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