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

 

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. Sochi-2014-Company-Olympics

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.

After a rather flat bill rate for Contingent Workers in 2013, analysts are predicting a sharp rise in the latter half of 2014. According to Robert Half Technology and The Creative Group, here are the positions that will see the sharpest rise in salary in 2014

money 1. Mobile applications developer: Experienced mobile applications developers can expect to see the largest increase, 7.8 percent, in starting compensation of any tech position listed in this year’s Salary Guide, with salaries ranging from $100,000 to $144,000.
2. Business intelligence analyst: Skilled business intelligence analysts can anticipate a 7.4 percent boost in starting compensation in 2014, with salaries ranging from $101,250 to $142,250.
3. Information systems security manager: Information systems security managers who can assess and re-mediate vulnerabilities, threats and intrusions are in demand, and are projected to see a 6.8 percent bump in base compensation this year, with average starting salaries between $115,250 and $160,000.
4. User experience designer: User experience designers can expect to see average starting salaries between $78,000 and $120,000, up 7.5 percent from 2013.
5. Mobile designer: Skilled mobile designers can anticipate average starting salaries to increase 6.3 percent in 2014, to the range of $66,000 to $103,000.
6. User experience specialist: User experience specialists can expect to receive base compensation in the range of $79,000 to $118,000, a gain of 5.9 percent over last year.

 

*Source-SIA (Staffing Industry Analysts)

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.”  obama_sotu_dann.photoblog600

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, 6a00d8345675df69e20167686b88a0970b-400wiIndependent 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

 

Organizations cannot afford to approach their contingent workforce management in an ad-hoc, as-needed manner. They must begin to manage their entire workforce, including the contract and temporary segment, efficiently. A third party can assist organizations to create an effective contingent labour management program that gives visibility into the costs, mitigates risk, and provides a record of the worker’s employment with the organization.

Aberdeen research surveyed companies and divided these organizations into best-in-class, industry average, and laggard categories. The best-in-class category consisted of organizations that were in the top 20% performers. They had 87% compliance to federal/state/regulatory labour and tax policies concerning contingent workers, 4.4 contingent worker quality ranking score, and 21% contingent worker spend savings.[1] These organizations have implemented many best practices that organizations should imitate when using a third party or managing contingent labour internally.

There are various third parties that organizations can use that provide different aspects of a successful contingent labour management program.

  • Independent Contractor Engagement Specialists (ICES) work with organizations to manage independent contractors — including high-rate, project-based SOW (Statement of Work) consultants — by acting as an Agent or Employer of Record (EOR) for IRS purposes. ICES will assess the eligibility of a potential contractor for 1099 status. If they are found ineligible, ICES will hire the worker as their own W-2 employee, allowing him/her to work for the client on subcontract. For those that are eligible, ICES will act as the “Agent of Record,” simplifying the process for their clients.[2]
  • Vendor Management Systems, or VMS, are technology solutions that provide visibility into how many contractors a company is using, for how long, and for what. These technology solutions provide visibility into the cost of the overall contingent labour program. The basic systems handle everything from requisition to off-boarding, including hiring approvals and processing time sheets and invoices.[3]
  • An MSP (Managed Service Provider) is an out­sourced service provider who is responsible for procuring and managing contingent workforce needs according to client requirements. MSPs may or may not offer a Vendor Management System (VMS) of their own but they normally combine a VMS technology offering into the programs they run for clients.[4]

All of these third parties can be used in combination or separately. Aberdeen research has found that although all types of third parties are used by best in class organizations, a VMS was the most commonly employed third party by best in class enterprises.[5] Top performing companies were 33% more likely to employ an MSP program than other companies.[6] Best in class organizations were 60% more likely to employ ICEs than other companies, and ICEs have historically shown to increase contract worker compliance by nearly 80%.[7]

For more information about how your organization can benefit from a third party, and to find out more about VMS, MSP, or ICES, Click here or contact:

Christina Fabugais
Marketing Manager
Contingent Workforce Solutions Inc.
Direct Phone:  416-642-9077
Toll Free:  1-866-837-8630 x9077
Email:  christina.fabugais@cwsolutions.ca

[1] Dwyer, Christopher J. Contingent Labour Management: Strategies for managing the complexities of the Contingent Labour Umbrella. Aberdeen Group. June 2010

[2] The ROI in Enterprise Contract Talent Management. The Human Capital Institute. Sept 2009

[3] Muson, Howard. Treating Contingent Workers as a Strategic Resource. The Conference Board: Trusted Insights for Business Worldwide. Sept 2010

[4] The ROI in Enterprise Contract Talent Management. The Human Capital Institute. Sept 2009

[5] Dwyer, Christopher J. Contingent Labour Management: Strategies for managing the complexities of the Contingent Labour Umbrella. Aberdeen Group. June 2010

[6] Dwyer, Christopher J. Contingent Labour Management: Strategies for managing the complexities of the Contingent Labour Umbrella. Aberdeen Group. June 2010

[7] Dwyer, Christopher J. Contingent Labour Management: Strategies for managing the complexities of the Contingent Labour Umbrella. Aberdeen Group. June 2010

US News reported that since the end of the recession, 54% of new jobs in the USA have been temp work. This statistic comes from the Bureau of Labor Statistics, which also indicated that roughly one in every 50 Americans held a temporary or contingent position as of the end of October.

While you may think that these trends are reflective of the uncertain economy, and that employers are hiring temporary labour because they are unsure that they will have the resources to hire full time staff, you may not be seeing the whole picture. The uncertainty in the economy is certainly driving employers to hire temporary or contract workers; however many employers are beginning to see that their contingent workforce allows them to be agile in the marketplace. They can hire highly skilled workers for specific projects, and when the project is over, they are not forced to find other tasks and roles for these individuals. US News reported that a survey issued by the consulting firm McKinsey 58% of employers said that they plan to hire more “part-time, contract, and temporary workers” over the next five years.

