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Everyone Will Have to Become an Entrepreneur

Everyone Will Have to Become an Entrepreneur | Worker Classification - Employees vs Independent Contractors | Scoop.it

Via Michael VanDervort
Sherry Griffin's insight:

Interesting graphic.  The savings behind hiring an Independent Contractor (IC) shown is due to ICs not needing to provide themselves with Workers Comp or Unemployment Insurance (in general, varies from state to state and I haven't researched all 50 states to confidently say it is the same in all states).  However, the premise is a little off.  Google and the big tech companies do want employees because they want control and complete ownership of what their workers do.  The issues with the big tech companies currently is that they are hiring skills for specific projects and then discarding the employee rather than developing him/her.  That is why they are looking to obtain foreign worker visas. 

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Peter Thompson's curator insight, March 18, 2013 1:02 PM

Interesting infographic on all the different x-preneurs of the future (now?) business.

Worker Classification - Employees vs Independent Contractors
There are many benefits to using Independent Contractors (ICs) in your business but if you do it wrong, it can cost you everything.
Curated by Sherry Griffin
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What Can Employers Do To Reduce The Cost Of Obamacare? - Forbes | @scoopit http://sco.lt/...

What Can Employers Do To Reduce The Cost Of Obamacare? Forbes Use Non-Employee Labor. Independent contractors by definition are not employees.
Sherry Griffin's insight:
I've always held a healthy respect for Forbes as they typically seem on their game, however, I have no idea how this article made it to print. Overall, the article is correct - if you have less than the equivalent of 50 full time employees, you don't have to comply with the new health care regulations. John Goodman really steps in it when he says "Use Non-Employee Labor. Independent contractors by definition are not employees. As long as they don’t work regular hours, workers can retain their status as contractors even if they work at the employer’s establishment." This type of misinformation is exactly why small business owners are getting into trouble. Goodman's assertion that working irregular hours is all that is necessary for a contractor to be a legitimate independent contractor is flat out wrong. There isn't a single agency in the US that would agree with Goodman's statement. Obamacare is one more reason why misclassification challenges are going to increase and money is being budgeted to increase misclassification audits. The objective of Obamacare is to increase business responsibility for paying health care premiums. Any business with a combined number of W2s and 1099s that hits 50 will be on the radar to be audited. In my opinion, Goodman and Forbes were irresponsible in putting this out and should apologize.
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End 'independent contractor' tax dodge by construction companies - Lexington Herald Leader

Kansas City Star End 'independent contractor' tax dodge by construction companies Lexington Herald Leader The McClatchy study found rampant misclassification of construction workers as "independent contractors." Using this one simple tactic, the...
Sherry Griffin's insight:
Well, slanted writing to say the least. Let's start with the correct information: Yes, misclassification is rampant in the construction industry. Texas does lose a ton of money and honest companies lose projects to cheating companies who underbid them by misclassifying workers. That is why the construction industry itself labored their law makers to pass legislation increasing penalties for misclassifying workers by construction companies. It is very tailored legislation addressing a specific industry issue. Now to the slanted writing . The author makes the assertion that all workers must be employees (don't accept payroll certification from companies that don't withhold taxes for they workers). There are very legitimate reasons to use a true independent contractor. Dissuading companies from utilizing contractors as a whole doesn't make business sense and shows a lack of business sophistication. The bigger (and more annoying) slant is the reference to no problems being found in Illinois in New York with the author's view that it is because they are not right to work states (meaning heavy union presence). Yes and no. First, misclassification definitely does happen in these 2 states. It is lower than in other states because they have been very aggressive in finding misclassification. Unions do okay a part but because of the reason the author would have you believe. I scooped an article this past week that explains how unions are impacting misclassification in NY and IL because they have union representatives staking out jobs, logging who is coming and going, interviewing workers, etc. Essentially, they are acting as misclassification investigators and turning over their findings to state agencies. Before anyone thinks they are doing it out of the kindness of their heart, realize they are financially motivated. Their pocketbook is why they are doing it.
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Rulings Raise Issues for Employers of Independent Contractors - Bloomberg BNA

