who might be less likely to complain. So what's in it for the worker? Absolutely nothing.

The thought of how times may have been simpler back then in creating a national holiday based on the American worker needing a breather is somewhat astonishing. If companies continue to short change workers, who's to say labor day shouldn't be honored on a monthly basis. After all, it's a growing trend with no end in sight. Peter McGuire, where have you gone?

Labels: Labor Day

]]> 2:29 PM Tuesday, September 8, 2009 A. Chavez aaronrchavez@gmail.com 2009_09_01_archive.html#3307814850130550075 9215942028067319158 <![CDATA[VMS Professionals – West Invitation]]>

You are invited to attend the inaugural meeting of VMS Professionals – West

VMS Professionals is a national not-for-profit association comprised of end user companies networking to discuss best practices in the acquisition and management of contingent labor. Our Mission is to network and educate with the highest professional integrity for the purpose of growing VMS Best Practices and contributing to the industry as a whole.

Hosted by: Nixon Peabody

Sponsor: Secure Talent

When: Friday, September 25th
Where: 1 Embarcadero, Nixon Peabody office on the 18th floor, San Francisco, CA
Time: 9am – 3pm

RSVP: Cynthia Moore - Discover Card; cynthiamoore@discover.com or call 224-405-2797

Featured speakers:
Ellen Papadakis – Nixon Peabody

In her second engagement with VMS Professionals, Ellen will provide and update on current legislation that affects our contingent workforce including co-employment issues.

Bernita Jenkins – Google

Bernita will discuss the process and results of her recent VMS RFP and the creative way she review vendors.

Cynthia Moore – Discover Financial and Co-Founder of VMS Professionals

Cynthia will facilitate the group/best practices discussion and discuss the benefits of VMS Professionals

Join us and realize the benefits of VMS Professionals Membership
In-person and on-line networking with other VMS executives
Regularly scheduled local and regional meetings for "best practices" discussions
Educational experiences through internal SMEs and guest speakers.
Personal and corporate development at annual National Conference
Opportunities to find solutions and overcome challenges through peer interaction

Labels: Best Practices, Contingent Workforce, VMS

]]> 2:26 PM Tuesday, September 1, 2009 A. Chavez aaronrchavez@gmail.com 2009_09_01_archive.html#9215942028067319158 5939100537615485211 <![CDATA[New House Bill Tackles Improper Worker Misclassification]]> A familiar bill was reintroduced a few weeks ago that is aimed at putting an end to worker misclassification. The bill, H.R.3408, otherwise known as the Taxpayer Responsibility, Accountability and Consistency Act was intended to make it difficult for employers to receive protection from, what could be, a large employment tax penalty to those who incorrectly misclassify workers as an independent contractors.
We first heard of a similar bill that was introduced almost two years ago by a Senator from Illinois, Barack Obama. At that time it was entitled The Independent Contractor Proper Classification Act of 2007(S. 2044). That bill was introduced in the last session of Congress and was cleared from the books since it did not pass.
H.R.3408 like S. 2044, is looking to repeal section 530 of the Revenue Act of 1978 and replace it with a new code section. The new code would allow employers to avoid tax liability if they had a "reasonable basis" for classifying the worker as an independent contractor. The reasonable basis being:
(1) The employer classified the worker as an independent contractor based on: (i) a written determination that addresses the employment status of either the worker in question, or another individual holding a substantially similar position with the employer; or (ii) a concluded employment tax examination of the worker, or another individual holding a substantially similar position with the employer, that did not conclude that the worker should be treated as an employee; and
(2) The employer (or a predecessor) has not treated any other individual holding a substantially similar position as an employee for employment tax purposes for any period beginning after Dec. 31, 1977.

With every new law comes it's penalties and this one is no different. Employers that misclassify employees as independent contractors would be subject to a minimum $250 penalty per incorrect tax return, up to $3,000,000 per year. The penalty imposed could be lowered if the employer's returns are corrected in a specified period of time.
Should this bill make it's way to the oval office, President Obama will have no problem signing off on a bill that he initiated a couple of years ago.

Labels: H.R. 3408, independent contractor

]]> 9:17 AM Thursday, August 13, 2009 A. Chavez aaronrchavez@gmail.com 2009_08_01_archive.html#5939100537615485211 5057711406667341704 <![CDATA[Minnesota Takes Aim at Courier & Trucking Industry]]> Beginning August 1st, new Minnesota legislation will be in effect, one of which will be directed at the courier and trucking industry. The new law will define factors that need to be present in order for a worker to be deemed an independent contractor. Some of the factors explained in the legislation are: 1) worker owns or leases the equipment, 2) worker is responsible for maintenance and operating costs, 3) worker is paid for services performed, 4) worker controls the manner and means of services performed and 5) worker enters into a contract/agreement specifying that worker is an independent contractor.
Sponsors of the bill have indicated that worker misclassification in these industries is a huge problem and that the new legislation has been long overdue. The common denominator in these industries happens to be the driver. Unless you've been on a deserted island or cut off from all media outlets, you've probably noticed that lawsuits involving couriers have been popping up across the US over the last few years. One courier company in particular is in the midst of a nationwide class action lawsuit of epic proportions that's bound to have a major affect on how companies engage in their independent contractor relationships.
As for the trucking industry, states like California, New York and Michigan have been monitoring the misclassification numbers. However what Minnesota is doing is attempting to contain the problem before it becomes uncontrollable. Now we all know that businesses who intentionally misclassify workers are not easily caught. By creating legislation targeting misclassification, Minnesota acknowledges the problem and issues a warning to those in the trucking industry that continue to do it.
We will not see immediate results from this new legislation but what we can hope for is that other states will take notice of Minnesota's efforts and follow their lead in attempting to curtail an illegal business practice that seems to run rampant throughout these industries.

The new legislation is somewhat overdue as a few of the bills sponsor called it a huge problem in Minnesota.

