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Stakes Rise In Worker Classification Dispute

Published by on December 4, 2007

The Alaska Employment Law Blog has a post today on a Wall Street Journal article about Blackwater’s independent contractor squabble with the House Oversight Committee.  CNN also reports on Rep. Henry Waxman’s demand for information from Blackwater and his allegation that the company had avoided millions of dollars in taxes by misclassifying workers.  The stakes continue to […]

The Alaska Employment Law Blog has a post today on a Wall Street Journal article about Blackwater’s independent contractor squabble with the House Oversight Committee.  CNN also reports on Rep. Henry Waxman’s demand for information from Blackwater and his allegation that the company had avoided millions of dollars in taxes by misclassifying workers.  The stakes continue to rise in the worker classification debate.

As previously noted here, employers are now facing multi-state class actions challenging worker classification.  In the 90’s, the battle involved worker classification for ERISA purposes.  Now, the battle is shifting to overtime liability.  The Blackwater situation marks a new interest by Congress in the situation.

Employers that want to classify workers as independent contractors should have legal counsel review the position carefully against the IRS’s 20-factor test and the IRS Training Manual (as well as published tax decisions on point) to see if the classification is defensible.  In addition, if you classify a worker as an independent contractor you should review your ERISA plans to see if they are nevertheless included within the definition of “employee” for purposes of the plan.  (Tips for solving such problems with your ERISA plan — The Retirement Plan Blog.) 

The potential liability (for example, unpaid overtime or employee benefits; federal and state tax liabilities for FICA and unemployment) — and now bad press and Congressional investigations — make the up-front investment worthwhile.

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