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)

Supervision and Service


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 courts continue to deal with ongoing contract labour disputes due to lack of due diligence in consistently classifying workers and ensuring that contractual agreements are legal and fair. The following FedEx lawsuit from Helena, Montana exemplifies many of the complex legal issues that can arise when organizations have not properly protected themselves.

For the full article, click here

Federal court judge Charles Lovell in Helena has said that the arbitration clauses in FedEx contracts with its drivers are so one sided that they are “Unenforceable”, and has ruled that the lawsuit move forward without arbitration. Lovell also ruled to dismiss four of the eight complaints made by Tracy LaSalle in his wrongful discharge lawsuit filed against FedEx Ground Package System. The dismissed complaints include malice, violation of Montana’s independent contractor law by misclassifying him as an independent contractor instead of an employee, unjust enrichment, and not paying him for overtime.

Lovell wrote that, under the law, an arbitration provision is unenforceable when it is both “procedurally and substantively unconscionable”, and this case falls into that area. Lovell ruled to wave the arbitration primarily because it unfairly requires “binding arbitration of the weaker bargaining party’s claims, but allows the stronger bargaining party the opportunity to see judicial remedies to enforce contractual obligations”. Lovell stated that “This type of disparity can become so one-sided and unreasonable that the agreement becomes unconscionable and oppressive.”

LaSalles’s lawsuit is part of a larger issue in which FedEx drivers argued that they were employees rather than independent contractors, and as such should be awarded overtime and holiday pay, and not be required to pay operating expenses for delivery vehicles, renting uniforms, and fuel.

In October 2010 a settlement was reached with FedEx that said the delivery drivers were, in fact, employees, but it also outlined a business model in which they could still be private contractors if they handled numerous routes instead of just one. Initially the required number was three, and LaSalle tried to sell his route. However, FedEx then changed the number of routes to two, and LaSalle’s sale fell through and he claims to have lost $175,000.

The October 2010 precedent setting settlement has had a large impact on LaSalle’s case and other subsequent trials. This case indicates that it is increasingly important for companies to perform the necessary steps in order to ensure compliance with contract labour law and tax regulations.

For more information about how your organization can mitigate contract labour risk, contact Contingent Workforce Solutions at:

Christina Fabugais
Marketing Manager
Contingent Workforce Solutions Inc.
Direct Phone:  416-642-9077
Toll Free:  1-866-837-8630 x9077

This week is the 17th annual National Payroll week, which is designed to build greater awareness of the size and scope of payroll and its impact on business, government and employees across Canada[1]. The workforce is constantly evolving, requiring today’s payroll professionals to keep up with ever changing employment and tax legislation.   Contract labour has emerged as a major workforce trend and this has impacted traditional methods of payrolling, which are typically designed for full and part time employees.

Contract labour has increased in Canada; a trend that was driven by the downturn in the economy as more companies began to hire contract and temporary labour in order to adapt to organizational needs and changes in the economy.  Since 1997, the contract labour market in Canada has grown by 300%, and it currently accounts for 25 to 35% of the North American workforce, bringing in 250 billion dollars annually.

The shift in the workforce toward contract labour has had an impact on the efficacy of traditional payrolling methods. It is now important that organizations execute the necessary due diligence when administering and payrolling contract and temporary workers. In the last 18 months Canada Revenue Agency (CRA) has increased the frequency of Worker Classification Audits to determine whether organizations are properly classifying their workers as employees or self employed contract workers. Without proper documentation and administration, organizations face the risk of having their contract worker deemed an employee. They are then subject to pay up to millions of dollars in owed payroll remittance premiums, back-taxes and wages.

Contract workforce administration specialists like Contingent Workforce Solutions (CWS) assist organizations with identifying worker classifications and ensuring proper government remittances; this mitigates the risk of worker misclassification and can save organizations millions of dollars. Jeff Nugent, Managing Director of Contingent Workforce Solutions believes, “Companies can no longer afford to do without the tools that allow them to account for and manage contract labour.  This is not a luxury item – it’s a need.”