Labels: courier, Employee Misclassification, Minnesota, trucking

]]> 4:25 PM Thursday, July 30, 2009 A. Chavez aaronrchavez@gmail.com 2009_07_01_archive.html#5057711406667341704 2768932881484343601 <![CDATA[The Do-It-Yourself Misclassification Experts???]]> On Tuesday, three former employees of the Home Depot filed a class action lawsuit against the company for intentionally misclassifying workers as exempt in order to deny them overtime pay. The lawsuit, which was filed in Chicago, indicates that the Home Depot violated Illinois minimum wage law by not paying time and a half to any of its assistant managers who worked over forty hours a week.
The former employees have stated that they were deprived of wages when the Home Depot required them to work over 55 hours a week. The accusations don't stop there as the former employees insist that the Home Depot had a policy of reducing salaries or terminating assistant store managers who did not work the eleven hour minimum shift for which they were scheduled.
This is just the latest in a string of improper worker classification. If what these workers are saying is true, could the Home Depot have been so bold as to think nobody would ever challenge them? I bet the do-it-yourself giant is building a legal team that will look to keep it from shelling out millions in unpaid wages and punitive damages.

Stay tuned.

Labels: improper worker misclassification, misclassifying workers, overtime

]]> 5:04 PM Wednesday, July 22, 2009 A. Chavez aaronrchavez@gmail.com 2009_07_01_archive.html#2768932881484343601 3345126338801437855 <![CDATA[November Surprise]]> News from the underground! Well not entirely but it's worth noting. The IRS has announced that in November, it will be kicking off the first of 6,000 random employment tax audits that will last throughout the next three years. The number is much higher than what was initially thought.
The IRS will be focusing their efforts on 1)exec pay and fringe benefits, 2)whether expense reimbursement plans qualify as accountable plans and 3) worker classification errors.
What's a business to do? Well for one, don't stand around thinking the IRS will never audit your company. Instead, now might be a good time to perform in-house audits to ensure that your company is following proper accounting procedures. As for worker classification errors, this might also be the time to consult in a third party who handles these types of situations.
Whatever the case, have your Accounting department look into the above mentioned focus points. Don't let yourself get caught off-guard when the IRS comes knocking.

Labels: audit, IRS

]]> 10:03 AM Monday, July 20, 2009 A. Chavez aaronrchavez@gmail.com 2009_07_01_archive.html#3345126338801437855 2274557868638807665 <![CDATA[Northwestern Mutual Gets Hit With Lawsuit]]> On Friday, a $200 million dollar lawsuit was filed in San Diego against Northwestern Mutual for allegedly denying minimum wage and overtime pay. To take it one step further, the class action lawsuit indicated that salespeople were misclassified an independent contractors when they should have been employees.
To back up the misclassification claim, the lawsuit states that salespeople were required to sell Northwestern Mutual products, work more than eight hours a day/forty hours per week without overtime and needed management to make decisions. Where have we heard this tune before? And right on cue, the corporate giant responds saying that the workers ""are not and have never been employees of Northwestern Mutual". Who are you going to believe? Northwestern Mutual's reps are saying that "court after court has reaffirmed the validity of this type of independent contractor distribution system". That's all fine and dandy but what are the real points to this lawsuit?
Besides the overtime and minimum wage, were there other behavioral control factors involved? Did the workers report to an office on a daily basis? Did they represent themselves as Northwestern Mutual employees? Whatever the answers are, we've only heard the beginning. And should the courts find that these workers were truly employees, there will be quite a few companies changing their worker model. Stay tuned...

Labels: class action lawsuit, misclassification, Northwestern Mutual

]]> 8:32 PM Friday, June 26, 2009 A. Chavez aaronrchavez@gmail.com 2009_06_01_archive.html#2274557868638807665 3191913799960423369 <![CDATA[Rocky Mountain High for Workers: Gov. Signs Mislcassification Bill]]> Earlier this week, Colorado Governor Bill Ritter signed a bill aimed at stopping worker misclassification. HB 1310 was signed by the governor on June 2nd and the bill includes the potential for fines of up to $5,000 per employee for first time offenders and up to $25,000 for subsequent violations.
The purpose of the new legislation was to curb the unfair competitive advantage that some businesses achieve when intentionally misclassifying their workers as independent contractors. Though not advertised, the new legislation also provides a potentially new revenue stream during this economic downturn. Those that oppose the bill state that the law could pose problems for employers since it's not always clear who should be an employee and who should be an independent contractor.
I applaud the governor for taking action against worker misclassification but in terms of penalties for repeat offenders couldn't there have been something else with a little more "sting" then not being able to do business with the state for 2 years. What about suspending a company's business license or their corporation?
Though the bill does a specify an industry to which it is targeted, it reads as if the construction industry as well as other blue collar businesses will be it's focus. The bill's success will ride on a term that this blog has not used in a while....whistle blowing!!! Let's hope Colorado realizes that worker misclassification not only equals a competitive advantage but it also affects people who are cheated out of minimum wage, overtime and benefits. Get those whistles ready Colorado.

Labels: Colorado, HB 1310, worker misclassification

]]> 10:26 AM Friday, June 5, 2009 A. Chavez aaronrchavez@gmail.com 2009_06_01_archive.html#3191913799960423369 2961391691351340715 <![CDATA[Former contractor looks to pull the plug on cable TV company]]> A former contractor for RCN cable TV company filed a lawsuit claiming the company should have paid him for unpaid overtime, benefits and medical bills that were incurred when he suffered an on-the-job injury.
The lawsuit involves more than 1,000 other cable installers who were deprived of overtime and benefits from RCN. The former contractor states that he and other contractors were performing services that were similar to other RCN employees except they were being paid by Custom Cable Concepts, a company who performed work solely for RCN.
It appears that RCN had complete behavioral control of the work being performed by the installers and since the former contractor's only gig was Custom Cable Concepts/RCN, there is no way that he should have classified as an independent contractor.
This latest lawsuit involving worker misclassification would have never come to light had it not been for the former contractor's services being terminated. Apparently when the former contractor requested time off after an injury that occurred on-the-job, he was shown the door. Did the former contractor feel scorned? Sure. Betrayed? You bet. More than likely this was the driving force behind the filing of the lawsuit.
Why is this lawsuit scary for employers? All it took was for the worker to feel "wronged" and just like that, he hired a lawyer. The former contractor worked for RCN from 2005 to February of this year and not one complaint was made concerning the lack of overtime pay, benefits or control by the client. Another reason why employers should take notice of this lawsuit is because it involves a third party that RCN brought in to provide workers. Though I bet RCN had knowledge of how Custom Cable Concepts ran their business, companies should always ensure that their third party vendors are paying their workers on a W2 or they may suffer the same fate as RCN.
We'll continue to monitor this case closely and provide updates as they become available.

