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Independent contractors have been around since the beginning of time. Throughout history man has hired workers to do a job with no strings attached or expectation of continued employment. The worker was hired, performed the services, received payment and moved on to the next job.  This practice over time gained enormous popularity and on the surface a great solution to an age old worker shortage problem. The no strings attached practice provided both the employer and the worker temporary relationships currently referred to as "contingent workforce" a way of life for many. This transient labor pool includes independent contractors, temporary workers, leased workers, agency worker (payrolled worker) and other titles that do not include the traditional employer/employee relationship.  According to the Government Accountability office (GAO) there are about 42 million contingent workers roughly 30 percent of the overall US workforce. A great solution for truly project based work and when used properly a win/win all the way around. But not everyone supports "pay as you go"" especially when it threatens a way of life for some. 

Strong opinions of naysayers like Lynn Woolsey a representative of California who is quick to shift the entire blame to the employer and are a constant in the movement for change  "The use of contract workers gives the employer a great advantage over the workers, says Woolsey. "We need to turn that around where workers actually receive their share of benefits for the amount of benefit they bring to a company."  In her view the current model benefits only the employer and the worker is left to fend for themselves. The piece she doesn't understand is the employer is not always in the driver's seat and the worker often calls all the shots. Traditional employment arrangements are not high on a contracted workers list and those on the independent contractor track run from full time employment. Semi-retired or retired baby boomers and other one person shows want the flexibility to work when they want. If left up to Woolsey and other supporters of the death of the freelancer model the axe would fall tomorrow. Groups like the teamsters, politicians and union representatives would fill the stands at the gallows in support of doing away with non-traditional work arrangements. But the reality folks in the end these work practices will not go quietly and disappear but stay underground where business as a freelancer is booming!

But in spite of changes in the law to address non traditional workers the wheel of change moves slowly. Although lawmakers continue to push legislative change directed at the employer with incentives like stiff fines and penalties the 300 pound guerrilla in the room continues to go unnoticed. Until law makers apply similar pressure to the contractors and hold them equally accountable and the watch dogs will continue to chase their tails. Continuance of ongoing employer scrutiny, criticism of the staffing industry who only want to help ease worker shortages and failure to apply equal pressure to the other contracting party are reasons enough to give us pause. Is this really all about helping out the worker ensuring they receive a fair shake?

Proper treatment of workers, fair pay and benefits should be offered accordingly. 

And remember it takes 2 to tango!

Companies reporting to authorities about a rival's employment practices happen more often than you think!
According to Bloomberg, UPS may have played a role in prompting an investigation by state officials of FedEx's employment of 15,000 drivers as independent contractors.

Sour grapes, huge tax and benefits obligations for the 92,000 W-2 union drivers shelling out a hefty sum for the workers are just the tip of the iceberg. In the meantime FedEx's ground unit which accounts for about a fifth of the parent company's $38 billion in revenue bypasses these employer requirements claiming ground drivers are independent contractors and not employees. UPS claims this model is an unfair business practice and may have been the catalyst behind the tip off. Thanks UPS! http://www.aircargoworld.com/break_news/06252008d.htm

The courier business is not alone in the war on employers who misclassify workers as independent contractors. With 10.3 million people working as independent contractors and state and federal coiffeurs with record deficits, a bright line leading to a perceived tax revenue drain hole is drawn to companies that hire these workers.  Targeted industry employers like Home Depot and Allstate Corp. are all too familiar with the aggressive pursuit by the auditing agencies.

The number of cases on the legal stage on any given day should be enough to make any employer sit up and take notice regardless of the industry in the line of fire.

While researching an article I kept bumping into buzz words used heavily in the independent contractor compliance world. In addition to these buzz words I also discovered there are pages and pages filled with industry experts and their credentials with offers of amazing solutions to help employers avoid the land mines associated with usage of the independent contractor. Words like worthy co-employer, co-employment protection, legally engineered program, risk mitigation and employer of record just to name a few.

Industry Lingo:

http://www.answers.com/topic/free-lance-employment-independent-contractors?cat=biz-fin

 Solicitations for employer company's looking for a solution provider to help answer questions like "who is after me and why should I care" or simply want to align themselves with a "worthy co-employer" need look no further.  It seems the industry is chock full of qualified compliance providers who possess equal levels of experience, industry knowledge and have years of practical experience with helping hundreds of employers to reduce or eliminate its risk! Which solution is right for you?
 