About CWS: Contingent Workforce Solutions is a business process management and advisory firm that help its clients gain control of their contract workforce. With close to 25 Years of Experience in Contractor, Temp staffing and Vendor Management Solutions, CWS is a partner that you can trust. Contingent Workforce Solutions’ was recently recognized in Profit Magazine’s 12th Annual PROFIT HOT 50 Ranking as Canada’s top new growth company, and was also awarded LoyaltyOne’s 50 Most Engaged Workplaces.

[1] National Payroll Week. The Canadian Payroll Association.

For more information about how you can update your payrolling system to match the needs of today’s workforce, visit our website, or contact:

Christina Fabugais
Sales & Marketing Manager
Phone: 1-866-837-8630 Ex. 9077

By Jeffrey Steinberger   |   May 7, 2007

Whether a person working for you is your employee or an independent contractor has one very important legal consequence: liability. Say you hire a company to paint your real estate office. During the work, a painter falls off a ladder breaks his arm. Falling paint damages computers that weren’t properly covered. Are you liable for the damages?

The general rule is that an employer is legally responsible for the negligence of his or her employees, but not for the negligence of an independent contractor. As with most broad legal principles, there are many exceptions. However, the general rule applies in most common circumstances.

So what are the differences between an employee and an independent contractor? There are a number of factors that determine which category a worker falls into. The most important of these is called the right of control. Does the employer have the right to exercise control over the worker? Basically, this means that the employer has the right to hire and fire the worker. But it also means the employer has the right to dictate both the means and the manner in which the worker performs the job. If this is the case, then the relationship is that of an employer and an employee. However, if the employer can control only the final results of the work, then the parties have an employer-independent contractor relationship.

Other factors that determine the nature of the relationship between an employer and a worker include:

  • whether the worker is engaged in a distinct occupation or business
  • whether the employer performs any required supervision
  • how much skill the work requires
  • who supplies the tools and equipment necessary for the work
  • the length of time needed to perform the job
  • whether payment is based on time or by the job
  • whether the work is part of the regular business of the employer
  • whether the parties believe they are employer and employee

How do these factors apply to our example? As owner of the real estate office being painted, you employed the painting company to do the work. However, you can’t hire or fire the employees of the painting company–including the one who fell off the ladder. You can control the final results of the work, such as the color of the paint used. However, you can’t dictate how the painters do the actual painting, and you don’t provide the paint, brushes, ladders, drop cloths and other needed materials.

Painting like this is usually skilled work done by a painting company. Yourbusiness is real estate, and you aren’t supervising the painters’ work. The job is for a limited period of time, perhaps a few days or more depending on the size of your office. You pay by the job and not by how long the job takes. Clearly, you don’t believe the painters are your employees. So in this case, there would be no dispute that all damages caused by the falling painter will be the liability of the independent contractor.

By Michael J. Lotito   |   August 12, 2010

Businesses that employ independent contractors may be more vulnerable than ever to private lawsuits and government scrutiny. Private actions involving alleged improper independent contractor classifications under the Fair Labor Standards Act (FLSA) and state wage and hour laws are on the rise. At the same time, the federal government has focused its attention on employers’ compliance with the rules governing worker classifications, and state governments have tightened their enforcement efforts.

Unlike employees, independent contractors are not covered by federal or state wage and hour laws, are ineligible for employee benefits such as health insurance and participation in company retirement plans, and cannot form or join labor unions. Additionally, employers are not required to pay Social Security, Medicare and unemployment taxes, or withhold and remit income taxes for independent contractors.

While companies are not prohibited from employing independent contractors, they can get in trouble for improperly classifying employees as independent contractors. Worker misclassification can result in substantial liability for unpaid wages, and taxes, penalties and fines, among other consequences.