Labels: misclassifcation, RCN

]]> 9:23 AM Wednesday, June 3, 2009 A. Chavez aaronrchavez@gmail.com 2009_06_01_archive.html#2961391691351340715 72902354066907170 <![CDATA[Caution: Former Employees as IC's ahead.]]> Are you the head of a business unit within a company that just went through a downsize? Did you lose out on talent that was critical to your business unit's success. Chances are that as the economy starts to rebound, you'll be looking to augment your staff by bringing back some of those workers. I'm here to tell you that it would be a big mistake to bring them back as independent contractors.
Many people have predicted that contract positions will be the first ones to rebound in this economy. Companies have unfinished projects that are awaiting completion. If only they could find an individual who is familiar with the company and it's work. Any idea who these managers might be thinking of? Here lies the problem....the former employee.
Most managers view onboarding former employees as independent contractors as a business practice that makes sense. Why not bring aboard a former employee who knows and understands the project. It's a short term solution so where's the harm? Well there's plenty of it. Receiving a W-2 and a 1099 from the same company in the same tax year screams audit. The IRS and state agencies see this as a blatant misclassification move that saves companies money without having to pay employer taxes, benefits and workers compensation. Unfortunately these agencies do not see our struggling economy as a period of leniency. No matter what, Uncle Sam wants his money.
So what's a manager to do? Hopefully companies have a limit on when a former employee can return as an independent contractor. If not, I recommend at least 12 months. If a company needs the talent early, the best way to go about it is to utilize a third party for your payrolling needs. Staffing companies and firms that specialize in payrolling with benefits are your best options. Make sure the third party is reputable and will bring the worker on as a W-2 employee. What about the fees associated with bringing a worker aboard through a third party? There are companies there that offer a great payrolling package at an affordable rate. In the end though, a third party's fees are minimal compared to what a reclassification can cost you.

Labels: former employees, independent contractors

]]> 8:24 AM Tuesday, May 5, 2009 A. Chavez aaronrchavez@gmail.com 2009_05_01_archive.html#72902354066907170 2359214666165872430 <![CDATA[FedEx Wins Another Ruling]]> Last Tuesday, FedEx Home claimed victory in a ruling that overturned a previous NLRB decision claiming that drivers for FedEx Home were employees not independent contractors. In a 2 to 1 ruling, a Washington federal appeals court ruled that approximately 4,000 drivers could not join a union because they are considered independent contractors not employees. The court's decision was based on the 'entrepreneurial potential' of the driver's ability to operate multiple routes, hire additional drivers and sell routes without permission from the company.
Lawyers for the drivers are becoming increasingly worried that the decision could affect the nationwide class action suite involving more that 27,000 drivers for FedEx Ground. This is the second win for FedEx in the last month as this latest development comes on the heels of a Seattle jury ruling that 320 single route drivers were independent contractors.
In December of last year, a California court decided that 203 drivers should have been classified as employees yet the most recent decisions have gone FedEx's way. What has changed?Why have the employment gods looked favorably on FedEx? The answer could possibly be knowledge and interpretation. How much knowledge did the Seattle jurors have on independent contractors? Did members of the jury truly know what an independent contractor was or did they base their judgement on information provided by FedEx's attorneys? And what about the Washington D.C. decision? Well, interpretation and a little bit of politics may have been the culprit as the judges who overturned the NLRB decision represented a more conservative view.
These latest FedEx wins are a surprise. It goes to show you that determining worker status is not an exact science. How individuals interpret a independent contractor relationship differs from one person to another.

Labels: Fedex Home, independent contractors, NLRB

]]> 7:40 AM Monday, April 27, 2009 A. Chavez aaronrchavez@gmail.com 2009_04_01_archive.html#2359214666165872430 7707986921222480597 <![CDATA[Seattle Jury Delivers a Victory Package to FedEx]]> Talk about a shocker. On Tuesday, a Seattle jury released a verdict favoring Fedex in the latest decision in an ongoing battle regarding the wrongful misclassification of employees as independent contractors. The lawsuit, filed in 2004, involved more than 320 single route drivers who claim their worker status prevented them from obtaining overtime at time and a half. Also included in the lawsuit was the reimbursement for uniforms.
The jury's decision comes as a surprise since a similar case in California last year ended with 203 drivers achieving victory. In that decision, both drivers and their lawyers were awarded with $26.8 million. Though this latest decision is a setback for the drivers, they intend on appealing. As for the national class action lawsuit involving more than 30,000 current and former drivers, the Washington decision has no bearing. However it's a good bet that both sides were paying attention to what was happening in the pacific northwest.
Fedex's win didn't go without it's usual victory lap. A Fedex spokesperson was quoted as saying, "Contractors freely chose to enter contracts with FedEx and operate their businesses as they choose". Are you kidding me? Maybe I'm mistaken but just because a worker signs an independent contractor agreement, it does not make them an independent contractor. These single route drivers were instructed to wear uniforms, instructed on their route to drive and Fedex was their only client. Notice a trend?
Though the the drivers experienced a setback in the state of Washington, chances are they'll see a different outcome on a national scale. Stay tuned.

Labels: Employee Misclassification, Fedex

]]> 8:53 AM Thursday, April 2, 2009 A. Chavez aaronrchavez@gmail.com 2009_04_01_archive.html#7707986921222480597 8744504241244020209 <![CDATA[Allstate Agents Don't Feel That They're in Good Hands with IC Status]]> Back in December, we reported that current Allstate agents were attempting to get noticed by the IRS for their current worker status. Well, it looks like they're at it again.
This time, a group of agents who were transitioned from employees to independent contractors back in 2000 have asked a federal appeals court to consider revisiting an age discrimination lawsuit that was filed after the worker transition. The former agents are arguing that the worker transition took place prior to some of their fellow agents reaching their twenty year anniversary with the company in which they would have been eligible for an early retirement.
Allstate has countered by saying that with the transition of the 6,400 workers to independent contractor status, there would be some people who be affected more than others.
The EEOC has also joined the fight since it claims that Allstate attempted to retaliate against agents who refused to sign a waiver that enabled the transition to 1099 status. With a signed waiver, a worker could continue working but could not sue for any past work related incidents. Without it meant that this was the end of the line.
A U.S. Circuit Court of Appeals heard the story from both sides on Monday and from what I've read, it will be interesting to see how this turns out. Both sides presented good arguments with Allstate claiming that it averaged approximately $232,00 per severance package along with allowing those individuals who decided to stay with Allstate keep their client list. According to Allstate, few people chose not to sign the waiver. Allstate countered that if they wanted to continue making a living with the company, they would have to take the offer.
What I don't understand is that Allstate transition plan was intended to save money and it was completely legal. Who says? If it was legal, then why are we revisiting this again. Last time I checked Allstate agents were only selling Allstate products, maintaining mandatory busines hours, abiding by sales quotas and were part of performance reviews. Why did it take nine years for anyone to take notice? My bet is that we haven't heard the last of this one.

