The Compliance Wire » illegal employment practices

Fed-Ex versus IRS $14mm

Stephanie Ellis — Tue, 22 Sep 2009 21:19:40 +0000

FedEx Corporation may face $14 million in taxes and penalties plus interest over the misuse of independent contractors in its FedEx Home Delivery division in 2002. The fines and penalties are related to uncollected employment and withholding taxes for 2002.

FedEx plans to challenge the IRS finding from the audit however final resolution any time soon highly unlikely.

“We believe that we have strong defenses to the proposed assessment and will vigorously defend our position, as we continue to believe that all of FedEx Ground’s independent contractors, including those providing the FedEx Home Delivery service, are independent contractors,” FedEx said in the filing.

The IRS is also reviewing Fed-Ex for similar issues related to tax years 2004 - 2008.

Laundry drivers clean up $22 Million

Stephanie Ellis — Tue, 25 Aug 2009 04:23:38 +0000

August 2009, Cintas Corporation, the largest uniform supplier in the nation with more than 400 locations posting sales last year of $3.9 billion settled a lawsuit with its workers. The payout was a message to “clean up its act”. The Cincinnati based giant settled a suit with its delivery drivers after 6 grueling years of battle. In March 2000, drivers wrongly classified as exempt workers and fed up with not being paid for overtime with the support of the Service Employees Union filed suit. The case settlement totaled a cool $22.75 million dollars. Not a bad haul for a days work. The amount each driver will receive after the split with more than 2,000 others minus attorney fees? Not much.

Worker classification is complicated and can be very costly when you get it wrong. All too often employers try to go it alone and navigate the rules. The end often results in a sizeable payout and bad publicity.

Cintas Corporation blames the union citing the suit was merely its way of pressuring it to allow worker unionization. The union’s opinion “After six long years of delay tactics and needles posturing by Cintas, drivers will finally receive just compensation for overtime work,” said Workers United’s president, Bruce Raynor.

Subcontractor is to blame for copycat cable guy suit

Stephanie Ellis — Tue, 25 Aug 2009 04:10:26 +0000

Cable company made to pay for subcontractors underground operations

Looks like Larry the Cable Guy has company. Communications companies are being bombarded with worker claims of unpaid overtime , worker misclassification and unlicensed workers. Joseph Valdez, cable installer filed a lawsuit against several cable giants claiming he was cheated out of unpaid wages. Attorneys for the plaintiff have accused the cable companies of worker misclassification and unpaid overtime. The overtime claim is not warranted in a case where the workers were hired as independent contractors. Is this a clear cut case of employer intentional misclassification paying the workers as independent contractors to avoid employer obligations? Perhaps it’s a simple case of misinformed cable companies duped by its sub-contractors providing the installers. Often a company finds itself in the middle of a legal dispute due to ignorance of the subcontractor’s actual relationship with its workers. These companies enter into an arrangement with the subcontractors under the impression the workers are paid as employees after all the contract prohibits them from supplying 1099 contractors. The unsuspecting company is totally unaware of any misconduct. Typically an organization will engage a subcontractor and assume they operate a legitimate business. Only when a worker files a complaint against the subcontractor do they become painfully aware of a bad employment arrangement and stuck in the middle of a hellish nightmare!

In June a former cable installer filed suit against RCN Corp. claiming he was an employee and not an independent contractor. Fritz and more than 1,000 other U.S. installers are paid as “independent contractors and recognize this arrangement has ripped them off for years. They claimed they have been deprived of overtime and other employee benefits enjoyed by RCN employees.

An unsuspecting business can sidestep these types of legal problems by taking time to run a thorough check on its subcontractors. A couple of phone calls and a few hard hitting questions about its hiring practices may turn out to be time well spent!

Misclassified Independent Contractor Bill Reintroduced

Stephanie Ellis — Wed, 12 Aug 2009 20:03:39 +0000

The race is on! Employers officially put on notice to clean up their act!