To further complicate matters for employers, the analysis for determining whether a worker should be classified as an employee or an independent contractor can vary depending on which of its obligations the company is considering. For example, state regulators examining whether a worker is entitled to unemployment compensation may determine that a worker is an independent contractor under state law while the IRS may decide the worker is an employee entitled to participate in the company retirement plan under the Employee Retirement Income Security Act (ERISA).

Legislation pending in Congress could make it more difficult for companies to employ independent contractors. The Employee Misclassification Prevention Act (H.R. 5107/S. 3254) would increase penalties for misclassification under the FLSA, require employers to notify workers of their classification in writing, and direct states to strengthen their own penalties for worker misclassification.

While there are different tests for determining employee vs. independent contractor status, a key common factor is whether the worker or the company controls the manner in which the work is performed. The more a worker–rather than the company–controls wherewhen and how the work is performed, the more likely an independent contractor relationship exists. Similarly, individuals who can work for other clients and can subcontract their work are more likely to be classified as independent contractors.

Additional considerations for determining a person’s status include the following:

  • If a person is on the company’s health-care plan, he or she may be an employee.
  • If a person uses his or her own supplies and equipment to perform the work wherever it is convenient, he or she may be an independent contractor.
  • If a person cannot reject an assignment for fear of ending the relationship, he or she may be an employee.
  • If a person pays his or her own business and travel expenses, he or she may be independent contractor.

Whether someone is or is not an independent contractor is critical in determining many employer obligations. Making an incorrect designation can have enormous economic consequences. Employers should also routinely review independent contractor arrangements to make sure the relationship has not changed into an employment relationship. Companies can reduce their exposure to wage and hour class actions and government investigations by working through this complex issue with competent counsel.

If I could sum up last week’s compliance session during the Fieldglass Best Practices Summit into one phrase, it would be “action required.” A little background… both those who are well-versed in the area of misclassification to those who are new to the topic attended the session. The government’s laser focus and “hunt for funds” is fueling much of the recent interest in Independent Contractor (IC) classification. Without raising taxes, the government hopes to collect approximately $400 billion by enforcing existing misclassification rules and laws. $400 billion is enough to pique anyone’s interest.

Guest speaker Julie Gottshall, partner from Katten Muchin Rosenman, LLP, shared her expertise on current class action lawsuits. Gottshall explained that lawsuits are on the rise and that both companies and individuals can be fined, thus, significantly increasing the misclassification penalty fund fervor.

One particularly interesting statistic Gottshall shared – only 26 percent of ICs are currently in managed labor programs. That means that more than 70 percent of a company’s IC population is either unidentified or unmanaged. The good news? A few attendees shared some of their current misclassification efforts, including the importance of meetings with key stakeholders, legal teams and HR and developing a plan to identify and manage ICs. On the flip side, the urgency of the situation was highlighted by plenty of note-taking and BlackBerry messaging.

Although confusing at times, there is a lot of information available. I will keep researching and blogging, sharing the latest trends and tips for reducing your risks. In the short term – ACTION REQUIRED! Start digging. Understand what your IC population looks like and the policies in place to protect your company and workers. Educate hiring managers up front about possible triggers and processes. Mandate compliance regarding IC incorporation and documentation that clearly articulates the working relationship. And lastly, find a way to reach out to your ICs. Make sure they are happy and understand their obligations to maintain their IC status.

When redesigning a Global  recruitment and staffing process there is a rule of thumb: Policy defines process! When you impact the policies you impact the process and how it should be executed.  Whether it is full time or contingent workforce policies, they are written to create consistent practices and protect the organization Country by Country.  Below is a list of articles that are helpful when considering different types of employment scenarios inside the organization. Additionally it begs the question how best to manage these changes. I always appreciate the reality check and hope you do as well.