Rulings Raise Issues for Employers of Independent Contractors Bloomberg BNA Two federal court rulings on package delivery drivers in California and Oregon may have broader state tax implications for employers with independent contractors.
Sherry Griffin's insight:
Acting in a manner contrary to their contract or having a contract that contradicts itself is where many business get messed up in their relationships with independent contractors. I like the insight that Lisa Petkun gives emphasizing "... the importance of the contract language combined with the actual conduct of the business."
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Independent Contractors Lying In Wait… An Employment Law Perspective - JD Supra (press release)

Independent Contractors Lying In Wait… An Employment Law Perspective JD Supra (press release) The Issue: Misclassification of employees as independent contractors is common and it can have “quicksand” impact on employers.
Sherry Griffin's insight:
Great breakdown on how independent contractor status can become an issue - even when the status is initially agreed upon and even desired by both parties. It really has levels of complexity most don't realize.
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Exotic dancers say they are employees, not independent contractors - The State

The State Exotic dancers say they are employees, not independent contractors The State And she developed paralysis on one side.
Sherry Griffin's insight:
There are actually 3 separate issues that should be considered in this article, though, the article lumps them all together as one issue of intentionally misclassified contractors. The 3 issues are: intentional/ignorant classification, businesses that don't file the taxes they are required to pay, and technical misclassification. Most trippers and many hospital worker are employees - even if they are called contractors for purposes of the US Department of Labor and a number of state agencies even if the IRS considers them contractors. Business will call workers contractors to save money without having any idea what constitutes a contractor. Some business simply don't file their taxes with agencies until they get caught and then they file bankruptcy (yes, these are evil companies ran by very bad people). Technical misclassification is when the relationship is correct but the paperwork is missing. There are 3 basic aspects to look at when determining if a contractor really is a contractor: 1) the contractor's business, 2) the relationship between the contractor client, and 3) the documentation of the relationship. Lack of a contract can allow the contractor to be deemed misclassified.
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Surviving the gig economy - Boston Globe

Surviving the gig economy Boston Globe “Thirty-three percent of independent contractors are baby boomers,” Zaino says. Many late-career freelancers are the most successful at it because they have years' worth of contacts and networking to draw on.
Sherry Griffin's insight:
This article/blog is a gem! It gives an insight into who independent contractors are and illustrates part of the reason the landscape of using independent contractors is so crazy. The author refers to his clients as "employers" and then make the following statement after saying that employers value their employees more than their independent contractors, "Not my employee, not my problem, the thinking goes." The "thinking" just doesn't go that way. That is actually, truly and legally the way. A real contractor is his/her own employer. The person or entity for whom the contractor completes a job is the contractor's client. If you engage a contractor who later refers to you as their employer, you need to terminate the contract as soon as the contract legally allows you. If the contract only terminates at the completion of the job, correct your contractor, "actually, I'm your client not your employer," and do not re-engage them in the future. Of course, if there is no contract, you probably are their employer. You may think it is just semantics and I'm being picky but terminology indicates expectations. Misaligned expectations can quickly get you into trouble.
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Legal Briefing: Contractors and Control - Workforce Management

Legal Briefing: Contractors and Control Workforce Management When Fernando Ruiz was hired by Affinity Logistics Corp.
Sherry Griffin's insight:
This case emphasizes again that it isn't what you call the worker; it's the reality of the relationship.
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Uber App Class Action Lawsuit - Lawfuel

Lawfuel Uber App Class Action Lawsuit Lawfuel Uber sent notices to many U.S.
Sherry Griffin's insight:
It was truly just a matter of time before a misclassification lawsuit was filed. Über is in the business of providing rides and without the drivers they have no business. That said, a class action suit may be tricky in regards to whose situations are "similar" enough. For instance, someone that actively markets his driving services and seeks fares on his own should not be considered similarly situated to the driver that exclusively gets her fares through Uber. Uber's decision to require mutual arbitration agreements after they were notified of the class action lawsuit in an attempt to minimize the class was ill advised. Though, not really surprising since they neglected to have a mutual arbitration agreement in the beginning.
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Is my Worker an Independent Contractor or an Employee?

