Some groups are calling it systematic and deliberate wage theft, others (slightly more diplomatic) are calling it a labour friendly campaign, but there is a tidal wave of turmoil brewing in the trucking Industry of the Ports of Los Angeles.
A report entitled “The Big Rig Overhaul: Restoring Middle-Class Jobs at America’s Ports Through Labor Enforcement” is a collaboration between three organizations alleging years of what they call the “enormous scale and shocking costs of an illegal business practice used by employers..” to bring attention and demand restitution and change to the industry. The National Employment Law Project, The Los Angeles Alliance for a new Economy and the Change to Win Strategic Organizing Center allege that worker misclassification in classifying port truckers as Independent Contractors instead of Employees became the port industries business model and was in fact a “scam”.
The numbers in the report allege a 1.4 billion dollar (includes wages and lost state tax revenue) misclassification scam that involves 60% of port truck drivers. Amounting to lost wages and benefits translating to 5,072$ per driver, per month.The report was published in the hopes to leverage Congress to pass legislation including The Payroll Fraud Prevention Act, The Clean Ports Act of 2013, and the Fair Playing Field Act of 2012.
From a Contingent Workforce Management perspective, the main point of emphasis and what it may come down to in the courts to deem who (if anyone) is in fact responsible for this misclassification will rely on the Nature of the Working Relationship between the alleged Independent Contractors and the trucking companies themselves. The CRA (Canada Revenue Agency) and IRS (Internal Revenue Service) do have a different set of standards in how they define the classification of workers, but where they agree in terms of how they view this report will be that:
A) They do not differentiate between errors of omission and errors of commission. If misclassification occurred, the company will be liable, regardless of intent.
B) Determining of the amount of control a company can have in regards to the daily tasks of an independent contractor. Two instances of note in this example would fall under Exclusive Service, and Supervision. (Both are further defined below)
While the outcomes of this report remain unclear at the present time, there was fair warning that 2014 would be a year of heightened scrutiny at all levels regarding worker misclassification. If nothing else, the groups involved in the allegations of this report shows that those warnings are true.
Are you properly managing your risk? Get a free risk assessment from CWS here
The pace at which the needs of business and Contingent Workforce Management shift are sometimes staggering. By the time we catch up to one, another rears its head. It can sometimes feel as though it’s a constant game of reacting to problems that are occurring rather than being proactive and seeking and solving those problems before they become an issue. It’s the industry’s equivalent to the Whack a Mole game at a carnival. With that in mind it’s imperative enterprises’ of all sizes take the time to investigate the potential holes in their Contingent Workforce Management processes as often as they can. In the past, there has been heavy focus on issues such as Direct Sourcing, understanding the legal issues surrounding changing legislation such as the Affordable Care Act, or even the heightened focus of government agencies surrounding the issue of worker misclassification and compliance. As we accelerate through what is sure to be another banner year of growth for the Contingent Workforce there is an issue looming on the horizon that will be on the tip of everyone’s tongue by the time we roll into June of this year. That of the process of Identity Management, or IDM. Identity Management refers to “the management of individual principals, their authentication, authorization and privileges within or across system and enterprise boundaries with the goal of increasing security and productivity while decreasing cost, downtime and repetitive tasks.” In simpler terms, it means
- Who has access to the system?
- What do they have access to?
- Can those who access the system do so efficiently?
- Is sensitive data properly protected?
- Does the system allow the best balance of access, usability, and security in terms of cost savings?
Whether fully integrated already or slowly adopting it, businesses are becoming increasingly mobile. Work is completed in the cloud, collaboration is done over smart phones and tablets, and even “hangouts” have become the lexicon of an increasingly mobile and data based workforce. So the challenge to be faced by those in the business of managing growing percentages of contractors and contingent workers is to balance the need for security regarding sensitive and intellectual data, with the need for efficiency for those who require increased sharing and flexibility in order to complete the tasks and projects businesses require of them. Refer to the graphic below for an illustrated view of the process and workflow of an IDM process.
*Courtesy Identity Automation
The timing of the concern regarding Identity Management is not a complete shock to those who have been following the numbers around the growth in the Contingent Labour Market. According to SIA (Staffing Industry Analysts) 2014 is poised to be a big year for IT, with almost all of the top 10 salary increases for Contingent workers being in the IT field. So, coupled with the boom of demand surrounding expert- skilled workers in IT, and the well documented struggles to find this kind of top talent, there is sure to be more contractors working for multiple companies and having access to multiple systems. What remains to be seen is how prepared enterprises are for this.
