If you’re like most of us these days, we’re taking time and carefully evaluating what we need versus what we want, what’s necessary and what’s a luxury. This is happening in households, and yes, in corporate boardrooms across the globe. Things are changing, they’ve been altered, modified and there can be a price to be paid. One thing that has changed is how governments are scrutinizing businesses today. In North America, both U.S. and Canadian governments are cracking down on companies who have a misclassified workforce, and the penalties for misclassified workers or contractors are steep. These government initiatives may be putting your company at an increased risk. So the question becomes are you certain that your needs in this area are adequately met by your current practices or should you be considering PEO (professional employer organization) services?
With that in mind here are:
5 ways a PEO services company can benefit your company
- Standardize the processing of all legal documents- Is all of your company’s documentation in order and meeting all the current requirements? PEO’s will implement a program that ensures your company is not at legal risk (very costly) for incomplete agreements, intellectual property exclusivity, non solicitation etc.
- Strict on boarding and engagement processes for every contractor- How is your company’s new hire process? Is it ironclad? Or are there shortcomings? Misclassification of workers is being felt by companies like Fedex and Microsoft and the government penalties have been in the millions of dollars. PEO services mitigate or eliminate these risks.
- Process automation- Each contractor is processed through an automated system with built in safeguards that control approvals, rates etc. that streamline your operations saving time and money.
- Expense processing automation- How does your company manage this? Is it failsafe? How much valuable time is being taken up with this task? How much are errors costing? PEO services automate the process dramatically reducing the risk of error and saving the time and effort staff are currently spending on this matter.
- Record and payroll management- Can you imagine not having to address all of the questions and concerns of your contractor workforce? What about co-employment issues, has your company ever had to cross that bridge? A PEO manages all of these issues and there can be significant cost savings both in staff time and legal fees associated with many of the issues that come up.
If you have all of this well in hand, great! But if you have any questions or concerns, get them looked into, contact a PEO and see how they can help, with the risks and penalties that are associated with companies who are found to be non compliant in regards to their workforce classification, we believe this is a necessity, not a luxury!
WHY PAY TOO MUCH?
by Maria Ricci, General Manager
PSC’s service offering is singularly that of a Professional Employer Organization. This is our key differentiator in comparison to a 
staffing company. We do not participate in any recruiting activities. We provide 3rd party independent contractor engagement and billing services to those corporations who are manning their Independent Contractor population on their own, bringing known independent contractors back from previous projects or pay rolling independent contractors through staffing companies for long periods of time.
A staffing firm’s primary objective is to supply quality contractors to corporations when needed. Speed and quality is of the essence. In order for a staffing firm to enable this operation and maintain a high level of satisfaction within their customer base they need to continuously invest. The majority of their spend goes toward the marketing and maintenance of these contractors. The corporation pays for that of course. At the outset, that is reasonable, considering that the corporation does not necessarily have the time or the savoir faire to do their own contingent workforce recruiting. It begins to get costly for the corporation when the contractor is needed for a longer time period but cannot hire them on permanent status: head count restrictions, permanent hiring freeze, project delays, additional workload etc...
Temporary to Permanent, without any additional fee clauses, are popular and beneficial to the corporation when the corporation can hire the contractor on a permanent basis. When the corporation cannot, often the corporation nor the contractor is allowed to continue their relationship unless the corporation buys the contractor.
Why choose a PEO:
- Reduced costs
- Standard Rate across the board – rate management through established rate cards
- There isn’t Temporary to Permanent placement clauses. This means that you can end and rehire the contractor as you wish if he has already been identified by the corporation through previous projects or placements with staffing firms.
- Turnover. Although this practice lacks in professionalism and good business etiquette, it is happening in the marketplace today. Because a PEO is not in the recruiting business the risk of offering your contractor a better opportunity is nonexistent.
- Proper classification of contractors reduces risks of co employment
- Proper processing of contractors ensures the right agreements and paperwork are signed and provided by the contractors to ensure the protection of the corporation, the contractor and the PEO.
The transition to a Professional Employer Organization can represent substantial cost savings for the corporation and therefore, why pay too much?
To learn more about PSC please do not hesitate to contact us at: info@paymentservicescorp.com or take our free Risk/Reward Questionaire. click below
FedEx Ground has agreed to pay the state more than $3
million to settle claims that the company misclassified its drivers as independent contractors, Attorney General Martha Coakley’s office announced Thursday.
Coakley’s office had alleged that Pittsburgh-based FedEx Ground had made insufficient payments to the state for payroll taxes, worker’s compensation and unemployment assistance as a result of the misclassification.
