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Legal Eagle: Contractors -- Whistle blowers welcome - CWS 30 January 2.2

Contingent Workforce Strategies 30

Employee misclassification is a growing problem in the Unites States. It's unclear exactly how much misclassifying employees costs the U.S. Treasury, but the Internal Revenue Service is on the warpath, looking for offenders. Following suit, in November last year New Hampshire launched a user-friendly Web site that permits anyone -- workers, citizens, agencies -- to notify the state if they suspect a worker has been misclassified as an independent contractor.

The inter-agency Task Force for the Misclassification of NH Workers Web site does indicate that it will keep confidential the identities of those who report misclassification, though the informants will need to identify themselves to the agency. Created last year, the NH Task Force is supported by the Departments of Labor, Employment Security, Revenue Administration, and Insurance. New Hampshire is just one state among many that have created such cooperative task forces for the purposes of sharing information and addressing the growing problem of worker misclassification.

It doesn't matter if your business is not located in New Hampshire. Every state has its own enforcement approaches, and on the federal level there are at least half a dozen agencies interested in cracking down on this issue. In fact, there have been various experiments with online complaint systems with varying degrees of success. For example, the Atlanta division of the U.S. Equal Employment Opportunity Commission's recently launched Web site began accepting online complaints, resulting in a two-year backlog.

Staffing Industry Analysts suggests that companies perform an internal audit of their use of contractors. Using independent contractors not only involves risks but demands subjective judgments. It helps to seek out experts that specialize in contractor compliance to minimize risks associated with misclassification. Another rationale for seeking outside help is that these specialists can keep up with the new laws and rules that crop up every year.

Whether you bring in experts or do it yourself, make sure you set your house in order -- or it will be done for you.


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