A Recent study by Ardent Partners suggest some early warning signs of some potential blind spots in regards to IDM within the current CWM processes of some enterprises.
- While nearly 64% of organizations institute regular reviews of contract labour compliance against requirements only 43% include detailed written assumption of risk of work completion ownership in their SOW’s (Statements of Work)
- Although 70% of enterprises have visibility into system access by contract talent, only 44% have implemented proper compliance measurements during the offboarding phase.
2014 is poised to be the year of the big data enterprise, and do you know who has access to yours?
Amidst a flurry of political and social controversy, the Olympic Games are underway, and for the international firms responsible for staffing the Sochi Games, they hope it’s all downhill from here.
Sochi’s three official staffing Suppliers: Adecco Group, Kelly Services, and Russian firm Exect Business have put three years of work into building the Contingent Workforce for the Olympic Games and the sheer numbers are staggering. The total number of temporary workers for the games may top 150,000 people, and that isn’t counting the roughly 25,000 volunteers that will be lending a hand to make sure the games run smoothly. Among those 150,000 workers 65,000 are skilled workers. These skilled workers were culled from a worldwide recruiting search, offering the opportunity for the organizing committee of the games the chance to hand pick expertise from the very best the world has to offer, as well as the chance for those skilled workers to show off their talents in front of an audience like no other. On paper it’s the perfect trade off, but somewhere along the way things went off the rails.
Vancouver temporary worker Johnnie Balfour’s exposing blog posts and statements about the treatment of himself and his team at the games has been well documented. (Go here to catch up) Even an entire twitter feed, @SochiProblems emerged to document all the issues journalists and athletes alike had encountered upon first arriving in Sochi. Littering news feeds around the world with pictures of brown water and unfinished construction. While these images weren’t exactly the image that the staff and Olympic Committee wished to have us see, the big picture moment of truth for the staffing agencies of the games going forward may not be boiled down to pictures or politics. It may boil down to the larger issues of transparency and control.
For those in the business of the Contingent Workforce this is an issue of risk debated and managed daily, as the decision to either outsource or direct source (hire from within) is weighted against the factors of cost, availability of resources (skills), and time. As the world’s eyes turn to Sochi for the games, administrative/payroll miscues and a lack of communication is not the way to put our (those in the contingent workforce solutions business) best foot forward. In this case, while a pool of extremely talented and eager workers were recruited and gathered for the games, it seems as though when they got there, the communication regarding their income was (at least according to Balfour) left open to interpretation . There is nothing that will turn an IC (independent Contractor) off faster than the notion that they’re not getting paid, and in Balfour’s case, seemed to be the last straw.
As an Employer and a Business you only get one chance to make a first impression with your Contingent Workforce and Independent Contractors. Making sure your T’s are crossed and your I’s are dotted is an absolute must in an industry where word travels fast. If your goal is to recruit and retain top talent, miscues are simply unacceptable. In the case of Balfour, the simple and affordable option of an IC Compliance and Payroll service could have been made available to figure out payment options and schedules before he even left for Sochi, and in the process, saved the staffing agencies responsible for 150,000 workers the potential firestorm of being made to look as a willing participant in the headache inducing and livelihood threatening payroll practices of the Sochi Games.
There is truly no replacement for transparency and efficiency in this business and the sheer size and publicity of this only goes to remind us that even a small administrative miscue or oversight can become a giant problem.
If all goes according to plan when the games close on February 23rd, viewers will hopefully be inundated with images of the athletes’ fists in triumph, their tears in defeat, and memorable moments of sportsmanship and diplomacy. Not pictures of brown water, unfinished construction, and the supposed mismanagement of temporary workers. If the stumbles in the weeks leading up to the event are any indication, the staffing agencies may be the ones in the front row cheering the loudest for the athletes to steal back the spotlight.
