“We are seeing the government re-doubling their efforts to combat misclassification. It’s no longer a catch-me-if-you-can approach with regards to misclassified contractors.”
--Maria Goyer, VP of business solutions at Populus Group. It offers a range of talent management options
Watch out: It’s going to be a bumpy ride. Worker misclassification and resultant lawsuits are indications that the Internal Revenue Service means serious business. To protect themselves, companies need to focus on implementing a plan to properly document their independent contractors.
“We saw in the 2011 plan for the Department of Labor (DOL) an initiative called Prevent and Protect. It involved rules that would require employers to conduct audits into the classification of independent contractors. It will be interesting to see if they convert that into regulations this year,” says Goyer.
In fact, the proposed 2012 budget shows that the government is re-doubling its efforts to combat misclassification. “They’re investing $46 million in multi-agency initiatives including wage and hour and OSHA. This money will be granted per state to address the issue of misclassification,” says Goyer.
So what can companies do? Start by auditing your contractor population, Goyer advises. With the maturing of CW programs, many companies are using statement of work consultants -- the majority of whom are independent contractors. Experts believe it is better for companies to use an independent third-party company to vet those contractors. Some companies rely on their MSP to do the job.
The MSP or third-party provider evaluates and appropriately classifies the worker. Either also might act as an agent of record for contractors who don’t want to be put on a client company's payroll. “If you payroll somebody, you’re an employer, but [a company that engages] independent contractors can be their agent of record,” says Goyer. This allows companies to outsource the engagement, administration and payment of contractors, reducing their burden and risk.