]]> 3:23 PM Wednesday, March 25, 2009 A. Chavez aaronrchavez@gmail.com 2009_03_01_archive.html#8744504241244020209 7974782451124861279 <![CDATA[WWE Misclassification Update]]> Last September, we informed you that World Wrestling Entertainment(WWE) was being sued by three former wrestlers over not being offered benefits and being labeled independent contractors when they should have been employees. Unfortunately for the former wrestlers, they won't get a chance to go toe-to-toe with the WWE in court. Last Tuesday, a U.S. district court judge dismissed the case per the WWE's motion.
The wrestlers now have to evaluate their next course of action. It appears that they can do one of three things: accept the dismissal, ask the court to reconsider the decision or file an appeal. Whatever action the wrestlers decide to take, it will speak loudly in terms of their overall intent. Where they just looking to cash in on a quick pay day or did they really feel wronged by WWE's classification as independent contractors?We'll continue to keep you informed on what happens next.

]]> 2:17 PM Monday, March 2, 2009 A. Chavez aaronrchavez@gmail.com 2009_03_01_archive.html#7974782451124861279 7478317742829229116 <![CDATA[Treasury Inspector General Acknowledges Worker Misclassification And Recommends IRS Do More]]> The Treasury Inspector General released a report last week summarizing the effects of worker misclassification and the steps the IRS has taken to combat the situation. Sadly, the report documented what some people in this industry already know: The misclassification of employees as independent contractors is a nationwide issue affecting millions of workers that continues to grow and contribute to the tax gap. When an employee is misclassified, tax revenues are not reported or paid and the burden of uncollected taxes shifts to other taxpayers.
The report marks the conclusion of an audit on the IRS's efforts to address the worker misclassification issue. The audit indicated that the IRS believes that a worker is misclassified for a number of different reasons: 1)unintentionally because of lack of knowledge, 2)some employers use Safe Harbor to legally treat workers as independent contractors when they should typically be employees and 3) employers who knowingly misclassify workers to cut costs in order to gain an advantage over competition who play by the rules.
Unfortunately for the IRS, the report provided concerning results on the data provided as it suggested that the agency do more to combat the problem at hand. Currently, the IRS enforces tax laws involving misclassification and attempts to educate the general public on proper worker classification. According to the Inspector General, it's not enough. $345 Billion is the IRS's estimate on current tax gap. Of that amount, $54 Billion is the employment tax portion with worker misclassification accounting for $1.6 Billion. Even the numbers that were provided were skewed as $1.6 Billion was an estimate from tax data from the year 1984. One can only assume that the amount is considerably higher.
The IRS has vowed to develop communication within it's business divisions that will help establish an agency wide employment tax plan intended to address the worker misclassification problem. It will be interesting to see what actions come of this since the IRS has no real idea of the numbers behind this problem. Maybe the IRS should start by paying attention to the states who have said enough is enough to worker misclassification. Considering what we read on misclassification, the doors of the construction industry could be the first ones the IRS knocks on.

Labels: independent contractors, misclassified workers, worker misclassification

]]> 4:07 PM Monday, February 16, 2009 A. Chavez aaronrchavez@gmail.com 2009_02_01_archive.html#7478317742829229116 834926034607349000 <![CDATA[Maryland To Take Another Crack at Worker Misclassification]]> Last Monday, Maryland Governor Martin O’Malley introduced his legislative agenda for 2009. Once of the items included in his agenda was on the topic of workplace fraud, i.e. worker misclassification. Though minimal details were released, the governor indicated that the industries targeted would be those where misclassification seems to be most prevalent.
(I think the Governor might be referring to you, construction industry).
O’Malley is just the latest governor to take a formal stand on worker misclassification. Though O’Malley introduced worker misclassification in his agenda, the governors of New York, Iowa, Massachusetts, Maine and Michigan have all signed executive orders creating task forces in an attempt to curb this unfair business practice which results in a loss of millions of dollars to the states economy.
Maryland has been aggressive as of late in addressing the worker misclassification issue however it's unclear as to whether the state as a whole is serious about the issue. In early 2008, Maryland introduced Employer Misclassification of Employees as Independent Contractors (HB 1590). A few weeks later the Maryland Secretary for Department of Labor, Licensing and Regulation found himself testifying on bealf of the bill in front of the House Economic Matters Committee. Unfortunately the testimony provided by the Secretary did not provide enough to push HB 1590 to the Senate. Instead, the bill's lifespan was cut short as it received an unfavorable report by the committee.
With the many states facing tough economic times, there's a good chance that the second go around for any legislation created at curbing worker misclassification in Maryland will experience a better outcome.