Know your co-employers! Ask hard hitting questions prior to making your final selection for a compliance provider. Remember, aligning yourself with a "worthy co-employer" will save you time and money in the long run. Asking basic questions related to IC compliance and collection of the documentation as evidence of experience are the first steps in a very involved selection process of a provider. Start by asking baseline questions:

1. How many IC evaluations have you performed?
2. How do you remain current on relevant compliance issues, law and legislation?
3. Do you provide support in an audit with the IRS, EDD or other auditing agency? 
4. Have you represented a client in a state or federal payroll audit or worker classification issue?
5. How many agency audits/ have you assisted clients with? 
6. What were the results of the audit(s)?
7. Have you ever had a worker classification overturned by a government agency? 
8. If so, what was the financial impact e.g., taxes, fines, penalties, etc?
9. What companies do you currently provide evaluation services for and how long have you been providing these services?
10. Can you provide references from your current clients on your compliance process or testimonials regarding your risk solution or audit experience?

For some Pennsylvania employers it may be time to pack up the old kit bag but minus the smile.

The Construction Industry Independent Contractor Act passed Monday by a landslide in a vote of 122-76.  This could mean severe punishment of those employers who misclassify workers to avoid paying their share of employer taxes.

Pennsylvania House of Representatives ignored lawmakers who lobbied heavily against imposing such severe penalties citing this extreme form of punishment would only worsen the ailing state's economy.  Should the bill become law, some governmental officials predict it may drive jobs to employer friendly states like North Carolina, Tennessee and Virginia. 

With union groups backing the measure and the state scrambling to fill empty tax coiffeurs, a passage of the bill into law is not unfathomable. The construction industry is not alone on the list of targeted industries.

The courier industry with the ever popular FedEx case rolling along at lightening speed, the infamous carnage of the software industry and other high-tech entities, I think we will see copy cat bills cropping up all over the country.  Heavy users of independent contractors waiting in line for their number to be up may find themselves at the front of the line.

Now I've seen it all! 

This article tells of an employer who falsely reported payments to independent contractors who never even worked for them!  It seems everyday we read or hear about how the government treats employers unjustly and how when they make a mistake and misclassify a worker as an IC, they are made to look like the bad guy.  Although most employers who make bad judgment calls when classifying workers rely solely on their best interpretation of the rules, this company clearly is not one of those mistaken employers.

Falsely reporting unpaid wages in any circumstance only leads to bigger issues with the government.  If this company is engaging in these types of practices, the audit door ordinarily closed is now flung wide open. It will become a free for all. Even if the contractor can't prove the client company falsely reported wages for him they are now on the radar as a possible revenue stream for the state and federal government.  In the end it won't be a matter of if they are audited but when!

Another update unfolds in the FedEx driver misclassification saga as shareholders take matters into their own hands and file suit against the FedEx board of directors. The plaintiff, Plumbers and Pipefitters Local 51 Pension Fund, alleges FedEx Ground unnecessarily exposed the company to damages through their questionable hiring practices.

The company was initially fined $319 million by the IRS for the 2002 tax year en lieu of classifying their delivery drivers as Independent Contractors while treating them as they were traditional W2 employees. However, after all is said and done, the company potentially may face liability and backtaxes totaling upwards of $2 billion dollars.

A spokesman for the company dismissed the union's lawsuit, calling it frivolous and without merit.  Yet, FedEx is currently fighting lawsuits in 30+ states as the result of this dangerous business model. FedEx still refuses to change how it engages these workers and continues to fight sinking more money into the tax dollar battle that has not enjoyed much success.

To date, stocks continue to sink as FedEx continues the battle and the IRS digs their heels in.

California just may be sitting on a newfound gold mine.  State audits and investigations of employers who use independent contractors are up 54% in the last 3 years and the dollars are adding up. Dollars from the states mining efforts in 2007 was $163.6 million although up 30.4% from fiscal 2005 still not the mother load. The dollars hitting the empty coiffeurs although fairly sizeable may not be quite enough to make employers sit up and take notice.

Misclassified workers, uninsured workers, unpaid tax dollars and state and federal deficits are reasons enough for auditing agencies to take a second or third look at the worker population in your organization. Presidential hopeful Barack Obama's campaign gains momentum as he picks up support from large pro-worker organizations, including the teamsters union. This candidate may impact the current reform in employee classification issues. If so, the nation can expect to see the number of audits jump up significantly. The sound produced by those cash registers as the dollars come in will be heard round the country.