Storm & Security

14 STORM & SECURITY PROTECTION / PEOPLE IN THE KNOW 2014 PROTECT / YOURSELF Today, more than ever, it does not pay to incorrectly classify an employee as an independent contractor. In years past, the Internal Revenue Service was the only agency that aggressively sought out incorrectly clas- sified employees. All that changed when the Depart- ment of Labor got involved and signed an agreement to share information on possible employee violations. The federal government has dedicated $14 million of the 2015 fiscal year budget to the Department of Labor (DOL) for preventing and detecting the misclas- sification of workers as independent contractors. The DOL is hiring more investigators and is providing grants to individual states so both the state and the federal government can share information for misclassified non-employees. As a result of this shared information, it is more likely for a company to be fined by a number of state and federal agencies simultaneously. Secretary of Labor Thomas E. Perez stated that since the initiative was launched, the DOL has already collected more than $18.2 million in back wages for more than 19,000 workers. Competitor in the marketplace or criminals? In the past, construction firms used the indepen- dent contractor model to help shield them from taxes and insurance requirements. The employer mandate and accompanying fines contained within the Health- care Affordability Act gave new momentum to various business sectors trying to have fewer employees and more private contractors. Many industry segments— health care, logistics, software vendors and adult entertainment—are using terms such as consultants, per diems, contractors, project workers, temps and specialists all in an attempt to negate the government penalties. The IRS estimates that self-employed workers underreport their incomes by 58 percent. Those paid in cash with no tax forms report even less. The IRS has issued two major concerns with this new trend: Employer taxes and employee taxes. The U.S. Government Accountability Office estimates the loss in 2006 alone at $2.72 billion in federal Social Security, unemployment and income taxes that were not matched by employers. A separate IRS study found that W2 employees pay 99 percent of taxes due. Indepen- dent contractors pay 42 percent of taxes that are due and self-employed individuals paid in cash report only 10 percent of taxes due. The second type of tax is the matching of the employee's taxes and the FUTA tax that employers are forced to pay. The states issues are the same: less em- ployee benefits leads to higher health care cost born by the government, and less revenues for state unemploy- ment funds. In states with an income tax, the problem is even deeper. According to a study conducted by the University of Missouri-Kansas City, from 2001 to 2005, the state of Illinois lost an estimated $124.7 million in income tax annually. Business owner, Tom Typrowitz Jr., owner of an international manufacturing company said, "Employee costs are crippling the ability of the U.S. manufacturers to compete in the world economy." Elected officials declare that employee benefits and the cost associated with them are a part of the American economy and any companies that don't pay their fair share are criminals. Clearly, the Obama administration has taken the position that independent contractor's status is a nationwide dilemma that shifts considerable costs to workers, abolishes employment-related protections, de- prives the government of billions of dollars in revenue and needs to be eliminated. | by Don Leggett | Exotic Dancers Bare All In Labor Dispute Department of Labor recovers $18 million in back wages. Let this be a lesson to you. In the past, firms used the independent contractor model to help shield them from taxes and insurance requirements.

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