Labels: maryland worker misclassification

]]> 10:03 PM Tuesday, January 27, 2009 A. Chavez aaronrchavez@gmail.com 2009_01_01_archive.html#834926034607349000 2768696779807872572 <![CDATA[A Look Back at 2008]]> 2008 was a year of task forces, new legislation, lawsuits, a settlement and oh yeah..a new President Elect. To start off, the results of task forces on worker misclassification were presented to the governors of Michigan and Iowa. In both cases, the results indicated that 1) states lose out important tax revenues, 2) misclassification provides an unfair advantage to businesses who abide by the law and 3) misclassified workers are deprived of worker benefits such as workers compensation, overtime and other employee benefits. Doesn’t this sound familiar? It’s somewhat surprising that these task forces are created with taxpayer dollars yet at the end of the day their findings surprise no one.
Task Forces weren’t the only things being created in ’08. New legislation aimed at curbing worker misclassification also took center stage. H.R.6111 and S.3648. were introduced to amend the Fair Labor Standards Act requiring employers to keep records on non-employees who perform services and to penalize employers who misclassify employees as non-employees. Both bills were cleared from the books since they were introduced in a previous session of Congress. You can bet with the new administration coming in that these bills will be introduced and may see there way onto the President’s desk if they can get passed the committees, the House and the Senate.
You’re probably wondering why lawsuits were being mentioned as a highlight in 2008 when they happen so very often. The reason is because one of them was poised to change the entire landscape of newspaper delivery carriers while another poses a legitimate threat to a multi million dollar entertainment and media company. First, Freedom Communications dba The Orange County Register settled a class action lawsuit brought on by the home delivery carriers who deliver the newspaper with a payout not to exceed $22 million. The settlement keeps in tact the home delivery carrier’s status as independent contractors which the Orange County Register has maintained all along. The second lawsuit involves a group of former wrestlers suing World Wrestling Entertainment (WWE) for misclassifying them as independent contractors. Though the thought of a wrestling misclassification suit sounds somewhat wild, it could dramatically alter the manner in which WWE does business with its performers. Currently, all performers are independent contractors and are responsible for their own travel and lodging however WWE controls their appearance and manages their gigs. Something has got to give and it’s a good bet that we’ll hear more in ’09.
2008 was especially kind to 203 current and former drivers for FedEx who received a settlement of more than $14 million ($27 million total with the remaining $12.5 going to attorney fees and court costs). FedEx decided to “put the matter behind them” and they still believe that they have not participated in any wrong doing. FedEx may have more in store for them in 2009 as litigation on behalf of 27,000 drivers marches its way through U.S. District Court. It would surprise no one if when 2009 comes to a close FedEx is the one left holding the package.
Finally, there was a change in the oval office. Barack Obama was elected as the 44th President of the United States. President Elect Obama receives mention since he has sponsored two bills targeted at worker misclassification. As mentioned earlier in the blog, both bills are destined to be reintroduced and should they find their way to the President, there will be not one bit of hesitation to sign them. 2009 is setting up to be a big year involving worker misclassification. If you’re an employer truly take the time to understand the difference between an employee and an independent contractor. Don’t just trust your instincts. If not, you may see your company’s name mentioned in this blog and that would not be a good thing.
Happy New Year and May Your Business Prosper.

]]> 12:48 PM Friday, January 2, 2009 A. Chavez aaronrchavez@gmail.com 2009_01_01_archive.html#2768696779807872572 5199766272043211581 <![CDATA[Allstate Goes Searching for IRS Attention]]> If you were searching the internet for business news over the Christmas week, chances are you came across an article entitled “Deliberately Misclassified?”. The article which centered on Allstate Agents and their search for independence, mentioned that back in 2000, Allstate decided to alter their worker model by changing the status of every agent from employee to an independent contractor. Fast forward to today and those same agents who are independent contractors are trapped in a web of control that would indicate an employee-employer like relationship.
The National Association of Professional Allstate Agents(NAPAA) is the organization responsible for the article and they state that Allstate exudes control factors such as mandatory business hours, sales quotas and performance reviews just to name a few. The organization also went on to reference a company that’s been in the news recently for their own worker misclassification woes…FedEx. After all, Allstate seems to have something in common with Fedex when it comes to their independent contractor worker model.
It’s somewhat surprising that the organization would decide to post an article that could potentially garner attention from the IRS or any state agency rather than file a lawsuit. It also goes to show the effect of what any FedEx decisions will have on industries who utilize a large number of independent contractors.
Stay tuned as we will continue to blog on any new information that's a result of this NAPAA press release. There’s a good chance that we will see more news in the early part of 2009.

]]> 10:21 PM Monday, December 29, 2008 A. Chavez aaronrchavez@gmail.com 2008_12_01_archive.html#5199766272043211581 4158484584612209798 <![CDATA[Christmas Comes Early for Fedex Drivers]]> Last Friday, Fedex settled a decade long lawsuit with 203 drivers that were misclassified by the company as independent contractors. The total amount of dollars Fedex has agreed to payout is in the neighborhood of $27 million. Of that total, $14.5 million will be paid to the California drivers and $12.5 million will be applied to attorney and court fees. The drivers stand to collect anywhere between $2,000 & $280,000 with the average payout being $70,000.
Though Fedex has agreed to the payout, they are by no means admitting to any wrongdoing. The shipping goliath still stands by their model that their drivers are truly independent business owners, not employees.
On a separate note, the IRS is still in the midst of auditing Fedex for the 2002 and 2004 -2006 tax violations from misclassifying its pickup and delivery drivers. Will the IRS pay close attention to this settlement before rendering a decision? Perhaps this latest settlement will provide enough doubt to resonate throughout corporate America and make big companies think twice about classifying their workers as independent contractors.

Labels: Fedex, settlement

]]> 10:00 PM Monday, December 8, 2008 A. Chavez aaronrchavez@gmail.com 2008_12_01_archive.html#4158484584612209798 7448626509798840255 <![CDATA[New Minnesota Independent Contractor Law Looks to Nail Construction Industry]]> A new Minnesota independent contractor law will go into affect on January 1, 2009 taking aim at the construction industry and its independent contractor population. The Independent Contractor Exemption Certificate Legislation will require anyone doing business as an independent contractor to obtain an Independent Contractor Exemption Certificate from the Minnesota Department of Labor and Industry. Any individuals performing construction services without an Independent Contractor Certificate Exemption will be deemed employees of the hiring contractor for whom they are performing services. The hiring contractor would be responsible for the workers compensation, unemployment insurance along with abiding by OSHA standards and wage and hour laws.
In order to obtain a certificate, a contractor must complete and submit an application to the Minnesota Dept. of Labor and Industry along with a $150 fee and documentation that would support his/her status as an independent contractor. In addition to the documentation, the contractor would have to demonstrate that s/he meets the law’s nine factor test used to determine independent contractor status. The Minnesota Dept. of Labor and Industry then has 30 days to render a decision on whether to grant or deny the contractor a certificate. The certificates will have a lifespan of 2 years with the $150 application due at the beginning of each renewal.
The law is not without its penalties. The hiring contractor who fails to comply will be subject to a fine of up to $5,000 for each violation. In addition, the hiring contractor would face civil penalties, back taxes and workers compensation premiums that would have been in place had the worker been an employee of the hiring contractor from the beginning of when services had begun.
Minnesota’s law is a good start to curtailing employee misclassification in an industry that’s notorious for this type of practice. The law does provide potential loopholes for which contractors can take advantage of. First, the nine factor test appears to center around the overall makeup of the contractor’s business including investment as well the relationship of the parties. Though behavioral control and financial are mentioned, they are by no means a focal point of the test. Second, the exemption certificate is solely required for individuals, therefore corporations, LLC’s and partnerships are exempt. Who says incorporating is not a panacea?
It will be interesting to see how the exemption certificate is enforced. Will whistle blowing be the key? Depending on the results that Minnesota sees from this new legislation, it could open eyes to other industries. There is no doubt that other states will be monitoring the new legislation and the effects of the certificate as they may look to implement something similar.

