Comments on: Employee or Independant Contractor? http://www.4laborlaw.com/employee-or-independant-contractor/ Employment Law by Charles J. Cochran, Jr., Esq. Thu, 11 Mar 2010 16:18:49 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Charles J. Cochran, Jr. http://www.4laborlaw.com/employee-or-independant-contractor/comment-page-1/#comment-3658 Charles J. Cochran, Jr. Thu, 11 Mar 2010 16:18:49 +0000 http://www.cjcochran.net/?p=130#comment-3658 Kris: From recent activity in the news it looks like the government will be looking closer at these classifications in the future. President Obama has stated that a substantial sum of money is being earmarked just to find and remedy misclassified Independent Contractors. Senator Kerry has proposed legislation that will put stronger impetus on Employers to properly classify their workers. While the driver for this closer review seems to be lost tax revenue I suppose that whatever the reason our country will be seeing a change in enforcement of the proper classification of workers. The upside to having tax revenue as a reason for tightening up classification is there is a need for the increased revenue and there should be a benefit in enforcement so this process will be a serious effort by government. Whether stronger enforcement will benefit workers still remains to be seen because of the ripple effect of any change. As you indicated "outsourcing" is becoming, or has become, a significant consideration for Employers. With this new government direction of increased enforcement and stricter review of the proper classification of workers outsourcing may become even more viable with employers where the type of employment permits it. If this policy can be implemented without being particularly over reaching then this could be a positive result. However, if enforcement eliminates the Independent Contractor classification except in absolutely clear circumstances then the impact could be very undesirable. I am in the process of reviewing this scenario for a new business right now and the current climate regarding classification is of great concern. Those employers who have classified their employees as independent contractors should all go back and review this determination again because the stakes in misclassification could be going up. I have yet to review Senator Kerry's proposed legislation but if penalties and other costs involved with misclassification increase and defenses to misclassification become less available then employer review should happen sooner rather than later. Those employers who have made a decision to classify their workers as Independent Contractors on border line distinctions cannot simply act like business is usual. Let us hope that the question of "fairness" and greater clarity in the rules used to make the classification can be legislated into this matter and if not that enforcement will at least have some flexibility. The practical impact of stricter enforcment will be increased employer costs which will probably be passed on to the consumer to some extent, as well as, impacting income to the employee. I really hope that this new attitude will produce a "win-win" situation for all but only time will tell. Kris: From recent activity in the news it looks like the government will be looking closer at these classifications in the future. President Obama has stated that a substantial sum of money is being earmarked just to find and remedy misclassified Independent Contractors. Senator Kerry has proposed legislation that will put stronger impetus on Employers to properly classify their workers. While the driver for this closer review seems to be lost tax revenue I suppose that whatever the reason our country will be seeing a change in enforcement of the proper classification of workers. The upside to having tax revenue as a reason for tightening up classification is there is a need for the increased revenue and there should be a benefit in enforcement so this process will be a serious effort by government. Whether stronger enforcement will benefit workers still remains to be seen because of the ripple effect of any change. As you indicated “outsourcing” is becoming, or has become, a significant consideration for Employers. With this new government direction of increased enforcement and stricter review of the proper classification of workers outsourcing may become even more viable with employers where the type of employment permits it. If this policy can be implemented without being particularly over reaching then this could be a positive result. However, if enforcement eliminates the Independent Contractor classification except in absolutely clear circumstances then the impact could be very undesirable. I am in the process of reviewing this scenario for a new business right now and the current climate regarding classification is of great concern. Those employers who have classified their employees as independent contractors should all go back and review this determination again because the stakes in misclassification could be going up. I have yet to review Senator Kerry’s proposed legislation but if penalties and other costs involved with misclassification increase and defenses to misclassification become less available then employer review should happen sooner rather than later. Those employers who have made a decision to classify their workers as Independent Contractors on border line distinctions cannot simply act like business is usual. Let us hope that the question of “fairness” and greater clarity in the rules used to make the classification can be legislated into this matter and if not that enforcement will at least have some flexibility. The practical impact of stricter enforcment will be increased employer costs which will probably be passed on to the consumer to some extent, as well as, impacting income to the employee. I really hope that this new attitude will produce a “win-win” situation for all but only time will tell.

]]> By: KrisBall http://www.4laborlaw.com/employee-or-independant-contractor/comment-page-1/#comment-3657 KrisBall Wed, 10 Mar 2010 09:01:01 +0000 http://www.cjcochran.net/?p=130#comment-3657 The way I see it companies are getting into the bigger picture of the outsourcing field especially now that global online resources are available. It is such a sad note that companies would only think of in terms of what strategy gives them the better edge. I totally agree with the author that instead of focusing on the classification, the government can actually do a better job of making it a win-win situation for both sides. Otherwise, we might see a spiking unemployment rate in the years to come. The way I see it companies are getting into the bigger picture of the outsourcing field especially now that global online resources are available. It is such a sad note that companies would only think of in terms of what strategy gives them the better edge. I totally agree with the author that instead of focusing on the classification, the government can actually do a better job of making it a win-win situation for both sides. Otherwise, we might see a spiking unemployment rate in the years to come.