In the announcement of the settlement, Coakley called it a “step to level the playing field for businesses.”
The settlement followed a joint investigation by Coakley’s office, the Executive Office of Labor and Workforce Development and the Department of Revenue. The investigation revealed that FedEx Ground’s misclassification of employees had resulted in “significant underpayments” to the Department of Revenue, Division of Industrial Accidents and Department of Unemployment Assistance, according to Coakley’s office.
The settlement also provides for a payment for the 13 drivers named in the attorney general’s citation, according to Coakley’s office.
FedEx Ground drivers in the state have also brought their own lawsuit against FedEx Ground - which is pending and not affected by the settlement with Coakley’s office - and FedEx Ground denies liability in the settlement, according to Coakley’s office.
On June 17, 2010, the Senate Committee on Health, E
ducation, Labor and Pensions conducted a hearing on the Employee Misclassification Prevention Act, S. 3254 (EMPA). The bill, which was introduced by Sen. Sherrod Brown (D-Ohio) on April 22, 2010, seeks to amend the Fair Labor Standards Act in several significant respects relating to the classification of workers as employees or independent contractors. The proposed legislation would:
Require employers to keep records of persons treated as independent contractors with respect to the hours worked by such individuals and the remuneration paid to them;
Require employers to maintain a record of the classification of each worker as an independent contractor or employee and to provide written notice of such classification to the worker, along with other notifications specified by the bill;
Provide for penalties to be imposed on businesses of up to $1,100 per person for violations of the recordkeeping requirements or for misclassifying workers as independent contractors, and up to $5,000 per person if the violation is found to be repeated or willful;
Provide for a presumption that any worker for whom the required records are not maintained is an employee of the company, which could only be rebutted by clear and convincing evidence that the worker is an independent contractor;
Provide for treble damages for willful violations of minimum wage and overtime requirements if the affected employee was misclassified as an independent contractor;
Require the secretary of labor to create a website that explains the rights that a person misclassified as an independent contractor may have and that would enable workers to file complaints online;
Provide for information sharing and coordination between the Internal Revenue Service (IRS) and the Department of Labor (DOL) with respect to misclassification issues; and
Restrict federal grants to state unemployment compensation systems unless the state has an auditing and investigation program that identifies employers not reporting compensation for unemployment compensation purposes.
In prepared remarks, Seth Davis, Deputy Secretary of DOL, made clear that DOL and the Obama Administration strongly support EMPA. Mr. Davis also noted that DOL’s Wage and Hour Division is actively considering a rule that would require employers, before classifying a worker as an independent contractor, to perform a written analysis of the worker’s status under applicable FLSA precedent, to provide a copy of the analysis to the worker, and to maintain a record of the analysis in the company’s files.
Opponents of EMPA remarked that the proposed legislation would impose enormous costs on owners of small businesses. Sen. Mike Enzi (R-Wyoming) estimated that it would cost billions of dollars for small businesses to comply with the recordkeeping requirements and would, for example, nonsensically require employers to notify employees that they were employees. He also noted that the audits would focus on recordkeeping rather than misclassification and fine employers simply for failing to keep proper records.
Although not the subject of the June 17 hearing, EMPA has been linked to the Taxpayer Responsibility and Consistency Act (TRCA), which was introduced by Sen. John Kerry (D-Massachusetts) on December 15, 2009. TRCA would amend §530 of the Internal Revenue Code in ways that would effectively remove the availability of the Code’s Safe Harbor provisions to all but a very few employers. The §530 Safe Harbor was originally enacted in the late 1970s to protect businesses that were relying on their industry’s long-standing practice of using non-employee workers for the performance of certain services, or on prior IRS audits that made no determination that independent contractors were misclassified. The idea was that the Safe Harbor would be temporary until a new independent contractor standard could be developed that was clear and objective and could be reliably and consistently applied. Contrary to that intent, TRCA would eliminate the availability of §530, except in a very few cases, without the adoption of a law that made the determination of independent contractor status clear and objective.
These legislative efforts, together with increased funding and enforcement efforts applied at both the federal and state levels, provide clear evidence of the increased risks and potential liabilities imposed on companies that use the services of independent contractors. Now is the time for employers to examine their independent contractor relationships and determine whether changes need to be made to those relationships or to the company’s practices in dealing with independent contractors.
By Lindsay Beyerstein, In These Times
O
ver 10 million American workers are classified as independent contractors. But how many of them are really self-employed and how many are falsely labeled as such by unscrupulous employers?
