The misclassification of independent contractors that companies should list as employees has drawn the rapt attention of the U.S. Department of Labor, the Internal Revenue Service and various state workforce agencies.
This has become a serious issue, and hundreds of businesses have faced prosecution. Regulatory agencies have put together a list of industries that are the most culpable in terms of misclassifications.
Coming under scrutiny
The list of industries that appear to have the most problems with misclassification of employees has come from press releases, congressional testimony by government officials and public statements. The list includes, among others, construction, nursing, trucking, catering services and landscaping companies. Also, dental offices, chiroprators and small medical offices are also companies that can get caught in the trap of misclassification.
Getting classification right
If the independent contractor the operations manager hires should have an employee classification, he or she will be missing out on company protections and benefits, such as overtime pay, required reaks, workman's compensation coverage, unemployment compensation and health insurance. An individual who actually is an independent contractor will typically have an agreement or contract with a company that specifies duties, compensation, any benefits agreed upon and conditions respecting termination.
The Labor Department has prosecuted hundreds of businesses that have listed employees as independent contractors to escape having to pay overtime or minimum wage. Settlements have been as high as seven figures. The bottom line is that misclassification is a slippery slope, especially in the construction business, and a firm may wish to reach out for legal guidance to ensure it does not run afoul of one or more regulatory agencies.