Last Tuesday, President Obama delivered his administrations’ most recent message to the people of the United States– and for those who’ve grown accustomed to these things, it was the usual banter and pageantry of goals and aspirations to improve the nation. However, among the policy discussions and rounds of applause was one nugget in particular that is relevant to those of us who follow such things. The impending rise of the minimum wage (at least for federal contracts) and its impact to the issues surrounding worker classification(s) and employee/employer relations. President Obama didn’t directly address the situation, but in an online piece for Forbes, columnist Robert Wood, put the issue on the table. “Did President Obama just make independent contractor v employee issues even bigger? Arguably, yes.”
Wood does play down the notion that every employer in the country is suddenly looking for loopholes or to reduce labor costs in the face of new legislation such as the minimum wage debate or healthcare, but he cautions both employers and employees to take a hard look at their relationship with one another.
In 2010, Department of Labor Secretary Seth Harris quoted a study that suggested up to 30% of employers misclassify workers, whether by simple oversight, or willful negligence, and the Government Accountability office is also quoted in Harris’ address as stating the IRS is losing billions of dollars in revenue. Harris goes on to suggest that this type of negligence and oversight is hazardous to the economy, and causes the long term effects of a loss in tax revenue, and public funded programs such as Social Security. Even as recently as two weeks ago, online publication Benefitspro suggested that 2014 would be the year lawmakers and regulators firmly crackdown on misclassification. However, what may be the most glaring statements from both the DOL study, Seth Harris, Benefitspro, and Mr. Wood, is that there will be no compromise in terms of how misclassification is treated by organizations like the IRS or the CRA. In other words, it doesn’t matter how it happened. All that matters is that it happened at all.
So, left with this potential crackdown the natural follow up is what’s next? Since every study and report indicates that contingent workforces are not going anywhere anytime soon, and in fact, will only continue to grow, Independent Contractors, Employees, and Employers need to have crucial conversations regarding the nature of their relationship. Contracts alone won’t cut it anymore. For employers looking to navigate the complex worker compliance labyrinth, there are plenty or resources at their disposal, but what is proving to be true as more and more non-compliance issues are raised on both sides is the need for specialists in this field. With the intricacies of legalese and the monotony of ever changing legislation, oversights can become easier and more common–but beyond all that it really goes back to a simple concept of clear communication and discussion of needs. What does the employer specifically require? What does the potential employee/contractor require? How will this relationship be supervised? Where can we educate ourselves to make sure our relationship will be compliant with the law? In most cases, the proper classification can be quickly deciphered with just a few simple conversations, and for employers looking to navigate the complex worker compliance labyrinth, there are plenty or resources at their disposal.
While the reasons and needs of a contingent workforce may differ by the industry, there’s seemingly one thing that everyone with stake in the state of the workforce can all agree on. The no-nonsense and zero tolerance approach of both lawmakers and regulators looms large on all parties involved in 2014, and taking the proper precautions is paramount in the face of liability enforcement policies, changing legislation, and the increased ability of government agencies to share information.
*Contingent Share of Workforce courtesy of the SIA
Short answer: Buyer Beware!
Many Employers are under the assumption that they can easily outsource IC misclassification or other employment and tax law liabilities by payrolling their independent contractors through a staffing firm or managed service provider (MSP). Although “bundling” IC misclassification, and employment and tax law compliance in with your existing contingent workforce staffing and/or MSP providers may seem like a smart idea, the reality is that in many cases, employers are paying millions of dollars to these providers in fees and receiving very little protection if any at all.
The problem with taking this “bundling” approach is that most of these providers lack the focus and knowledge to implement a fully compliant IC verification process. Many providers over-trust the power of their contracts. Although a contract is an important part of defining the relationship the rules governing the classification and the tests applied by auditors look at the true working relationship vs. what is written on a contract. Therefore putting faith in the phrase “we have a contract” vs. having your provider perform proper worker education and deep due diligence and offer full visibility into the classification of the workers is a very risky proposition.
Focused compliance experts perform all of the detailed verification and worker education required to properly vet the situation and obtain the necessary detail to defend a tax authority or legal claim. In the absence of proper due diligence and verification in advance of an engagement it is often entirely up to the worker to determine the “nature” of the working relationship. When looking at the details of the majority of reclassification cases lack of proper due diligence and worker education upfront have resulted in workers whistle blowing on their employers or inadvertently triggering an audit after filing for government based benefits such as unemployment insurance or in the case of an injury, workers compensation insurance.