]]> 8:54 AM Thursday, December 4, 2008 A. Chavez aaronrchavez@gmail.com 2008_12_01_archive.html#7448626509798840255 4129909026208142356 <![CDATA[Is a “Change” Coming For Employers Who Utilize Independent Contractors?]]> A few weeks ago, the American public elected Barack Obama as its 44th President. During President Elect Obama’s run for the White House, he preached the word “Change”. Unfortunately, for employers, a part of that change may be directed at them. Before becoming the President Elect, Obama was instrumental in sponsoring two senate bills aimed at worker misclassification, the Independent Contractor Proper Classification Act of 2007 (S. 2044) and the Employee Misclassification Prevention Act (S. 3648). The Independent Contractor Proper Classification Act of 2007 eliminates Section 530 Safe Harbor and requires employers to treat workers misclassified as independent contractors as employees for employment tax purposes upon a determination by the Secretary of Treasury. The bill looks to eliminate industry practice as a justification for misclassification of employees as independent contractors. Employers would be required to maintain a list for three years of all independent contractors who have performed services for them along with the independent contractor’s name, address, social security number and tax identification number. Responsibility will fall on the employer to notify independent contractors of their federal tax obligations along with notifying their employees and independent contractors their right to seek a status determination from the IRS.
In addition to the Independent Contractor Proper Classification Act of 2007, Obama recently co-sponsored the Employee Misclassification Prevention Act which looks to amend the Fair Labor Standards Act to require employers to keep records of non-employees who provide services. The act looks to hand out penalties to employers who misclassify employees as independent contractors. The amount of the penalty would not exceed $10,000 for each violation and would be handed out to anyone who repeatedly or intentionally misclassifies its workers. The bill is in some ways similar to H.R. 6111 which was introduced in the House earlier this year.
Both of the above mentioned bills are currently in the beginning stages of the legislative process and are being reviewed by committees prior to a general debate. Should either of these bills make it through the House and Senate and onto the President’s desk, you can bet that “Change” will be felt by employers everywhere.

Labels: Employee Misclassification, Independent Contractor Classification

]]> 1:29 PM Thursday, November 20, 2008 A. Chavez aaronrchavez@gmail.com 2008_11_01_archive.html#4129909026208142356 2327076487891302633 <![CDATA[Keep on Truckin’…Wait, Not So Fast!]]> A couple of weeks ago, California Attorney General Jerry Brown sued three trucking companies who provide services to Los Angeles and Long Beach ports for intentionally misclassifying their truck drivers as independent contractors. The companies classified their drivers as independent contractors to get out of paying workers compensation and employee benefits. The crackdown on truck driver misclassification at these ports is a direct result of a task force created by the California Attorney General in February 2008. The recent lawsuits come on the heels of two other trucking companies who were sued by the Attorney General in September.
Apparently the Attorney General is not the only one to take notice of truck driver misclassification. Hearings have been conducted in Long Beach and Oakland that centered around truck driver misclassification and how it lends to harbor area pollution. The truck drivers were advised where and when to work yet they were considered independent contractors. A point could even be made that by hiring drivers as independent contractors is integral to the trucking company’s business. As a matter of fact, a majority of the truck drivers indicated that they were working for only one company.
In addition to the drivers’ testimony, public officials presented a Clean Truck Program proposal that the ports are considering. The program would phase out old trucks and would require trucking companies (providing services to ports) to employ drivers rather than maintain an independent contractor relationship. The current port trucking model does not lend to a clean harbor since most drivers are independent contractors who cannot afford the newest technology which in turn would produce lower emissions.
The port trucking industry is just the latest example of drivers being examined by state officials. Is the trucking industry as a whole the next to be targeted by the IRS or EDD? Let’s hope that a majority of trucking companies don’t fall asleep at the wheel when it comes to classifying a driver’s status.

Labels: truck driver misclassification

]]> 9:02 AM Monday, November 10, 2008 A. Chavez aaronrchavez@gmail.com 2008_11_01_archive.html#2327076487891302633 5055624568269173190 <![CDATA[A Look Back: Secure Talent at SIA]]> Secure Talent recently attended the Staffing Industry Analysts Summit on Contingent Workforce Strategies. The event was geared for corporate buyers and contingent workforce managers. It focused on the information they need to know to better manage this critical component of their organization’s workforce. One of the highlights for Secure Talent was the “Speed Supplier” segment. It was a bit like speed dating… we had 60 seconds to provide an idea that was helpful to the managers that attended and was compelling enough to encourage the managers to visit us in our booth, without selling. In other words, we couldn’t say how we differentiate ourselves from our competitors, but we could give them an idea that may help them better manage their contingent workforce.

Secure Talent’s “Speed Supplier” presentation was focused on breaking through when the decision making process is stalled. Our suggestion….. try approaching the decision from a different point of view than what you’ve been doing. Use a “what is the worst thing that can happen” perspective. It could help you break through decision deadlock and move you forward on your project.

Labels: Contingent Workforce Strategies, Secure Talent, SIA

]]> 8:11 AM Friday, November 7, 2008 A. Chavez aaronrchavez@gmail.com 2008_11_01_archive.html#5055624568269173190 402590395657959351 <![CDATA[Referee Delivers Another TKO to FedEx]]> The FedEx case is like the energizer bunny, it just keeps going and going and going. By most counts, this is probably top of the third and will probably go way into overtime. A referee appointed by a California Superior Court Judge just awarded $14.4 million dollars to 200 drivers as a result of them being misclassified by FedEx as independent contractors vs. employees. The award is to reimburse the drivers for work related expenses e.g., uniforms, vehicle maintenance insurance, etc. You can imagine the shock for both sides in the case at the $14.4 million award--after all it is almost triple of what was anticipated.

