Government To Crackdown On Businesses That Misclassify Workers As Independent Contractors

Worker misclassification costs the federal government $1.6 billion annually. In late 2010 the IRS and the U.S. Department of Labor (DOL) announced an interagency misclassified worker initiative designed to target and pursue employers who misclassify workers. The DOL is dedicating $25 million and at least 100 employees to this initiative.

    

While not good news for employers who misclassify workers, the initiatives are good news for employers who properly classify their employees, because employers who misclassify workers do not pay into the unemployment or workers' compensation pools, employers who comply with the law must pay more than they otherwise would have to pay if more employers.

Many businesses mistakenly believe they have discretion to designate a worker as an employee or an independent contractor, or that however the business and the worker prefer to characterize the relationship controls.

As State & Federal taxing authorities rely more heavily on IRS Form 1099 data to determine which businesses to target for a worker misclassification audit, the names on 1099s could become one of a business' biggest points of vulnerability.

Employers who misclassify workers run risks that include, but are not limited to: having to pay back taxes, interest and penalties; owing back wages and penalties for violating federal and state wage and hour laws; penalties for failing to obtain and properly maintain Form I-9s; jeopardizing the ERISA qualified status of their 401(k) or pension plans; and owing more for workers' compensation premiums. 

On the state level the costs are also dramatic. More States will be utilizing IRS Form 1099 data to target businesses for audit and a growing number of States Including New Jersey are moving to enact legislation designed to increase revenues when misclassified workers are discovered.

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Half of All States Now Suing to Stop Obamacare

If it is allowed to be implemented, Obamacare will eventually do deep and Irreparable Harm To Our Nation’s Budget Deficit. But while Obamacare is more of a long-term threat to fiscal health at the federal level, it is a  clear and present danger to the states. Of the 34 million Americans who gain health insurance through Obamacare, over half (18 million) will receive it through Medicaid.

While the federal government will pay for a portion of the liabilities it doesnt pay for it all and it will not pay for any of the States administrative costs for adding 18 Million Americans to their welfare rolls. That amounts to Billions in unfunded federal mandates for states to absorb.

33 Republican governors have signed a Letter to the White House and Congress making an emphatic appeal that the laws Medicaid provisions be repealed. It is also why the newly elected governors of Ohio, Oklahoma, Maine, and Wisconsin have all decided to sue the Obama administration in hopes of stopping Obamacare. Specifically, Gov. Mary Fallin of Oklahoma Has Announced that the State will pursue its own case against the law, while Ohio Gov. John Kasich and Wisconsin Governor Scott Walker will add their states to Florida’s multi-state suit.

Additionally, Maine's new Attorney General William Schneider Announced Maine would also join the the Florida litigation. That brings the number of states on the Florida suit to 23 and the total number of states suing to stop Obamacare (which includes Virginia and Oklahoma) to 25.

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NLRB Threatens To Sue Four States Over Secret Ballot union Laws

The National Labor Relations Board (NLRB) has threatened to sue Arizona, South Carolina, South Dakota and Utah over constitutional amendments guaranteeing workers the right to a secret ballot in union elections. NLRB’s acting general counsel, Lafe Solomon, said the amendments conflict with federal law.

Business groups such as the US Chamber of Commerce, IEC, ABC and the CDW favor the amendments, arguing that secrecy is necessary to protect workers against union intimidation. They are concerned that Congress might enact legislation requiring employers to allow the "card check" process for forming unions instead of secret ballot elections.

The NLRB has sent letters to the Attorney General of each state warning them that their amendments are pre-empted by the supremacy clause of the Constitution and their new laws are unconstitutional. Read More

Phil Kerpen, vice president for policy at Americans for Prosperity said the NLRB's action "shows how determined the board is to accomplish card check by backdoor means, against the wishes of the American people and Congress." Read More.

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