]]> By: Chuck Cochran http://www.4laborlaw.com/employee-or-independant-contractor/comment-page-1/#comment-65 Chuck Cochran Mon, 09 Mar 2009 00:49:40 +0000 http://www.cjcochran.net/?p=130#comment-65 I received an interesting E-Mail from George which addressed this post and thought I would bring a portion of it back into these comments. Please note that anyone who sends me an E-Mail can rely upon my discretion in not giving out any of their private information. Thank you for the E-Mail which you sent me. I brought a portion of your discussion back to the Comments section of this posting because I think your observations are very relevant to the subject of this article. "Maybe someday the IRS and Congress will figure out that instead of treating it as a "misclassification" problem, they should focus on solutions that make the classification unimportant or less important. There should be -- from a free-market standpoint -- neutrality as to form of business relationship, which would encourage people to join forces in the most productive ways." George Owner-Editor of George's Employment Blawg www.employmentblawg.com I agree with you that one way to address the problem of mis-classification might be to look at limiting the actual impact of the legal distinction between being an Independent Contractor versus an Employee. My next posting in this series may develop this thought. I would appreciate the comments from other readers concerning these thoughts with a possible question for comment stated as: "From a legal perspective would it be practical to eliminate the distinction between Independent Contractors and Employees on at least some levels in the Employment context?" Certainly every discussion is defined by the questions which are asked to start it therefore if anyone wishes to suggest a new question please do not hesitate to provide it. In fact the more questions, observations and comments which are provided which home in on this concept the better. If it concerns you that your question might not appear directly related to the particular point we are discussing please remember that I had intended, from the outset, to write a series on the subject of Independent Contractor vs. Employee and your points raised might provide the direction for a future posting. I received an interesting E-Mail from George which addressed this post and thought I would bring a portion of it back into these comments. Please note that anyone who sends me an E-Mail can rely upon my discretion in not giving out any of their private information.

Thank you for the E-Mail which you sent me. I brought a portion of your discussion back to the Comments section of this posting because I think your observations are very relevant to the subject of this article.

“Maybe someday the IRS and Congress will figure out that instead of treating it as a “misclassification” problem, they should focus on solutions that make the classification unimportant or less important. There should be — from a free-market standpoint — neutrality as to form of business relationship, which would encourage people to join forces in the most productive ways.” George Owner-Editor of George’s Employment Blawg
http://www.employmentblawg.com

I agree with you that one way to address the problem of mis-classification might be to look at limiting the actual impact of the legal distinction between being an Independent Contractor versus an Employee. My next posting in this series may develop this thought. I would appreciate the comments from other readers concerning these thoughts with a possible question for comment stated as: “From a legal perspective would it be practical to eliminate the distinction between Independent Contractors and Employees on at least some levels in the Employment context?” Certainly every discussion is defined by the questions which are asked to start it therefore if anyone wishes to suggest a new question please do not hesitate to provide it. In fact the more questions, observations and comments which are provided which home in on this concept the better. If it concerns you that your question might not appear directly related to the particular point we are discussing please remember that I had intended, from the outset, to write a series on the subject of Independent Contractor vs. Employee and your points raised might provide the direction for a future posting.

]]> By: Charles J. Cochran, Jr. http://www.4laborlaw.com/employee-or-independant-contractor/comment-page-1/#comment-64 Charles J. Cochran, Jr. Sat, 07 Mar 2009 19:35:51 +0000 http://www.cjcochran.net/?p=130#comment-64 George: I agree with you. The hidden costs associated with being an Independent Contractor create a serious burden. Because of the scale at which the "big employer" buys benefit packages they will always be in a position to purchase them at a discount to what the individual can. Membership in small employer groups where they can combine their purchasing power provides some leveling of the playing field but it just cannot match the single "big employer" in purchasing power. Self-Employment tax has always been a real burden and it is easy to let it get ahead of us. Thank you for taking the time to comment on my post. I certainly appreciate it. Chuck George: I agree with you. The hidden costs associated with being an Independent Contractor create a serious burden. Because of the scale at which the “big employer” buys benefit packages they will always be in a position to purchase them at a discount to what the individual can. Membership in small employer groups where they can combine their purchasing power provides some leveling of the playing field but it just cannot match the single “big employer” in purchasing power. Self-Employment tax has always been a real burden and it is easy to let it get ahead of us. Thank you for taking the time to comment on my post. I certainly appreciate it. Chuck

]]> By: George Lenard http://www.4laborlaw.com/employee-or-independant-contractor/comment-page-1/#comment-63 George Lenard Fri, 06 Mar 2009 18:37:11 +0000 http://www.cjcochran.net/?p=130#comment-63 I foresee a future economy with increased legitimate independent contractor relationships. If we ever manage the get the health care monkey off employers' backs, it will be off employees' backs as well, and they will be much more interested in continuing the consulting, multiple-income stream existence that sustained them through the current hard times -- once they don't need a big company providing the bennies. Tax revenue is the biggest problem. Self-employment tax is a bear, as all of us self-employed lawyers know. I think the govt. needs to come up with a process for withholding or more frequent reporting and payment or the revenue losses will escalate as more people earn as ICs. I foresee a future economy with increased legitimate independent contractor relationships. If we ever manage the get the health care monkey off employers’ backs, it will be off employees’ backs as well, and they will be much more interested in continuing the consulting, multiple-income stream existence that sustained them through the current hard times — once they don’t need a big company providing the bennies.

Tax revenue is the biggest problem. Self-employment tax is a bear, as all of us self-employed lawyers know. I think the govt. needs to come up with a process for withholding or more frequent reporting and payment or the revenue losses will escalate as more people earn as ICs.

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