A bill nicknamed “the independent contractor misclassification act” officially introduced as the Taxpayer Responsibility, Accountability and Consistency Act of 2009 (H.R. 3408) is on the move again. The bill introduced in 2007 never became law stalled in Congress eventually dying on the vine. Aimed at curtailing tax cheating employer activities is top of mind and has a number of industries a bit nervous. Purpose of the bill is to shut down a perceived revenue drain in the tax system. A blatant employer tax loophole for some who have intentionally misclassified its workers as independent contractors and for years got away with it.

Why would an employer intentionally misclassify a worker and how would they benefit from this practice?

Most industry experts will tell you it’s to avoid employer responsibilities and cheating the government out of billions of dollars in tax revenue. Governmental officials position the problem as “unfair employer tactics which ultimately hurts the worker”. Reality is the money well is dry and employers who do the right thing want the loophole closed. For years many employers have side stepped their obligations looking for a cheap way out and the very tax law loophole the government is trying to close was in fact created by them!

Ah, but alas no more! The bill was reintroduced and gaining a great number of supporters on a daily basis. Looky-lou’s who have complained this loop hole has created an unfair advantage for their competitors who practice tax evasion and cite the practice as a direct contributor to the long list of social ills. Responsible employers are chomping at the bit for this bill to pass. When the bill will actually pass is anyone’s guess.

Advice for those who choose to take comfort in the wheels of justice turning slowly and think they have plenty of time. Heed the writing on the wall and get going on cleaning up your mess. The pro-labor Obama administration’s outward appearance its focus is on healthcare for America but make not mistake. A revenue drain directly responsible for the severe cash flow problems is the front runner on this administration to do list!

Employers 670 New Reasons Why Comply

Stephanie Ellis — Thu, 02 Jul 2009 18:26:51 +0000

The Department of Labor will add 670 new investigators by 2010.

Secretary of Labor Hilda L. Solis inadvertently just got a little help from her friends over at Homeland Security. ICE dropped off more than 650 audit notices yesterday and to pull off that number of audits it will take a heap of cash!

Solis should have no trouble obtaining the funds she needs to help get her own house in order. Solis is on a mission after receiving a copy of the release of a Governmental Accountability Office (GAO) report she announced the department’s system for receiving and responding to wage and hour complaints is ineffective and discourages wage-theft complaints. “The department’s Wage and Hour Division has already begun the process of adding 150 new investigators to its field offices to refocus the agency on these enforcement responsibilities.” In addition, under the American Recovery and Reinvestment Act, the agency will hire 100 investigators to ensure that contractors on stimulus projects are in compliance.

The DOL is poised to receive a whopping $1.7 Billion dollars to help bolster worker protection programs putting every employer on notice. Sneak peek at who gets what if Solis has it her way. Leading the pack the Wage & Hour division is to receive $228 million and 200 new auditors, and then there is OSHA – $560 million and 160 new auditors.

Ouch!

You’ve Got Mail! Audit Notices Hit

Stephanie Ellis — Thu, 02 Jul 2009 17:52:16 +0000

The U.S. Immigration and Customs Enforcement (ICE) dropped off Notices of Inspection (NOIs) to 652 businesses nationwide.

ICE is at it again! It seems there is no shortage of funds for this group of auditors and it crew. The round up for undocumented workers continues but one has to wonder if ICE has a secret benefactor. Where other governmental agencies are struggling to pay resources to help get its arms around other illegal hiring practices, ICE continues to keep the cash flowing. This is one agency that has yet to go to the well for money and find it’s dry….fist full of dollars.

The 652 businesses being presented with a NOI today for a I-9 audit have been selected as a result of leads and information obtained through informants and other investigative means. In April 2009, ICE implemented a new strategy to help curtail illegal employer hiring practices to reduce the demand for undocumented workers in the U.S. This nationwide initiative is being launched today as a direct result of this new strategy.