The Consultant - 2016 - (Page 34)

YOUR BUSINESS If It Walks Like a Duck and Quacks Like a Duck... Are your independent contractors really your employees? MATTHEW CLARKE AND MEGAN DELOCKERY merican poet James Whitcomb Riley once wrote, "When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck." With increasing regularity, government agencies and courts throughout the country are applying this same "duck test," and other legal tests discussed below, to find that the "independent contractors" so often used by companies in the forestry industry and elsewhere really have all the appearances of actually being "employees," and they thus should be treated as employees for purposes of payroll taxes and other employment matters. A growing concern facing consulting forestry practices today, and all industries, is correctly determining whether a particular worker, or entire group of workers, truly fits the definition of being 34 an independent contractor, or whether they should actually be considered an "employee" under federal or state law. The U.S. Department of Labor describes the issue as "one of the most serious problems facing affected workers, employers, and the entire economy." Businesses have certain inherent incentives to classify workers as independent contractors in order to avoid requirements to withhold payroll taxes, pay FICA, Medicare, and other withholdings, or make workers' compensation and unemployment insurance contributions under state law. Unfortunately, simply labeling workers as "independent contractors" or "1099 workers" is not enough to make those workers actually independent contractors under the law. In recent years, the U.S. Department of Labor and many states have been progressively more focused on the issue of proper classification of independent contractors. Making the wrong decision in how you classify a group of employees could result in major consequences for your business, including investigations by state or federal agencies or court cases brought by workers who claim they should have been treated as employees with all of the benefits that accompany that classification (such as minimum wage, overtime, worker's compensation insurance and other benefits). For example, in December 2014, the U.S. Department of Labor obtained a court judgment of $380,000 in back wages against a business that was found to have misclassified its employees who installed drywall as independent contractors. Other large judgments recovered by the Department of Labor against companies who misclassified employees have ranged from thousands to millions of dollars in back wages, damages and penalties. This type of case (and the resultant large judgment against the employer) is not uncommon as agencies and plaintiffs' attorneys have increased the number of claims they bring regarding employee misclassification. In fiscal year 2014, investigations by the U.S. Wage and Hour Division alone resulted in collection of more than $79 million in back wages for more than 109,000 misclassified workers. The increase in claims and investigations related to employee classification makes sense given the fact that the U.S. Government Accountability Office estimates that 40.4 percent of the U.S. workforce is made up of contingent workers. Of that number, 12.9 percent represents independent contractors who provide a product or service and find their own customers. To assist in navigating this tricky issue, we first look at some of the current legal battles regarding misclassification. We will then provide a discussion of common criteria used to determine whether workers qualify as independent contractors or employees, as well as some additional practical suggestions on ways to help minimize risk and ensure that your company does not fall into the trap of THE CONSULTANT 2016

Table of Contents for the Digital Edition of The Consultant - 2016

From the Executive Director: The Elephant in the Room
From the President ACF – We Join You
Member Profile: Keville Larson, Renaissance Forester
The Value of a Consulting Forester
Fracking and the Landowner
Two Weeks at the Gates of Hell
If It Walks Like a Duck and Quacks Like a Duck…
Proposed Unmanned Aerial Vehicle Regulations from the FAA
Cross-Border Trade Disputes Heat Up
Will Small Firms Have to Specialize to Survive?
The Cradle of Forestry
Products & Services Buyers’ Guide
Index of Advertisers
A Call to Order

The Consultant - 2016