If it looks like a duck and quacks like a duck--well, it's probably a duck!!!

There will be a lot more to follow on the FedEx v Estrada suit.

Labels: misclassification

]]> 12:23 PM Tuesday, October 21, 2008 Jeff Phelps jeffphelps339@gmail.com 2008_10_01_archive.html#402590395657959351 4471465649839903656 <![CDATA[Latest Trends in Staffing, a Must See!!!]]>

Secure Talent is an Optimum sponsor at the upcoming Staffing Industry Analysts Contingent Workforce Summit (SIA CWS Summit) in Brooklyn New York. The two day event, held on October 28 and 29, is the premier event for buyers from all segments of the marketplace. CWS provides an excellent opportunity for buyers to gain tremendous insight on trends, analysis, products, services and players in the human capital management industry e.g., 1099 risk management, VMS, MSP, payrolling services and of course staffing. This event features exceptional speakers and 30+ sponsors/exhibitors. Typically, the event is attended by a few hundred buyers from across the country. If you are attending this year’s event, stop by booth #8 and find out the latest on 1099 risk management.

]]> 8:30 AM Monday, October 20, 2008 Jeff Phelps jeffphelps339@gmail.com 2008_10_01_archive.html#4471465649839903656 1469339797090915568 <![CDATA[Ignoring the Problem will not Make it Go Away]]> In the past 18 months we have seen an exponential increase in the actions by members of the house of representatives and the senate, yes republicans and democrats, to specifically address a seemingly ubiquitous and pervasive issue, the misclassification of employees as independent contractors. We are seeing more and more legislation at the state and federal levels imposing greater and greater penalties, fines and sanctions against employers--some knowingly misclassifying workers, some simply conducting business as usual. The number of cases is truly staggering as is the the amount of many of the fines. Governors are signing into law executive orders, states are banding together to form task forces and unions are seeking the assistance of government agencies. While the cost of misclassification may pale in comparison to the recent bailout of Wall Street, many estimate the cost to the IRS and other government agencies to be in the tens if not hundreds of billions of dollars.

Microsoft was the poster child for misclassification for many, many years having settled their misclassification case for $97 million. The Microsoft case now pales by comparison to the FedEx case which is estimated to exceed $1 billion and perhaps even reach $2 billion. In the past 18 months we have seen legislation instigated or passed in states such as California, New Jersey, Connecticut, New Hampshire, Illinois, Michigan, New York, and many more. At the federal level we've seen legislation authored or supported by names such as Obama, Kennedy, Durban, Murray, Woolsey, Miller, Andrews, and so many more.

It is clear that public policy on the issue of employee misclassification is changing. Some argue that the impetus is around recovering the billions in unpaid taxes, others to ensure the workforce is afforded the various protections under federal and state laws e.g., FLSA, Title VII, etc.

One thing is clear to most, even with the challenging economy, this is not the time to conduct business as usual. The old school thinking, "I've never been audited before", is not only risky business, it is very costly and can be devastating. Spending the next month or 18 months in an audit with a state or federal agency is not what any employer wants. Knowing that the auditor may contact the "independent contractors" that either currently provide services or previously provided services over the past several years can expose any number of risks and liabilities.

A word to the wise, audits are on the rise, deficits are soaring, unemployment is escalating, thousands of employment lawsuits are filed weekly--isn't it time to mitigate the risk of employment misclassification?

Labels: misclassification

]]> 9:18 AM Saturday, October 18, 2008 Jeff Phelps jeffphelps339@gmail.com 2008_10_01_archive.html#1469339797090915568 6197065956394400389 <![CDATA[The IRS Delivers a Big Bad Package to FedEx]]> I recently published a whitepaper on the FedEx worker misclassification debacle. The FedEx case is arguably the most significant we have ever seen, in terms of the people and money involved. I must admit that I am surprised by the number of people that are not aware of the mess FedEx in. Most surprising is that so many do not see the similarities between FedEx and their own use of independent contractors. This is not just about drivers or packages, this is about services being performed that are integral to FedEx i.e. delivery of packages. Not to mention the uniforms, trucks, control—well read the paper for the details. So while you may not have people delivering packages in uniforms with trucks, ask yourself, “do I have people performing services that are integral to my business that I am treating as an independent contractors vs. employees?” The FedEx case is a perfect example of how something can quickly get out of control e.g., 100’s of claims, class action status, wage & hour issues, labor organizing and the issues keep building. It is a slippery slope. Will you be next?

Labels: misclassification

]]> 8:51 AM Thursday, October 16, 2008 Jeff Phelps jeffphelps339@gmail.com 2008_10_01_archive.html#6197065956394400389 7857743911015595222 <![CDATA[Misclassification of Workers - Big Fines, More Legislation, Greater Risk, Increased Complexity and Unfair Competition!]]> Pending legislation, HR 6111 is another recent example of Congress sending a huge salvo over the bow of employers who would repeatedly or willfully fail to accurately classify a worker i.e., W2 employee or 1099 independent contractor. The last couple of years are taking shape as the “Governments war on employee misclassification!” Across the country at the state level, governor’s and legislators are proposing and approving severe, some might call harsh executive orders and legislation with an almost “take no prisoners approach”, except of course in a few states e.g., where misdemeanors, felonies and jail time are applied.

HR 6111 includes provisions for fines of up to $10,000 for each violation. Essentially the bill would also require companies to:

Provide notice to workers of their classification and maintain records

Inform workers that they may not be afforded certain protections and rights as a non-employees as a result of their classification

Direct workers as to how to contact the Department of Labor if they suspect they have been misclassified as independent contractors

Also, HR6111 would require unemployment agencies to conduct auditing/investigating programs to detect misclassification and ensure that at least 25% of wage and hour audits focus on classification violations.

Why all the interest by the government regarding employee classification? Well to start, according to one estimate, and there are several, the government has not collected an estimated $30+ billion dollars in taxes due to employee misclassification in the 8 years. Is money a motivator? With record deficits at the local, state and federal levels, unemployment increases, the mortgage debacle, Wall Street bailout, etc., there is certainly interest and commitment to deeply mining existing sources of revenue. There is also the desire to secure the American workforce by providing protections as designed e.g., FLSA, Title VII, and to ensure they are provide with employee benefits, rather than intentionally and wrongly excluding workers from these rights and opportunities by misclassifying them as independent contractors. Furthermore, there is growing concern that misclassification of workers provides those that do it with an enormous unfair competitive advantage by avoiding the burden of tax withholding, employee benefits and exposure to employment law.

