Your tax dollars at work – the federal Department of Labor (DOL) has increased its budget request 16% in 2010 and 25% in 2011 over the 2009 budget (all you smaller business owners out there can groan out loud!).
Part of the reason for the requested increase in budget? So they can bust your company for misclassifying, according to them, “employees” as “independent contractors.” To the DOL, the purpose is noble: “To meet the challenge of ensuring “good jobs for everyone” (not that the actual dollars change whether we label it “jobs” or “contract work”). And to do this, they deem it necessary to “Ensur[e] that the most vulnerable workers are employed in compliance with wage and hour laws.”
To us at Vision Law® this paternalistic view is a tad aggravating. What if these “vulnerable workers” want to have the flexibility of self employment and the independence of free lancing? No, our tax dollars are spent on our elected officials telling us we need them to protect us and tell us what is in our best interests. Never mind that in “this economy” putting anyone to work might be a good thing.
What Does This Mean For Businesses?
Increased burden, increased taxes and penalties. With a 25% increase in budget, $12 million and 90 new FTE’s (full time equivalents) of which are slated for a “new multi-agency Misclassification Initiative,” if your business uses “independent contractors” to perform its core business functions, then you might want to consider whether the risk of treating them as independent contractors is worth risking hassles from the federal government (and state government bodies as well).
Further, if your “independent contractor” worker files for unemployment insurance when the job is done or files a wage claim or for missed rest or meal periods, then what? The DOL will “strengthen and coordinate” the friendly state of California’s “efforts to enforce labor violations.” Notice “labor violations” is a foregone conclusion.
How To Avoid The Initiative
As entrepreneurs ourselves, we understand risk. We understand reward. If you, a fellow entrepreneur or successful smaller business, use independent contractors to perform your core business function, then you might consider the risk of a “misclassification audit” or class action lawsuit brought by one of your “independent contractors” claiming to be an employee instead. Contact us for more information.
DOL’s 2010/2011 budget: http://www.dol.gov/dol/budget/2011/bib.htm#whd