IRS, Department of Labor and States Targeting Employers Using Independent Contractors

In a first joint strike, the Department of Labor is teaming up with the Internal Revenue Service and State governments to go after home builders and others who allegedly misclassify emplyees as independent contractors, thereby avoiding the payment of overtime compensation and the withholding of taxes.

According to a report by the Wall Street Journal, "allegations of worker misclassification in the construction industry generally come in two forms: that builders misclassify laborers they hire directly as independent contractors, or they knowingly hire subcontractors who misclassify workers. The Labor Department's efforts focus at least in part on holding large builders accountable for classification violations by their subcontractors, according to person familiar with the matter."

A statement by the Department of Labor makes it clear this is only one of many industries they intend to target, including hospitality, janitorial services, agriculture, day care, health care and restaurants.

Bottom line: If you utilize independent contractors, regardless of industry, you are vulnerable. The proper classification for a worker depends on a number of sometimes complex factors including how much control or direction an employer wields over the workers. Contact us if you have questions.

You can find the Journal article here:
http://online.wsj.com/article/SB10001424053111903927204576574892314453196.html?mod=WSJ_hp_LEFTWhatsNewsCollection