Labour market experts are also saying that a fundamental shift is taking place in the workforce, as temporary and contract workers can now be found across all industries and job functions. Before, temporary and contract labour was primarily limited to manufacturing, construction, clerical and other relatively low paid job functions. However, now contract workers can be found in Information Technology, Engineering, Accounting, Health Care and many other industries.

People are turning to contract work for various reasons. Some people have been laid off, and find that temporary and contract work is the best way to gain income while searching for full time work, and many are finding that contract work often leads to full time positions at those companies. Many find that they prefer the freedom and flexibility of contract work. They are able to choose when and how much they work, and they are able to be their own boss. Still others have found that they would like to work after retirement; however they want to be able to choose their own projects and how much they work. Contract work provides the perfect balance for those looking to work after retirement.

Employers that traditionally had 100% full time core workforce are now looking to migrate to an 80% full time, 20% contingent core workforce. The 20% are usually perpetual contractors, with no expectation to move these people back to full time. This gives employers the flexibility to adjust to changing business demands. However, employers need to be wary of the legal and tax risks that come with employing contract workers, especially on a long-term basis. The laws around contingent workers are complex, and many organizations do not have the necessary resources or competencies to manage these workers in house. For that reason, many employers are also using an MSP provider in order to mitigate risk and save money.

For more information about how your organization can employ contract workers and benefit from an MSP, click here or contact:

Christina Fabugais
Marketing Manager
Contingent Workforce Solutions Inc.
Direct Phone:  416-642-9077
Toll Free:  1-866-837-8630 x9077
Email:  christina.fabugais@cwsolutions.ca

Attend any recruitment or Human Resources conference and you’ll know that these industries are filled with mind boggling industry jargon. It can be overwhelming to try to understand all of it. One term that is particularly confusing is “co-employment”; however organizations face huge risks by not understanding this concept and taking the necessary steps to ensure they are protected against it.

Co-employment occurs when two or more legally separated employers share potential or actual employer responsibilities with mutual employees between the two organizations. It means that the two companies jointly employ the worker.

While this situation can be intentional, employers do not want co-employment situations when they are hiring contract workers. Employers do not want to be responsible for employment responsibilities and liability for their contingent workforce.  However, while employers may think that their agreement outlines that the contract worker is self-employed, the CRA may actually find that a co-employment arrangement actually exists.

What happens if the CRA does find that your organization has a co-employment arrangement with your contingent workforce? The classic example of the consequences of co-employment is a case in which Microsoft had to pay $97 million to a group of temporary workers that were deemed employees. Because these people were deemed employees, they were therefore entitled to benefits and additional pay, and Microsoft had to pay these workers what they were owed, along with a hefty fine. Other organizations could be faced with similar penalties if the CRA finds that their contract workers are actually employees.

This is a huge risk that companies need to address. Co-employment sounds like another industry buzz-word, but employers cannot afford to ignore or misunderstand the consequences.  The CRA has recently begun to increase its investigation into co-employment and contingent worker classification, and so you need to make sure that your organization is compliant with employment laws in order to mitigate your risk.

For more information about how you can mitigate your risk against co-employment, visit the CWS website or contact:

Christina Fabugais
Contingent Workforce Solutions Inc.
Direct Phone:  416-642-9077
Toll Free:  1-866-837-8630 x9077
Email:  christina.fabugais@cwsolutions.ca

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
Email:  christina.fabugais@cwsolutions.ca

Volatility in the economy drives companies to hire more contract workers, and this is a trend that has become apparent in the last few years. Recent news of the world economy slowing further will only cause this trend to increase. Companies need to consider their contingent workforce as part of their total talent strategy, because they can no longer afford to treat permanent and contract workers separately.

While the downturn in the economy has driven the increase in contingent labour, many workers are also choosing contract labour as an alternative to permanent work. Contract Labour gives individuals the freedom to determine their own work schedules, be their own boss, and pursue work that they find challenging and rewarding. For many, this is enticing.

While the increase in contract labour allows companies to be more agile and better cope with specific needs, it also presents management challenges. Companies need insight into their contract workforce so that they can manage costs, ensure compliance with employment and tax laws, and be sure they continue to hire quality performers.

Human Resources Executive Online recently published an article detailing how companies need to better manage their contract labour. The article also described how “In organizations where contract labor isn’t managed by HR, there likely will be some resistance to change”. However, the benefits of properly managing contract labour need to be emphasized. The article gave some advice about influencing key people to consider a different management approach, including:

  • Illustrate why it is important for HR to have control of all talent, whether that is due to demographic shifts or volume-hiring needs and to ensure workforce planning efforts align with business requirements.
  • Communicate the risk and rewards of not centralizing the contract workforce and how worker misclassification and improper budget alignment can be costly.
  • To ease the transition and get buy-in from stakeholders, help participants visualize the end result and how processes can come together to make using contract labor successful.
  • Make the connection between how optimizing all human potential — employees and contractors — can impact customer experience, sales and other business outcomes.
  • Take the time to update roles and responsibilities to gain visibility into how many contract workers are filling job descriptions that are actually full time jobs[1].

Today, contract labour is unavoidable. Workers are increasingly finding that contract work suits their lifestyle and turbulent economic times require companies to look for alternative staffing strategies. It is important that key people recognize the need to revamp their company’s HR department to meet today’s needs.

For more information about how we can help you better manage your Contract Labour, click here

[1] Orler, Elain. Human Resources Exectutive Online. http://www.hreonline.com/HRE/story.jsp?storyId=533340887