That's one of the questions the Senate Committee on Health, Education, Labor and Pensions (HELP) set out to answer in a hearing on employee misclassification last week.
Employers mislabel their employees as contractors in order to avoid paying Medicare, UI and Social Security taxes. Amazingly there are no legal consequences for misclassifying workers, even if the employer does it on purpose. Committee Chair Tom Harkin (D-Iowa) pointed out this kind of tax evasion is costing cash-strapped state unemployment insurance funds billions of dollars a year.
A 2000 study commissioned by the Department of Labor found that up to 30% of employers misclassify at least some of their employees. The practice is rampant in the construction industry and in low-wage and gray market sectors of the economy.
By breaking the law, employers can cut their labor costs by up to a third. Frank Battaglino, who owns a sheet metal company in Maryland, testified about how hard it is for law abiding employers to compete with companies who cut corners.
"Increasingly we were being beat out of competitive bids by unusually low bids," Battaglino said. "We know this is a direct result of companies deliberately misclassifying their workers as independent contractors."
Who counts as an employee? The law takes a pretty commonsense view of the question. Basically, if you work for wages with the employer's tools at the employer's workplace under the employer's supervision, you're an employee. True independent contractors are literally in business for themselves. They invest capital in their own ventures and share in the profits or losses of their enterprises.
Deputy Secretary of Labor Seth Harris told the committee about one Wisconsin family restaurant that tried to evade minimum wage laws by classifying the dishwashers in their kitchen as "independent contractors."
Most workers don't realize that most of the rights they take for granted in the workplace derive from their legal status as employees. For example, most anti-discrimination laws are written in terms of what employers can do to their employees. Contractors may not be protected.
Help may be on the way for misclassified workers. In January of 2010, the DOL hired more inspectors to combat misclassification. The President's 2011 budget calls for an additional $25 million to help the DOL, IRS and other agencies address the problem.
Finally, Harkin and Sen. Sherrod Brown (D-OH) have introduced the Employee Misclassification Prevention Act, which would impose penalties for misclassifying employees as contractors and require employers to keep records on non-employees who work for them.
The impacts of the new health care laws on contingent workforce management will not be fully understood for some time, and could be subject to change before they
take effect. But some provisions of great concern are approaching rapidly, including a little understood and newly highlighted 1099 reporting provision slated to take effect on January 1, 2012.
Like the proposed Employee Misclassification Prevention Act (EMPA) bill, this new requirement would “pierce the corporate veil” of hidden independent contractor vendors and require immediate discovery and control over challenging spend categories such as statement of work consultants and sub-contractors.
According to Michael Tanner, a senior fellow of the CATO Institute:
The latest surprise is Section 9006(b)(1) . . . which requires that businesses provide a 1099 form to every vendor with whom they do more than $600 worth of business over the course of a year. . . Of course businesses already have to file 1099s for outlays on items like consultants. But the new rule will mean that even the smallest of businesses will have to issue a form — and file with the IRS — for virtually every purchase or payment. Consider how many business transactions go on every single day in a $14 trillion U.S. economy. Millions, perhaps hundreds of millions, of forms will be winging their way between businesses and between businesses and the IRS. The potential for mistakes and lost forms would be tremendous. And with errors would come audits and penalties."1
With legislation like this already passed into law, there is no need to wait for the Employee Misclassification Prevention Act to start bringing SOW consultants and incorporated independent contractor vendors -- including project services spend -- into your centralized Contingent Workforce Management program.
You will be required to not only track this spend, but issue 1099s, starting in just a year and a half. Given the tremendous amount of organizational change such a requirement represents, enterprises should look to starting the process of a deep contractor risk assessment now.
After all, even if this particular provision affecting 1099s laws is extended or overturned, the message from legislators and regulatory agencies is clear -- there will be no more hiding of independent contractors for purposes of misclassifying workers.
1. Tanner, Michael. CATO Institute. “Health Bill Floods Business In Paper.” May 6, 2010. http://www.ajc.com/opinion/health-bill-floods-business-521926.html?tag=content;selector-perfector
Posted by Liz Greene
FIRST SUMMARY JUDGMENT RULING FROM THE FEDERAL MDL COURT HOLDS THAT ILLINOIS FEDEX DRIVERS ARE EMPLOYEES, NOT INDEPENDENT CONTRACTORS
In PSC's ongoing coverage of the Federal Express Cases on Employee Misclassification, we bring you the latest update from Illinois District Court.