Moreover, precedents have been set where the IRS, and other state and federal agencies, have deemed transparent all of the layers between the provider of services [contractor] and the receiver of services [employing firm] for the purpose of assessing the relationship. So, in practical terms it doesn’t matter how many layers are between firms and the IC/1099s – the IRS will treat the relationship between the “worker” and “firm” as direct. The result is any misclassification assessments, penalties and fines are the liability of the firm as much as they are the liability of the staffing firm.
New legislation tabled in Congress last year called the “Payroll Fraud Prevention Act” is looking to require Employers to perform mandatory worker classification and inform the workers of the classification prior to the engagement to ensure that the workers that have been classified as Independent Contractor/1099 are actually independent and understand the pros and cons of their classification.
In building a business case to make this a priority within an organization it is also important to note that since worker misclassification can be deemed payroll fraud these liabilities “pierce the corporate veil” – meaning that corporate officers and directors are personally responsible for source deductions and reclassified wages.
The first step Contingent Workforce Solutions recommends is to perform a Risk Assessment that will give you a diagnosis of the firms’ contract workforce Risk.
The first phase of the Risk Assessment is to take an inventory of your non-employee headcount. This activity should help in identifying who within the organization is working as an Independent Contractor, a temp employee or an employee of another consulting organization. In many cases contract workers are spread throughout organizations with very little visibility – having been brought in by various departments in any number of ways. Once the identification of all of your contract workers occurs an estimate of the potential liability that could accompany an audit can be calculated.
The second phase of a Risk Assessment is a detailed assessment of each individual worker to determine their worker classification and or their eligibility to work legally. With this information you can identify who should be treated as a W2 and who should be IC/1099. More importantly during this assessment you can identify potential worker misclassification risks where workers who you believe are independent contractors / 1099’s are not thinking or acting like independent contractors.
Mississauga, Ontario – November 7, 2013– Contingent Workforce Solutions (CWS) is pleased to announce they have been awarded the 2013 Health & Safety Award by the Association of Canadian Search, Employment and Staffing Services (ACSESS). As Canada’s National Staffing Association, ACSESS oversees the monitoring and governance of industry best practices.
The award is presented to a company in the staffing and human capital services industry that has demonstrated outstanding performance in workplace health and safety (H&S). The judging criteria was based on the following considerations: leadership in demonstrating a commitment to H&S; innovation in the communication and awareness of H&S information; visionary leadership in the planning, development & implementation of best of breed H&S practices and participation in the community and industry health and safety programs.
Contingent Workforce Solutions’ innovative Health & Safety program called, WorkSafe, has been custom developed to help independent contract and temporary workers work safer and prevent workplace injuries and hazards. CWS’ program was designed to build outstanding awareness that escalates the importance of Health & Safety for contract and temporary workers. Through its very efficient online orientation system and dedicated approach, CWS ensures the timely enforcement of worker education, workplace inspections, and proper incident responses to ensure a safe and healthy environment for all. CWS’ WorkSafe program is compliant with Provincial legislation in Canada, and State/OSHA legislation in the US.
Jeff Nugent, Managing Director of CWS says, “I’m very proud that Contingent Workforce Solutions has been recognized as a leader in the area of Health & Safety. Our team has worked very hard to develop a leading edge program that promotes the health and safety of all workers, especially contingent workers who are often overlooked when it comes to worksite and job specific health and safety training. It is very important for us to meet the needs of employers that are looking to ensure compliance, and to mitigate their overall risk when dealing with contract and temporary workers.” Nugent goes on to add, “We believe that ensuring our workers safety is just the right thing to do and we look forward to continuing to develop innovative Health & Safety and other value added programs for our clients in the years to come.”
About Contingent Workforce Solutions
Contingent Workforce Solutions provides Contract Workforce Management services and technology that enables corporate and staffing agency clients to centralize the process of engaging, administering and paying contract, temporary and project based workers in an efficient and risk free manner. Through its highly developed processes and technology, CWS allow clients to streamline their processes, reduce risk and save money. As experts in the field, CWS provides independent contractor & worker classification that ensures its client’s workers are administered in compliance with employment and tax regulations. For more information please visit www.contingentworkforcesolutions.com
The Association of Canadian Search, Employment and Staffing Services (ACSESS) is the single voice for promoting best practices and ethical standards for the recruitment, employment and staffing services industry in Canada. With more than 1,200 member offices offering staffing solutions in the areas of professional search, and temporary and contract staffing, ACSESS members provide a key service to businesses and offer a broad range of career planning and employment opportunities. For more information please visit http://www.acsess.org/
The CWS Team is in Chicago this week to kick off the CW Solutions Forum! As an Optimum Sponsor of the event we are participating in innovative and thought leadership driven sessions focused on Worker Classification, Compliance, and Risk Mitigation
As an added bonus we invite all attendees to drop by our booth to enter into our draw for an iPad Mini.
