labor lawAdivision of labor law center

 Massachusetts recently increased the penalties for employers who misclassify employees as independent contractors.

Many states are imposing stricter penalties for employers who illegally avoid paying unemployment insurance and workers’ comp by misclassifying workers as independent contractors.

In Somers v. Converged Access, the Massachusetts Supreme Judicial Court ruled that the independent contractor law is a strict liability  statute. This means that the employer’s intent in misclassifying a worker is irrelevant. Therefore, the worker was entitled to compensation for wages, overtime and benefits that he would have received, if he had been correctly classified as an employee. In addition, the employee was permitted to keep the $65 per hour that the company paid him as an independent contractor – an amount far in excess of an employee’s wage in the same job.

The Massachusetts company was required to pay the employee for benefits including vacation and holiday pay. In addition, the company was ordered to pay the employee overtime at a rate of $97.50 per hour – 1.5 times the worker’s $65-per-hour wage.  

The Massachusetts definition of independent contractor is even more strict than federal independent contractor regulations. A worker is an employee unless he or she is: (more…)

The IRS  and U.S. Department of Labor are cracking down on employers who try to avoid employment taxes by misclassifying employees as independent contractors.

Under IRS regulations, an independent contractor is a self-employed small business person. The employer does not have to pay FICA or unemployment taxes on independent contractors, under federal law. State laws requiring workers’ comp insurance do not apply to independent contractors. Employers are also not required to withhold federal income taxes for independent contractors.

The minimum wage and overtime provisions of the FLSA, the federal Fair Labor Standards Act, do not apply to independent contractors.

All of these factors make hiring independent contractors very attractive to employers. However, both the IRS and the U.S. Department of Labor have stepped up enforcement actions against employers who misrepresent workers as independent contractors, when in fact they are employees.

To further complicate the issue, there is no one standard or group of standards to determine if a worker is an independent contractor, rather than an employee. The IRS has traditionally used the 20-factor test, particularly to determine if workers’ compensation coverage is required.

The IRS 20-factor test basically determines how much control the employer exercises over the worker. In general, a high level of control results in employee status, rather than independent contractor status. When an employer controls when, where or how the work is performed, that usually constitutes employee status.

Other agencies use (more…)

Employers who neglect to pay court-ordered restitution face hefty fines and penalties under both California and federal law.

In a recent California case involving Southern California Cleaning Service, a federal judge ordered the company to pay an additional penalty of $2,400 per day, for each day that the payment is delayed.

Even worse, the court also found the two owners of the company in contempt, and ordered them each to pay an additional $200 per day penalty. Further violations could result in them being jailed for contempt of court.

Both the fines will continue on a daily basis until the employees are paid in full.

In addition, the company was ordered to pay $227,701 in interest – 4.4% — on unpaid back wages of almost $3.5 million, plus $1 million in liquidated damages to workers.

The company’s troubles began in 2007 when the U.S. Department of Labor won a lawsuit against the southern California employer.

The judge in that case determined that Southern California Maid Services and Carpet Cleaning had improperly classified nearly every employee (more…)

Under a Minnesota law taking effect on January 1, 2009, employers must pay benefits for any workers who do not have a certificate showing they are an independent contractor.

The Minnesota Independent Contractor Exemption Certificate (ICEC) law requires individuals who work as independent contractors in the construction industry, to obtain a certificate from the Minnesota Department of Labor and Industry. The law does not apply to individuals doing business as corporations, LLCs or partnerships.

Contractors who employ individuals who do not have an ICEC must pay state workers’ compensation and unemployment insurance for those individuals. In addition, such workers are considered employees legally and all state and federal employment laws, including minimum wage, overtime and worker safety standards, apply.

The law was designed to (more…)