The Inherently Dangerous Nature of Selling on a Street Corner

Independent contractor or employee? It’s a hot question these days, for sure. A recent decision from the Delaware Superior Court answers the question in an unusual way–yes and no. In Colon v. Gannet Co., Inc.,
No. N10C-04-007-MMJ (Del. Super. July 26, 2012), the court held that the plaintiff was an independent contractor but that the employer still could be found liable for harm caused to him during the course of his work. Continue reading

Delaware Adds Public Shame to Its Arsenal of Weapons to Fight Misclassification

make you feel smallEmployers in the construction industry should, by now, be painfully aware of the Delaware Workplace Fraud Act, signed into law in 2009. The Act imposes stiff penalties on construction-services employers who misclassify employees as “independent contractors.”

As a result of amendments signed into law on July 12, 2012 (HB 222.pdf), the General Assembly has added more teeth to the law, in the form of public shame. Now, the name of any employer that has violated the Workplace Fraud Act will be posted on the Department of Labor’s website for a period of 3 years from the date of the final determination. Continue reading

IRS to Employers: Raise Your Hand If You’ve Misclassified Workers

All individuals performing work for an employer should be classified as employees or independent contractors. Employees are then further classified under the Fair Labor Standards Act as “exempt” or “non-exempt” for purposes of overtime compensation. Proper classification of employees and independent contractors can be difficult, and misclassification can lead to significant financial liability in the form of back taxes and overtime pay. Red 3D Figure Raising Hand_thumb

In an attempt to address misclassification of independent contractors for tax purposes, the IRS launched the Voluntary Classification Settlement Program (VCSP). The goal of the VCSP is to properly classify workers, while collecting unpaid payroll taxes for employees improperly classified as independent contractors. Continue reading

3d Cir.: Enforceability of Non-Competes Where Employee Misclassified

approved-stamp_3The Third Circuit gave employers new reasons to worry about misclassifying their employees in its decision in Figueroa v. Precision Surgical, Inc., (PDF), C.A. No. 10-4449.  A former employee brought suit seeking to invalidate the non-competition provision in his independent-contractor agreement (“ICA”).  The plaintiff alleged that his former employer had materially breached the contract and, therefore, could not enforce it against him. Continue reading

Pennsylvania Passes Misclassification Law

caution_sign_road_barrier_thumbPennsylvania now has a misclassification law that mirrors Delaware’s law. Delaware’s Workplace Fraud Act, enacted in 2009, imposes stiff penalties on construction industry employers who improperly classify employees as independent contractors to save on  business costs and avoid paying appropriate taxes. Sheldon Sandler previously posted about Delaware’s law. Continue reading

Will “Misclassification Initiatives” Reduce Employers’ Use of Independent Contractors?

Employers’ use of independent contractors instead of traditional employees has been on a steady incline over the past 20 years. Some employers feel that they can save money by using independent contractors instead of full-time employees. The contractors themselves may value the autonomy and economic perks that the status provides. Also, the specific skills and knowledge that independent contractors can bring to a short-term project can be critical and, therefore, worth a premium but not sustainable in the long term. But the use of independent contractors is not as perfect as these mutually beneficial points may seem. Continue reading

U.S. DOL to Ramp Up Enforcement Against Misclassified Workers

President Obama’s administration will seek more funding for the U.S. Department of Labor (DOL), including more funds to enforce wage and hour laws and pursue employers who misclassify employees as independent contractors. In a press release yesterday, Secretary of Labor Hilda L. Solis outlined the president’s fiscal year (FY) 2011 budget request for the DOL, which is built around the vision of “good jobs for everyone.” Continue reading

Construction Industry Beware: The Delaware Workplace Fraud Act Is Now Law

3d_man_holdingDelaware has become the latest state to impose stiff penalties on construction industry employers who improperly classify employees as independent contractors to save on business costs and avoid paying appropriate taxes.

On July 31, 2009, Delaware Governor Jack Markell signed into law House Substitute No. 1 for House Bill No. 230, which imposes significant monetary and other penalties on “construction services” employers who willfully misclassify employees as “independent contractors.” Continue reading

Delaware General Assembly Piles on Construction Industry

3d_construction_manIndependent Contractor Update: A bill targeting the construction industry has been introduced   in the Delaware General Assembly. “The Construction Industry Independent Contractor Act,” HB129,   which is similar to one that failed to pass during the last legislative session, creates a presumption that an individual performing a service “in the making of improvements to real property” is an  employee rather than an independent contractor.  To overcome that heavy burden, an employer must prove that the individual is free from control or direction over the performance of that service, the service is outside the usual course of the employer’s business or performed outside of all of the employer’s places of business [seemingly impossible to prove in the context of a construction employer, who travels from place to place], and the individual is customarily engaged in “an independently established trade, occupation, profession or business.” Continue reading

Employee Misclassification Prevention Act Update

Independent Contractor Update:  Earlier this year, legislation was introduced that would prevent employers from improperly classifying employees as “independent contractors” in order to avoid paying them overtime and benefits. The Employee Misclassification Prevention Act (H.R. 6111) hasn’t seen any activity since June, when it was referred to the House Ways and Means’ Subcommittee on Income Security and Family Support. (Readers may recall that this was the same time that the Delaware and Pennsylvania state legislatures were reviewing similar legislation).  Continue reading