North America

PEO trend in small to mid-size employers
Dykema Gossett PLLC USA – August 31 2009
However, for purposes of the Fair Labor Standards Act, the courts have determined coemployment status by applying an economic realities test, which considers (1 

DOL and IRS to scrutinize misclassification of independent contractors
Barnes & Thornburg LLP USA – April 26 2010
… In addition to the DOL, the Internal Revenue Service (IRS) will be scrutinizing independent contractor arrangements. As part of …

New $25 million blockbuster – coming soon to an employer near you!!
Strasburger & Price LLP USA – April 19 2010
in confirming the proper classification of its workers as contractorversus employee  the factors in classifying a worker as an employee orindependent contract. 

The Department of Labor (DOL) has been given funds and a clear directive from the President to step up employee misclassification enforcement efforts. U.S. Secretary of Labor, Hilda Soliz, has announced a new program to advise workers of their labor and employment rights. The program, called “We Can Help,” was launched last week. The We Can Help website provides a toll-free hotline for an employee or contractor to raise questions or concerns about how she is being paid. The worker is promised confidentiality and undocumented workers are protected from immigration enforcement for complaints about wage violations. To aid its efforts in getting the word about the We Can Help program out to workers, the DOL has teamed with various employee advocacy groups, including the AFL-CIO and others to educate workers. Plans include distribution of litera…

United Kingdom

Equal pay for temps
DWF LLP United Kingdom – March 25 2010
Ahead of the implementation of the Agency Workers Regulations in October 2011, Asda and Unite have struck a deal that will give temporary agency workers in 


MOM issues “Tripartite Guidelines for Re-employment of Older Employees”
Allen & Gledhill LLP Singapore – March 30 2010
On 11 March 2010, the Minister for Manpower Mr Gan Kim Yong announced the finalised set of Tripartite Guidelines for Re-employment of Older Employees (the “Guidelines”) at the Committee of Supply Debate.


Sweden – Lower rate of increase in the number of unemployed

According to original data, published today by Statistics Sweden (SCB), 448,000 persons aged 15 to 74 were unemployed in March 2010…

What does this all mean to me? ( I know you are wondering)

There is no such thing as ONE global process.  There is such a thing as a global framework, however the HOW will change by country. I call this A Global Framework with localized practices. Think of your technology as the vertebrate and the function that must perform according to country requirements. (Even the technology must meet country standards!)

Full-time recruitment

1.  Education

2.  Expat Management – Educating managers who go abroad what they can and cannot do, based upon country legislation and

3. Recruitment process and benefits discussions based upon geography

4. Recruitment on-boarding processes

5. New program’s to support retiree’s

Contingent Workforce

1.  Managed services as we know in the United States is not the same when you go across the pond

2. Supplier management as a common framework will have a different RASIC chart (roles and responsibilities chart) by country due to legislation.

3. Unemployment rates impact to supplier resume submittals.

4. New programs to support retiree’s.

Yes there is more that can be added to this list, but it goes to the saying policies drive process.  Therefore making recruitment and staffing one of the most misunderstood function both internally and outsourced today.

I recently joined Brightfield Strategies, the premier consultancy in contingent workforce strategy. Colleagues are asking WHAT IS IT YOU ARE DOING TRACEY?   So I thought I would share a part of what we do at  the firm, because learning the different perspectives that the team offered, had an impact on my thinking.

I have enjoyed my work on the design of our audit practice. I work with Frank Lyons, a practicing attorney in the contingent workforce space, and Erika Halverson, a consultant with experience in contingent workforce management.  Combined, the industry experience on this team enables us to analyze an issue from multiple perspectives and create a set of solutions that can bring a sharp perspective to the details that can make or break a contingent workforce management program.

Today we asked ourselves WHY companies reach out to Brightfield.  We honed in on uncovering the risks that lurk inside your contingent workforce program.

