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Employer defense may help during an investigation

An employer defense may have the potential to ease consequences in the event an employer is accused of dishonest practices. A recent report revealed the high number of businesses in California and across the nation that have intentionally labeled employees as independent contractors to intentionally avoid higher costs. Lawmakers in Washington have announced their plan to expose companies that mislabel the classification of their employees in an attempt to financially benefit. A business owner may prepare an employer defense if they suspect they may be investigated.

This practice allows a company to benefit from workers without the financial burden that direct employment often requires. An employee may require insurance, overtime and other costs or compensation for their work. The practice of misusing an independent contractor status has purportedly cost the government billions of dollars in tax money through stimulus agreements and contracts federally assigned to these employers that may have been dishonest about their staff.

Federal contracts will specifically be under review following the next election, and an in depth investigation of suspected employers will begin. Reports indicate that certain businesses in California and in other states may have retained at least 20 percent of their assets by failure to remit taxes. This may have been possible through the misclassification of employees, which served to potentially exploit workers and damage competitors.

Many of the workers employed by the businesses in question were claimed as independent contractors without the provision of workers' comp or unemployment benefits and did not have the option for overtime. Legislation has been suggested that will create greater penalties for employers that are dishonest about the classification of their workers. An employer may seek professional help preparing an employer defense if they are selected for review.

Source:, "Lawmakers vow to deal with issue of companies misclassifying workers", Franco Ordonez and Mandy Locke, Sept. 12, 2014

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