Thursday, April 29, 2010

Does your boss tell you you're an "independent contractor" ...

... when you know you're not? It's not just a matter of semantics. An employee who is classified as an independent contractor must pay the employer's share of social security taxes, and there is the obvious point that independent contractors are excluded from receiving any benefits. Many new law school graduates, who have little bargaining power, are characterized as independent contractors by unscrupulous employers when it is clear that the new grads are employees.

Well, in a recent issue, the American Bar Association's online ABAJournal reports that Congress appears ready to make the misclassification of employees as independent contractors a criminal offense:

For years, employers have been warned that misclassifying employees as independent contractors could lead to expensive consequences.

But soon the practice could also lead to criminal penalties: Congress is expected to enact a bill introduced last week in both the House of Representatives and the Senate that would make it a federal offense to do so, reports a Pepper Hamilton media advisory. (Employers, of course, may continue to treat true independent contractors as independent contractors.)

The Employee Misclassification Prevention Act "is a game-changer,” says partner Richard Reibstein in the release. “Because it is expected to face little opposition in the House and Senate, employers should use this narrow window of time to immediately review their employment classifications. The government is expected to aggressively pursue companies that are in obvious non-compliance.”

If the EMPA is passed, potential penalties for noncompliance would include fines of $5,000 per employee.

Read the rest of the article here.