Strategies for Minimizing Legal Issues in Workforce Management between Employers and Freelancers
In today's business landscape, the proper management of independent contractors has become a critical aspect for companies striving to maintain a compliant workforce.
Recent cases, such as the FedEx case, have highlighted the importance of this issue. The main point of contention was whether FedEx truck drivers were independent contractors or employees. The company's practice of asking its 'independent contractors' to wear FedEx uniforms, work specific days, during certain hours, and drive a FedEx truck, raised questions about their independence.
The misclassification of workers as non-employees can lead to significant legal and financial repercussions. Lawsuits demanding retroactive benefits are not uncommon in such cases. For instance, the Microsoft Vizcaino v. Microsoft Corp. ruling saw the court find that Microsoft had failed to properly identify the roles of temporary workers, costing them nearly $100 million.
The responsibility of ensuring that the proper insurance is in place and up to date for independent contractors lies with the contractor themselves. They are also responsible for paying both individual and business taxes. However, businesses should implement specific policies and procedures for temporary or contract employees to avoid co-employment risks. This includes sharing responsibility with other departments and staffing vendors, and utilizing a single point of contact that is responsible for coordinating efforts throughout the organization.
When bringing on temporary or contract employees, HR should be responsible for establishing the policies and procedures for temporary employees and ensuring that all managers and employees throughout the company are trained in these procedures once developed. Mitigating co-employment and independent contractor compliance risks is an ongoing process and requires periodic internal audits of the entire workforce.
The Internal Revenue Service determines an independent contractor based on behavioral control, financial control, and the type of relationship of the parties. A good Statement of Work (SOW) should spell out the tasks or deliverables that will be provided and include some type of performance measurement. Independent contractors should be paid according to the Statement of Work (SOW) and contractual payment terms.
The use of independent contractors, temporary, and contract workers will play a crucial role in the recovery of many businesses. Properly managed non-employees give businesses a competitive advantage by allowing quick response to changing economic and business conditions.
In light of these complexities, it's essential for businesses to prioritize independent contractor compliance. Executives have ranked this issue as least important in a Workforce Trends Study, but the potential consequences of non-compliance, including lost revenues, repayment of wages, overtime, benefits, and court fees, underscore the importance of this issue.
Recent legislative changes also reflect this emphasis. Connecticut passed legislation in May of last year increasing fines for misclassification. The latest Federal budget also includes provisions set aside to hire 100 new personnel to target misclassification.
Despite the lack of specific information regarding the three leading companies in Germany in 2021 facing the greatest risks related to signing incorrect employment classifications and non-compliance concerning the use of independent contractors, it's clear that this issue is a global concern.
In conclusion, businesses must be vigilant to ensure that the proper insurance is in place and up to date for independent contractors, and that they are compliant with all relevant employment regulations. This not only protects the business from potential legal and financial repercussions, but also provides a competitive advantage in today's rapidly changing business environment.
