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Already in 2015, Renewed Focus on Employee Classification
No CommentsEmployee classification — labeling each of your workers as either employees or contractors — has always been important, and the Affordable Care Act has brought more reasons for to make sure you get it right. Employers can face penalties under the ACA’s shared responsibility provisions, and if the government decides workers you’ve labeled as contractors are really employees, you may face those penalties.
It can be hard to determine whether the people who work for you are employees or contractors. This week I’ve been reading about employee classification and some recent news surrounding employee classification mistakes. Here are some of the best articles I found.
7 Questions Employers Should Ask Themselves Every Year. The National Law Review: “Have you reviewed each worker treated as an independent contractor to ensure he/she should not be treated as an employee? If that is too much to swallow, have you at least reviewed the status of each worker added an independent contractor in the previous year – especially any reclassified from employee to contractor (not necessarily wrong, but certainly a change to undertake very carefully)?”
The Ins and Outs of Onboarding Employees and Independent Contractors. Entrepreneur: “In the early stages of a business, many founders prefer to engage independent contractors or consultants to perform services. It allows the company to avoid implementing costly payroll processes and employee benefits and the company saves significant dollars that would otherwise have to be paid on employee-related federal and state taxes. In fact, it’s such a big savings that the IRS decided several years ago to crack down on improper classification of employees by imposing hefty penalties on the companies.”
Affordable Care Act: What Employers Need to Know in 2015. The Metropolitan Corporate Counsel: “In broad terms, the government is concerned that because the penalties under the shared responsibility provisions of the Affordable Care Act are centered within the employer-employee relationship, some employers may be tempted to classify certain individuals as independent contractors to avoid having to provide such individuals with health insurance coverage (and thereby negating the possibility that the employer could be subject to a penalty with regard to same). In addition, the government is concerned that classifying an individual as a contractor may permit an employer to avoid being classified as a large employer.”
What if There Were a New Type of Worker? Dependent Contractor. The Wall Street Journal: “Nearly all U.S. workers fall into one of two buckets: employees, who are covered by labor laws such as minimum-wage and antidiscrimination statutes, or independent contractors, who get flexibility in their work but few protections…A handful of legal scholars have argued that labor policy should expand to include a third category, one that extends some protections to those who take on project-based work but have little leverage or power in their work arrangements.”
Uber, Lyft Face Crucial Courtroom Test Over Driver Benefits. Reuters: “Smartphone-enabled car services Uber and Lyft head to court this week to resolve a critical question for Silicon Valley’s sharing economy: whether their drivers are independent contractors or employees. The two privately held companies face separate lawsuits seeking class action status in San Francisco federal court, brought on behalf of drivers who contend they are employees and entitled to reimbursement for expenses including gas and vehicle maintenance. The drivers currently pay those costs themselves. If the judges rule against Uber and Lyft, it could significantly raise their costs beyond the lawsuits and force the companies to pay social security, workers’ compensation, and unemployment insurance. Employees would also gain the right to organize.”
If you have questions about whether your workers are employees or contractors, please contact us. Our team is experienced in employee classification and can help your company stay on the right side of the law.
HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.