Is my Worker an Independent Contractor or an Employee? For every business owner, large and small, knowing the difference between an independent contractor and employee is an important one. It is particularly important ...
Sherry Griffin's insight:

A very well written article regarding independent contractors. 

 

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Truckers, Outside Contractors and Urinals - Huffington Post

Truckers, Outside Contractors and Urinals Huffington Post Classifying them as "independent contractors" rather than "employees," works wholly in their favor, as it not only gives them near dictatorial powers, but prohibits drivers from seeking...
Sherry Griffin's insight:

David Macaray makes a truly Ironic statement in this article.  He starts by saying that trucking companies misclassify their workers as independent contractors (ICs) partially so that they can't unionize.  He then goes on to say,"Of course, when a trucker belongs to a union, it's a whole new ballgame. No more impossibly long hours, no more abysmally low wages, no more deadhead time. As union members, they're entitled to negotiate their wages, hours, benefit package, and working conditions -- the prospect of which terrifies trucking companies ... "

 

The irony of the statement is that. by definition, true ICs negotiate their hours, wages, and working conditions.  If a contractor is not able to negotiate those items, then it is extremely likely that they are misclassified.

 

Misclassification of workers creates problems for legitimate ICs because it confuses the issue, makes businesses leery of engaging new contractors starting their own business, causes legislatures to increase regulations making it tougher to be compliant, and reduces the rates that ICs can charge because misclassified worker rates artificially deflates the rate because these workers aren't paying business operating expenses that true ICs pay.

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Cruz cabs hit the road - Sault Star

Sault Star Cruz cabs hit the road Sault Star Lewis plans to hire his drivers as independent contractors, not employees. The two men spoke, with media present, outside the meeting room.
Sherry Griffin's insight:
It costs less to hire independent contractors than employees? Only if they are short term! Business owners that think they are saving money by hiring a 40 hour week independent contractor instead of an employee and at the same time believe that independent contractors is making more by not being an employee really don't understand the concept of business. When both of those items above are true is it a pretty sure bet that the independent contractor is really a misclassified employee. So much education needed and so few business owners who understand they need it.
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Oldtown Salinas security owner sentenced to jail, probation - The Salinas Californian

Oldtown Salinas security owner sentenced to jail, probation The Salinas Californian Perez further misclassified his guards as independent contractors rather than employees as required by the Bureau of Security and Investigative Services and...
Sherry Griffin's insight:
The summary gives the impression that the owner went to jail for misclassifying his workers. That's not accurate. Rather, it was a series if bad business practices and decisions - one of which was misclassifying his workers - that landed him jail time.
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Strengthen Your Small Business by Using Subcontractors

If you need help in your business, consider using subcontractors instead of employees. View the benefits of doing so and how to arrange the agreement.
Sherry Griffin's insight:
Ugh! Here we go again with the misinformation. A true contractor will cost more than an employee. Don't you as a business owner include your expenses in the price you charge for your product or services? An Independent Contractor (IC) does as well - plus they bring their own training (which the author pointed out) and that means a higher rate. There are definitely times when using an IC will benefit your company and they should be used. The key is to know when you can and when you cannot. Hire a Worker Classification Specialist to make sure you are compliant and have the documentation needed to back you.
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Should I Hire a Contractor or an Employee? - Entrepreneur (blog)

Should I Hire a Contractor or an Employee?
Sherry Griffin's insight:
Legal compliance should also be kept in mind. What he author neglects to consider is seasonal, part-time, and temporary employees. There is no requirement that employees be guaranteed a specific number of hours. Meaning you can have an employee who only does work as needed. The only items in this article that puts you in a legally defendable position are 3.c potentially item 6. Using anything else in this article as your basis for engaging a contractor leaves your company exposed. As a rule businesses operate with a range of exposures. What is vital to business decisions is knowing where your exposure is and appreciating your exposure level. This article fails to cover the actual facts that should be considered when deciding to hire an employee or contractor.
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NC must get tough with payroll cheats - News & Observer