As a team we decided to share a few elements in the management of your contingent workforce program where you may find goblins lurking:

  • Staffing and MSP Contracts
  • 1099 (IC Compliance)
  • Policies and practices
  • Temporary worker assignment longevity
  • Contingent labor documentation (Non-employment, IP and  Confidentiality agreements)
  • On-Boarding and Off-boarding
  • Insurance
  • Utilization of Retirees

Two risks I will discuss in greater detail are seemingly simple items, but according to Frank Lyons can expose a company to significant risk.


With any audit, we look at documents, processes and policies that protect the client.  In addition to any specific items identified by the client, our Audit team makes sure that each individual temporary worker has in place:

1. Non-employment acknowledgement

2. IP assignment document

3. Confidentiality agreement

The non-employment acknowledgement requires a temporary worker to state in clear, unambiguous language that s/he is NOT a client employee.   This provides extra protection around benefit taxation risk as discussed in the Staffing Industry article at:

IP assignment protects a company from losing intellectual property when a temporary worker walks out the door at the end of an assignment.

Finally, the confidentiality agreement offers a client some assurance that proprietary information disclosed to a temporary worker will be protected both during and after the temporary worker’s assignment has ended.

This documentation should be kept on each worker and should be available through your MSP or the Contingent Workforce Program.  The loss associated with not having these documents accessible is typically unknown until an issue gets escalated, and by then it’s usually too late to look for other relief.  The reality is, why take the chance?

Retiree Utilization

Scenario: An employee retires or takes a package from the company, than returns to the company as an independent contractor.  If the retiree is not properly classified as a valid Independent Contractor, your benefits director would be more comfortable sitting directly on top of Eyjafjallajökull. (By the way, our attorney spent two-and-a-half years in Iceland and is one of the few people in North America who actually knows how to pronounce the name of the volcano that shut down half of Europe’s air space.  An added Brightfield benefit!)

Properly deployed, retirees are a true source of talent.  Many in the MSP world are building out retiree portals leveraging the VMS system. How these retirees are paid as contractors can sometimes be obscure. Especially if it is not carefully controlled by contract, and if random audits are not conducted regularly, a company can find itself unknowingly exposed to enormous potential liability.  A retiree contracted through an agency to his or her old employer, where the agency allows the worker to be a 1099, exposes the former employer to unimaginable risk. The risk is greatest if the retiree is receiving retirement benefits from the organization and is NOT a valid 1099.  If you think you may have this exposure, Brightfield suggests you consult with qualified benefits and tax experts immediately.  In the opinion of our counsel no amount of risk is acceptable.

The fact is there is risk in everything we do.  Contingent labor is projected to be 25% of the workforce in 2010, so managing the special risks associated with this workforce segment is an essential element of running an effective program.   Our audit leaders recommend first understanding the exposure and risk in your program and then determining the best strategy to managing the risk.

To learn more about contingent labor risk, Staffing Industry Analysts is hosting the Contingent Workforce Risk Forum in May. See their or send me an

In my email today the following article popped up:

March 22 2010

To reduce costs, employers have turned to independent contractors to perform traditional staff functions. Unlike employees, independent contractors generally do not qualify for benefits and employers of independent contractors are not liable for Federal Insurance Contributions Act (“FICA”) contributions, Federal Unemployment Tax Act (“FUTA”) contributions, state unemployment contributions, workers’ compensation premiums, or overtime.

Experts believe numerous employers wrongly classify employees as independent contractors. One study concluded that employers illegally passed off 3.4 million employees as independent contractors, while the Department of Labor (“DOL”) estimates that up to 30 percent of employers misclassify employees. Ohio Attorney General Richard Cordray estimates that 92,500 workers are misclassified in Ohio, which costs the state up to $35 million a year in unemployment insurance taxes, up to $103 million in workers’ compensation premiums and up to $223 million in income tax revenue. “It’s a very significant problem,” Cordray recently stated in The New York Times.

