Storm & Security

Employees, or Not? The IRS has listed three significant categories of questions that can be used to determine independent contractor or employee status. • Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? • Financial: Are the business aspects of the worker's job controlled by the payer? • Type of Relationship: Are there written contracts? Will the employer relationship continue after the project is completed? The IRS questions have been broadly outlined and then the judicial process takes over. At that point in the judicial process no particular weight is given to any of the factors, and the determination in every case is subjective. In a New York case, dancers at an exotic club who signed contracts with club operators successfully sued the club for not paying overtime or minimum wages. The federal and state governments are expected to file for back employer taxes and penalties. Beginning in 2016, the club, now with 1,245 dancers who are now considered employees, will be forced to deal with Obamacare penalties. FedEx pioneered the independent contractor work model in the logistics industry. Under this system, the workers function as self-employed drivers with their own routes; can hire other drivers to expand their routes; and cover the costs of their own trucks, gaso- line, uniforms and benefits. But a federal court ruled that because all the packages were picked up at FedEx and FedEx had final responsibility of uniforms, delivery polices and collected the money from the customer, FedEx was the ultimate employer. Signed contracts, willing employees … what can employers do to protect themselves from the penalties associated with misclassification? Mike Shea, employer liability specialist, said, "Employers should familiarize themselves with state and federal labor laws that govern worker categorization and be careful to suitably classify personnel." As the court system con- tinues to expand the definition of employees, the penalties for wages, overtime, SUTA, FUTA, Employers FICA/Medicare match, Affordable Healthcare Tax, ERISA violations for employee benefits and, finally, attorney fees will punish the employer for making an incorrect classification. Don Leggett is managing partner for Insurance Office of America. PEOPLE IN THE KNOW 2014 / STORM & SECURITY PROTECTION 15 M I S C L A S S I F I C AT I O N A D D S U P The following are more examples of lawsuits involving the status of workers, the results and potential payouts: The Sacramento Bee and The Fresno Bee are fighting lawsuits filed on behalf of a combined 10,000 newspaper carriers who claim they were wrongly identified as independent contractors. Microsoft settled a lawsuit for $97 million: Back wages and the loss value of stock options. Female football players sued lingerie league for independent contractor misclassification. San Diego Union Tribune had misclassified its newspaper carriers as independent contractors in a nearly $10 million judgment.

• Cover