June, 2010. Source: http://www.fedexdriverslawsuit.com/
FedEx Ground and Home Delivery drivers have been found to be employees under the Illinois Wage Act. The decision was issued by U.S. District Court Judge Robert Miller in the multi-district litigation that Judge Miller has been presiding over for the past five years. (In re: FedEx Ground Package System, Inc. Employment Practices Litigation, Cause No. 3:05-MD-527 RM) This holding came in a May 28, 2010 Opinion and Order granting summary judgment to the Illinois drivers under the Wage Act. The Court did not rule on other claims made by the Illinois drivers, but indicated it will address those claims separately. The decision is important in that it is one of a growing number of decisions in the past few years holding that the FedEx Ground drivers are employees and not, as FedEx claims, independent contractors. The essence of the cases consolidated before Judge Miller is that FedEx Ground has intentionally and consistently misclassified drivers as independent contractors, when they are in reality employees. Judge Miller specifically found that the Illinois drivers were employees under the Wage Act because their work was an essential and a necessary part of FedEx's business. As former CEO Dan Sullivan testified, the drivers are the "centerpiece" of FedEx's "workforce" and they are an "essential component" of the company's business. The Court noted the fact that drivers must wear FedEx uniforms and maintain a personal appearance satisfactory to FedEx. Contractors supply their own vehicles, but they must bear FedEx's logos and advertising. Further, FedEx structures the routes so that the trucks are in use 9 to 11 hours a day. Contractors can hire replacement drivers, but only with FedEx's approval. Finally, the Court noted that FedEx managers were obligated to have business discussions and customer service rides each year in order to maintain FedEx's image and reputation. Drivers' motions for Summary Judgment in 40 other states are pending. Currently, there are 63 lawsuits consolidated in the multi-district litigation. Motions for Summary Judgment have been filed, briefed and are awaiting decisions in almost all of these cases.
Labor Department Announces Enforcement Actions Against More Than Half of the Subcontractors on 'The Province' at RIT Project
Enforcement actions part of statewide crackdown on employers who mis
classify workers as independent contractors or pay them "off the books"
Albany, NY (June 08, 2010) -
State Labor Commissioner Colleen Gardner announced today the results of two enforcement sweeps at the ‘The Province' at RIT (Rochester Institute of Technology) construction project. Widespread violations of State labor laws were found, including nonpayment of overtime, off-the-books employment, failure to carry workers' compensation insurance, and
misclassification of employees as independent contractors by more than half (12 of 21) of the subcontractors interviewed by DoL on the site.
The sweeps were carried out by the New York State Joint Enforcement Task Force on Employee Misclassification on January 26 and February 9 of 2010. The Task Force is an interagency strike force formed in 2007 to address the problem of employers who improperly classify employees as independent contractors or who pay workers "off the books." The strike force that visited ‘The Province' work site included investigators from the NYS Department of Labor and the Workers' Compensation Board.
"In each of these cases, employers brought in crews of out-of-state workers who were typically paid off-the-books," said Commissioner Colleen Gardner of the New York State Department of Labor. "Our announcement today is a victory for workers and taxpayers. We were able to recover these workers' hard-earned wages from out-of-state contractors within a few months."
Gardner added, "The problem of employers misclassifying workers as independent contractors or paying them "off-the-books" is happening statewide. My message to those employers, whether you are from New York or another state, is: ‘You are cheating your workers and the taxpayers, and undercutting honest businesses. We are looking for you - and the chances that you will get caught have never been better.' "
Chair Robert Beloten of the New York State Workers' Compensation Board said, "A business that doesn't carry insurance threatens its workers' well-being and gains an unfair advantage over its law-abiding competitors. Our stop-work order program is an essential tool in dealing with employers who refuse to follow the law and provide workers' compensation coverage for their employees."
Four subcontractors were found to owe a total of $42,835.32 in unpaid overtime wages and liquidated damages. An additional $22,500 in penalties was assessed by the Department of Labor's Division of Labor Standards. The department has already collected $33,728.13 for the labor law violations from three subcontractors, and a fourth subcontractor has agreed to pay a balance due of $31,607.19.
The Department of Labor's Division of Unemployment Insurance found that 12 of the 21 contractors on the site had misclassified 211 workers and owe the Unemployment Insurance Trust Fund more than $80,000 in unemployment insurance taxes.
Three subcontractors were also issued stop-work orders by the Workers' Compensation Board for not carrying workers' compensation insurance.
To learn more about the entire release visit the NYS DOL website.
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