Recent Developments

Facing record budget deficits, many government agencies have started aggressively pursuing employers that misclassify regular employees as independent contractors. President Obama recently proposed a $25 million DOL “Misclassification Initiative,” targeting the misclassification of employees as independent contractors. The Initiative would provide 100 additional DOL enforcement agents and increase states’ capacities to address misclassification. This follows a joint proposal by the DOL and the Department of the Treasury to enhance both agencies’ authority to penalize employers that misclassify employees.

Similarly, Delaware and Maryland recently imposed new penalties on employers that knowingly misclassify workers as independent contractors. Similar legislation has been introduced in Pennsylvania. In Ohio, Attorney General Cordray announced a collaboration between his office and the Ohio Department of Job and Family Services, Ohio Department of Taxation, and Ohio Bureau of Workers’ Compensation (“BWC”) to target employers that misclassify employees as independent contractors.

With the Attorney General’s attention focused on the costs of employee misclassification, Ohio employers that misclassify employees risk significant taxes, fines, penalties, and increased workers compensation premiums. In addition, misclassified employees have brought multi-million dollar class-action lawsuits against employers for failure to pay proper wages and overtime.

Employee or Independent Contractor?

The existence of an independent contractor agreement, by itself, does not create an independent contractor relationship where an employer-employee relationship actually exists. Rather, multiple factors determine whether a worker is an independent contractor, and different factors are considered by different agencies. For tax purposes, the Internal Revenue Service considers which party has control over the work being performed. For wage-and-hour purposes, courts and the DOL analyze the “economic realities,” which focus on whether the worker is an employee or in business for himself, and the Ohio BWC employs its own 20-factor test.

With increased scrutiny of purported independent contractor relationships, employers should re-evaluate their worker classifications. Such a review could reduce the risk of costly taxes, fines, and penalties for employers in the event they have misclassified their employees as independent contractors

So What? Total Workforce Risks Are Imminent.

I reached out to a few attorney friends and asked – how real is this?  I personally know we have been getting phone calls to do more contingent workforce audits.

The reality is those who do AAP consulting such as Pinnacle AAP ( have seen an increase in audit requests related to OFCCP compliance.  This is due to new OFCCP leadership, the changes in business philosophy and the fact that auditors will be going directly onsite with client corporations.

New laws are coming into effect such as Bill 139 in Canada. Bill 139 is designed to provide new rights for temporary workers and will change how staffing providers charge and manage these resources. Cheryl Thacker and Darryl R. Hiscocks in an article published about this bill state: Temporary agencies typically charge a significant “finder’s fee” to prevent or discourage a client from hiring a temporary employee permanently. Under the proposed legislation, temporary agencies would be prohibited from charging a “temporary to permanent” fee where the employee has been working for the client company for six months or more. This would imply that an audit of tenure and cost of conversion will need to be monitored and audited for legal compliance.

Other areas of contingent management risk  that we see are:  Are your 1099’s valid?, Do 1099’s have the appropriate insurance? How long have 1099’s and contractors worked for your organization?  How are contractors treated inside your organization?  Do the rates you have negotiated with your supplier are they being adhered too? How are contractors and temporaries acquired and tracked? When a contractor leaves, how are they off-boarded?  When a contractor is converted to full-time, how is this tracked in the permanent hiring process? How do you track people who are laid off from full-time and immediately accept a contract position?

The reality is talent acquisition and management is a process that must be well managed. The type of talent and the changes in our working environment will challenge the whole concept of “full time” work as we know it today.  I see this as a perfect storm, where companies are changing, the laws and risks are coming into focus and the ability to respond effectively will require the talents of multiple disciplines.  The reality is, we need people to do the work.  The type of people will vary based upon the work and end product desired.  HOW we acquire, pay and manage these peoplewill need to be better structured, managed, tracked and trended – so risk, cost, quality and HR effectiveness can be accomplished at the end of the day.  Policies can no longer be lightly interpreted because sites such as are bringing to the forefront the lawsuits and costs associated with IRS and OFCCP activities.  We have now entered the age of TOTAL WORKFORCE MANAGEMENT.   Ready or not, here it comes.