CWS 3.0: June 19, 2013

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Firm Pays $176,204 to 17 Misclassified ICs

A contractor that provides services to heavy industrial and commercial construction projects in Texas paid $176,204 in back wages to 17 maintenance employees who were misclassified as independent contractors (ICs), the U.S. Department of Labor Reported.

The company, Ratech, provided the maintenance employees to a mining operation in Bridgeport, Texas, according to the DOL. They were paid straight wages rather than overtime.

“These misclassified employees worked long hours — in at least one case, as much as 95 hours in a workweek — without receiving overtime compensation,” said Cynthia Watson, regional administrator for the Department of Labor’s Wage and Hour Division in the Southwest. Employee misclassification puts honest employers at a competitive disadvantage, she said. “The department is committed to combating this practice to protect workers and ensure a level playing field.”

With the IRS and other agencies stepping up their classification efforts, companies need to take extra steps to ensure they are in compliance.

Classification can be tricky, and the IRS recently ruled that a worker can be both an employee and an independent contractor for the same company. So companies should review each independent contractor relationship carefully to ensure they are properly classified. The IRS considers the degree of control and independence workers have when evaluating worker classification. So take a look at where and how your ICs conduct their work and the level of direction managers have over them. And periodically conduct audits to ensure the working relationship hasn’t changed over time.

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