Employers need to heed the many and growing number of threatening warnings from the various branches of government and their agencies. In effect, if you are misclassifying workers we will find you through one of a growing number of mechanisms; the use of reporting, audits, technology, inter-agency sharing and misclassified workers essentially “blowing” the whistle on you. And yes, once we find you we apply to the fullest extent possible devastating penalties, fines and potentially jail time. Some employers need to move away from old thinking, “you can’t buy the insurance after the hurricane has hit.”

Labels: government

]]> 12:04 PM Friday, October 10, 2008 Secure Talent eplicatravis@gmail.com 2008_10_01_archive.html#7857743911015595222 5681811892082384597 <![CDATA[Extra! Extra! Read all about Misclassification]]> A trial is set to begin on a class action lawsuit involving employee misclassification. A group of former newspaper carriers are suing Freedom Communications Inc dba The Orange County Register for multiple labor code violations that stemmed from The Orange County Register misclassifying newspaper carriers as independent contractors. Some of the violations include: failure to pay minimum wage, hourly wages and overtime wages; failure to provide meal and rest periods as well as unfair business practices. In October of 2007, an Orange County superior court judge ruled that 6,000 past and current carriers could sue The Orange County Register to collect past benefits that would have been owed to an employee. The lawsuit is seeking $100 million in damages.

Attorneys representing the newspaper carriers indicate that The Orange County Register controls the manner and means of how the services are performed. It was also noted that the job itself carries little skill and that the delivery services performed by the carriers are an integral part of newspaper agency’s business. The Orange County Register argues that newspaper carriers are able to hire assistants and can perform services for other newspaper agencies.

This class action suit has the potential for huge ramifications since a large majority of the newspaper industry considers newspapers carriers independent contractors, not employees. The Orange County Register notes that classifying these types of workers as independent contractors is industry standard.
Should the courts award the newspaper carriers with employee status, precedence will be set that will not only affect the cost of doing business for newspaper agencies but possibly the consumer who receives home delivery.

Labels: independent contractors, misclassification

]]> 4:06 PM Friday, October 3, 2008 Secure Talent eplicatravis@gmail.com 2008_10_01_archive.html#5681811892082384597 334545943330277192 <![CDATA[Hammering away at the construction industry]]> Starting in 2007, the construction industry has been getting hammered for intentionally misclassifying its workers as independent contractors. We’ve read that a carpenter’s union filed a lawsuit against builder DR Horton for replacing unionized workers with illegal independent contractors and paying them considerably lower wages. We’ve seen several states such as Pennsylvania, New Jersey and Illinois create legislation that includes financial penalties to companies within the construction industry that knowingly misclassifies workers. We’ve also heard from Dr. Fred Kottler of Cornell University speaking out on the costs involving worker misclassification and how it affects the economy.

Has the construction industry reached a point where it must adapt to change and accept the high costs associated with doing business? Or will the industry continue their current business course and ignore the risks associated with intentionally misclassifying workers? Intentional misclassification of workers equates to an unfair competitive advantage. The construction industry is comprised of law abiders and law breakers. Law breakers avoid paying employment taxes or workers compensation therefore the cost of doing business is relatively low. Law abiders who obey labor codes and pay workers accordingly, experience a higher cost.

How can states and the Department of Labor monitor the industry? Whistleblowing may be the key. I’ve provided an example of the carpenters union filing a lawsuit against DR Horton and more recently, although not construction related, a UPS lobbyist became a Fedex whistleblower.

Until now I’ve been somewhat skeptical of whether the negative media, executive orders and legislation would provide enough ammunition to change the way the construction industry does business. However the law abiders(aka whistleblowers?) may determine the outcome. After all, they’ll have nothing to lose and will do whatever it takes to negate the competitive advantage.

Labels: misclassification

]]> 4:35 PM Monday, September 29, 2008 Secure Talent eplicatravis@gmail.com 2008_09_01_archive.html#334545943330277192 7665819226541854013 <![CDATA[FedEx won’t know overnight what the total fines from the IRS will be for misclassifying workers!!!!]]>

But FedEx and the workers that are part of the class action know that it could be a billion dollars or more. So far hundreds of millions have been assessed and that only represents the one year that has been audited, 2002. Buckle your seatbelts, this has already proven to be a rough ride and the road ahead may not be any better. The IRS will be auditing additional years as well. One can only imagine the impact this case is having on FedEx e.g., morale, confidence, loyalty, trust, staff resource consumption, etc. While the financial impact is unfathomable, these other impacts can be far reaching and can have long lasting affects on a company and its employees, suppliers and of course its customers. The FedEx case involves over 50 lawsuits that were consolidated in a federal court in Indiana, representing over 24,000 drivers across the country.

Will FedEx be the catalyst for change? Will it be devastating enough to emphasize the importance of properly classifying workers? Or will it be yet another example that will be viewed by many companies as irrelevant to their business, industry or utilization of independent contractors. Arguably, FedEx probably didn’t think Vizcaino v. Microsoft was relevant i.e., Software Development v. Delivery Services. And, there are so many other cases that if you only look at the dissimilarities vs. the similarities, you too might not see the drivers for the packages.

FedEx has already become the new landmark case, even though it is miles from being over. Based on legislation passed and pending in the last 18 months, there will be plenty of room for FedEx to be challenged for their new ranking at the top. After all, they can now claim to have left Microsoft in the dust, nothing but a faint image in the rearview mirror.

While FedEx can’t turn the truck around, there is no time like the present for them and others to install effective employee classification programs. The misclassification of workers is top-of-mind for many legislators, government agencies and employee/employer rights organizations. It has become a banner that no employer of choice wants to wear. Misclassifying workers has become synonymous with non-competitive practices, depriving workers from employee benefits and precluding employees from government protection.

A word to the wise, be sure you are on the right course to mitigate your risk of misclassification.

Labels: misclassification

]]> 11:52 AM Wednesday, September 24, 2008 Secure Talent eplicatravis@gmail.com 2008_09_01_archive.html#7665819226541854013