Issue link: http://read.dmtmag.com/i/75653
54 • AUGUST 2012 • WORLD FENCE NEWS If you're like many employers in this difficult economic environment, you may be tempted to use independ- ent contractors as a way of trimming labor costs. When workers aren't on your payroll, after all, you don't have to shell out premiums for health care, unemployment insurance or workers' compensation. And you don't have to pay Social Security taxes or fund over- time, time off, vacations and retire- ment plans either. "The savings enjoyed from using independent contractors can be huge," Avoid costly penalties for misclassifying employees as independent contractors BY PHILLIP M. PERRY says Nancy E. Joerg, managing share- holder and senior attorney of the St. Charles, Illinois office of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. (www.w-p.com). "In some cases employers can save a third or more of payroll costs." Unfortunately, many employers National Metal Industries Winged Slat® Locking Slats Bottom Top Lock Hedge 2 Neil Court, Oceanside, NY 11572 • (516) 594-0364 • Fax (516) 594-0377 using independent contractors are in for a costly surprise: The federal and state governments are beginning a big crackdown on what they perceive as widespread misclassification. "The IRS has announced it will be auditing some 6,000 companies over the next three years," says Joerg, whose labor and employment law firm counsels and defends employers around the country on independent contractor matters. "They are adding staff to do so. They are hoping people will turn white with fear and try to comply immediately." Aluminum Slats WWW.NMIFENCE.COM Over 100,000 lineal feet of privacy slats ready to ship! Privacy slats • Fence tools Fence hardware available Saving money Why crack down now? One rea- We Proudly Support Professionalism in Fencing! son is financial. "The federal govern- ment sees misclassification as bringing less revenue," explains Joerg. "Ac- cording to reports, the enforcement ac- tions will bring $7 billion over the next decade to the federal treasury." Policy also comes into play. "Pres- ident Obama sees this as a crucial human rights issue," adds Joerg. "He sees companies who misclassify peo- ple as tax cheats who are depriving employees of their basic rights." Misclassification can be expen- sive. Employers can get hit with penal- ties for back federal and state taxes, liability for back wages, unpaid over- time, and liability for medical ex- penses which should have been covered under an employer's group health plan. There can be additional implica- tions since employees are protected by provisions of laws such as the Family and Medical Leave Act. "You may not be aware that your misclassified indi- viduals are subject to specific labor laws," says Dallas employment lawyer Barry Hersh (www. hersh-law.com). And don't forget attorney fees: "These cases can be expensive to defend." Fi- nally, as a business owner you may well be liable personally for penalties or unpaid overtime. Smaller companies are especially vulnerable. "Larger employers often use third party agencies for contingent labor," says Hersh. "While this does not offer complete protection, it may help shield the employers from liabil- ity. Smaller employers often do not have that luxury: they hire their inde- pendent contractors directly. So this issue will be a big trouble spot for mid-sized and smaller businesses, es- pecially those that are labor intensive." continued on page 56