BE SURE TO STOP BY CWS BOOTH #15 TO ENTER THE DRAW!
Tuesday September 10, 2013
Details: Workplace accidents happen to be an unfortunate reality for many companies to deal with in today’s economy. When these accidents happen to involve the contingent workforce, who bears the assignment of liability and brunt of the cost can often be unclear, resulting in tremendous penalties, fines or judgements. What can you do to protect your company? How should your relationships be structured? Kersten Buck, Director, Strategic Solutions, Staffing Industry Analysts moderates this interactive Panel Activity with Experts Jeff Nugent, Managing Director of Contingent Workforce Solutions & Eric Rambaugh Partner, Michael Best & Friedrich LLP. From workers compensation exclusivity to OSHA compliance and enforcement, this workshop will explore the myriad ways program managers can manage their companies liability while creating a safe workplace environment for everyone.
For more information and to schedule a meeting with one of our representatives contact:
P: 1-866-837-8630 Ext. 9077
By: Angelina Mollov
With a growing number of concerns in the workplace, it is important that employers of contract employees and payers of independent contractors alike know exactly how to handle complaint investigations in a way that is fair, prompt, and legally defensible. Employers must handle complaints in a manner that is compliant with legislation, such as the Human Rights Code and all relevant Health and Safety Legislation.
Complaint investigations ensure that a healthy and safe work environment is maintained for all members of an organization and for those working in tandem with the organization. Contingent Workforce Solutions (CWS) has specific policies and procedures in place which ensure the Health & Safety of all contractors and that “No One Gets Hurt”. As such, CWS is able to provide guidance to its Clients to ensure that a healthy workplace is maintained.
As Mark Hertzberger, a trained specialist with over 20 years of experience in Health & Safety suggests, all complaints must be attended to and dealt with in an objective and respectful manner. Hertzberger provides the following tips for employers, contract employees, and independent contractors in order to ensure compliance with the relevant legislation and in order to ensure a healthy and safe work environment for all. Here are a couple of Mark’s tips:
Take all complaints seriously and act promptly on every complaint
Hertzberger suggests being objective and listening attentively without projecting personal bias. He also suggests comparing all details provided by the complainant against your company policy and against all legislation that is pertinent to the complaint at hand. It is important to be mindful that even complaints with insufficient evidence may highlight certain underlying issues within the workplace. For example, team dysfunction and or mismatched leadership styles.
Investigators should be objective
Hertzberger points to objectivity as the most important trait of an investigator. Hertzberger suggests hiring an external party or expert from the Ministry of Labour to obtain the facts and judge the situation in order to avoid any bias. Most importantly, the findings of an investigation should be communicated to members of the organization, contract employees and independent contractors alike.
For more information regarding what regulations bind contractors, independent contractors, and employers, please consult local authorities in your jurisdiction.
For the full article please visit: http://www.nxtbook.com/naylor/HRPH/HRPH0513/index.php#/44
By: Christina Fabugais
Last Tuesday, the Obama administration announced that they were listening to businesses, and have decided to extend the requirement for business with over 50 full time employees to provide health care to their workers. The Affordable Care Act was slated to be enforceable January 2014, but has been delayed till 2015 in order to accommodate businesses who have been struggling to set up their programs in time.
Valerie Jarrett, the Senior Advisor and Assistant to the President for Intergovernmental Affairs and Public Engagement, wrote on the White House Blog:
“As we make these changes, we believe we need to give employers more time to comply with the new rules. Since employer responsibility payments can only be assessed based on this new reporting, payments won’t be collected for 2014. This allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers.”
The government is still urging employers to voluntarily set up their programs in order to be ready for the new 2015 date.
For more information on how the Affordable Care Act will affect your contingent workforce read our previous blog post Thinking of Using Independent Contractors to Avoid Paying Into the Affordable Care Act? Read This First.