Posted by MBO Partners
Healthcare workers that were classified as independent contractors by the Delta-T Group filed a lawsuit on February 17th claiming they were misclassified, according to a news item in MSNBC today. If the court agrees with their position -- that they should have been classified as employees -- then they have been unjustly denied overtime compensation, unemployment, benefits, payroll taxes, and worker's comp. The company could be forced to compensate the group of healthcare workers for all of these items plus a slew of IRS penalties.
As the plaintiffs' attorney Rebekah Bailey explained, "As corporate budgets continue to tighten, more employers are looking to classify workers as independent contractors in an effort to reduce costs, such as overtime compensation, employee benefits, payroll taxes, unemployment compensation, and workers compensation. The law is clear, however, that many of these workers do not qualify as independent contractors."
I expect that this year we may be seeing many more such cases. Not only are regulating bodies like the IRS and state revenue and labor agencies stepping up contractor classification audits (many states have formed "task forces" addressing the problem), but improperly classified workers themselves have more awareness of their situation, and more tools available to do something about it, than ever before.
Now, any worker that is classified as an independent contractor and feels they should have been an employee can fill out an SS-8 form (request for worker status determination by the IRS) or an 8919 (contesting they should not have to pay full amount of self-employment taxes). Either one of these forms tips off the IRS that there may be an issue, and as contractors around the country get a grip on their taxes due for April, a portion of them are going to be looking for a way out, perhaps by contesting their status. In addition, now that there are data sharing agreements between most states and the IRS, an audit at one level may quickly trigger an audit at the other.
Audits and lawsuits may also be triggered by overtime, unemployment, or worker's compensation claims levied by independent contractors looking for the benefits they feel they should be due, especially in cases of worker injury or layoff. Given the number of layoffs this year, I think we're likely to see an increase in audits and cases triggered by unemployment claims submitted by laid off contractors.
At the same time, the healthcare industry is one of the few growing sectors out there, but is under no less pressure to leverage more agile structures incorporating the contingent workforce. Getting healthcare workers exactly where they need to be and when, and on a contract basis, is a tremendous logistical challenge.
The requirements for a worker to qualify as a true independent contractor are incredibly rigorous, and the IRS estimates that the problem of misclassification is tremendous. In any case, this will be an interesting year to watch: with the American workforce being restructured, individuals screaming for healthcare and other employee benefits, and the Treasury looking for its missing tax money, it looks like a perfect storm to me.
Healthcare workers that were classified as independent contractors by the Delta-T Group filed a lawsuit on February 17th claiming they were misclassified, according to a news item in MSNBC today. If the court agrees with their position -- that they should have been classified as employees -- then they have been unjustly denied overtime compensation, unemployment, benefits, payroll taxes, and worker's comp. The company could be forced to compensate the group of healthcare workers for all of these items plus a slew of IRS penalties.
As the plaintiffs' attorney Rebekah Bailey explained, "As corporate budgets continue to tighten, more employers are looking to classify workers as independent contractors in an effort to reduce costs, such as overtime compensation, employee benefits, payroll taxes, unemployment compensation, and workers compensation. The law is clear, however, that many of these workers do not qualify as independent contractors."
I expect that this year we may be seeing many more such cases. Not only are regulating bodies like the IRS and state revenue and labor agencies stepping up contractor classification audits (many states have formed "task forces" addressing the problem), but improperly classified workers themselves have more awareness of their situation, and more tools available to do something about it, than ever before.
Now, any worker that is classified as an independent contractor and feels they should have been an employee can fill out an SS-8 form (request for worker status determination by the IRS) or an 8919 (contesting they should not have to pay full amount of self-employment taxes). Either one of these forms tips off the IRS that there may be an issue, and as contractors around the country get a grip on their taxes due for April, a portion of them are going to be looking for a way out, perhaps by contesting their status. In addition, now that there are data sharing agreements between most states and the IRS, an audit at one level may quickly trigger an audit at the other.
Audits and lawsuits may also be triggered by overtime, unemployment, or worker's compensation claims levied by independent contractors looking for the benefits they feel they should be due, especially in cases of worker injury or layoff. Given the number of layoffs this year, I think we're likely to see an increase in audits and cases triggered by unemployment claims submitted by laid off contractors.
At the same time, the healthcare industry is one of the few growing sectors out there, but is under no less pressure to leverage more agile structures incorporating the contingent workforce. Getting healthcare workers exactly where they need to be and when, and on a contract basis, is a tremendous logistical challenge.
The requirements for a worker to qualify as a true independent contractor are incredibly rigorous, and the IRS estimates that the problem of misclassification is tremendous. In any case, this will be an interesting year to watch: with the American workforce being restructured, individuals screaming for healthcare and other employee benefits, and the Treasury looking for its missing tax money, it looks like a perfect storm to me.
No comments:
Post a Comment