NC must get tough with payroll cheats News & Observer Under pressure from a deep recession and its aftermath, employers are cutting corners by classifying their workers as independent contractors.
Sherry Griffin's insight:
Misclassification is also an result of confused business lawyers who believe a contract is all that matters (hint: any employment lawyer can tell you a contract is highly recommended but it is only piece of the puzzle), CPAs who are solely focused on the IRS and don't realize that misclassification is defined differently by other agencies (CPAs everywhere are saying "there are other agencies?"), and business consultants whose knowledge is limited. I've met many business owners who firmly believe they are doing it right but for someone who really knows this area, the red flags are obvious and concerning.
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Business, labor groups find shared ground - Fort Worth Star Telegram

Business, labor groups find shared ground Fort Worth Star Telegram The legislation slaps contractors with a $200 fine for every employee improperly classified as an independent contractor.
Sherry Griffin's insight:
This is case and point why independent contractor stats is suspect. Companies that intentionally misclassify are able to underbid their competitors because their overhead is less. It is almost how you show that they are misclassifying. For example, a company utilizing independent contractors legitimately will typically have higher expenses. The reason is that when you hire a legitimate contractor to roof a house, for example, the fee he charges includes what he pays himself, his employees, the cost he has incurred training, insurances, licensing expenses, marking expenses, payroll expenses, etc. The benefit is that he and his staff know what they are doing and will save you money by being able to do a better and faster job because they are experts at roofing. You pay more because the expertise benefits you in the end. If you are saving money up front using a contractor, it's highly likely you really have an employee. Though, not definite because a contractor is allowed to take a loss and may choose to do a job below cost in order to show the value he will bring to future projects or in exchange for a reference he can give to potential clients. If you are undercutting your competition by misclassifying your employees as independent contractors, don't expect them to just take it.
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At the Uber for home cleaning, workers pay a price for convenience - Washington Post

At the Uber for home cleaning, workers pay a price for convenience Washington Post That's the tradeoff in moving toward independent contracting in the service economy, where people order services online just as they would order batteries or a pair...
Sherry Griffin's insight:
I find this really interesting. They appear to be doing a number of things right but a couple of big items jump out at me as significant. Homejoy cleaners arrive in their Homejoy shirt. This gives the appearance that they are Homejoy employees. Now, if the shirt actually says "Homejoy Contractor" or something like that, fine. But you need to be aware of the perception you create. In a real cut and dry example of using a contractor properly, the contractor would be representing their own company. The flat rate to clients also bothers me. If they switched their model up to a Priceline.com type model where the client put in a price and the contractors picked which they wanted, that would be more in line with being a contractor as well. And let's be honest, Homejoy cannot possible expect their contractors to be legit paying them the amount they do in some of the locations they operate. A contractor is supposed to be in business for themselves and that means paperwork. Contractors should also be aware that unless it expressly states otherwise in the contract they sign with Homejoy and that Homejoy signs with the client, the contractor can be sued by Homejoy and the client. If the contractor is operating as a sole proprietor, then the contractor can lose everything they own. It will be interesting to see what details we find out as this company grown. Contractors or employees? At this point, we have just enough information to make us wonder.
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New York, Illinois find success in tackling labor violations - Kansas.com

The State New York, Illinois find success in tackling labor violations Kansas.com Last year, Illinois toughened its employee classification law by increasing potential financial penalties for construction companies that wrongly classified workers...
Sherry Griffin's insight:
Have any doubt that unions are playing a significant part in the crackdown on independent contractors? Read this article and pay attention to "who" is doing the investigating...
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Employment Law: Attorneys Speak Out - Nevada Business Magazine

Employment Law: Attorneys Speak Out Nevada Business Magazine To insure that a person is an independent contractor there are strict guidelines on how to initially set up the contract and then how to treat the person as an independent contractor so...
Sherry Griffin's insight:
I'll confess that I'm a huge fan of Anthony Hall of Holland & Hart (and his associate, Dora Lane, absolutely rocks). Anthony is quoted in this article along with a number of other Reno area employment lawyers. Overall, the article focuses on employee issues but the last section focuses on Independent Contractors. Enjoy!
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Workers Comp Corner: Being mindful with contract help - Barre Montpelier Times Argus

Workers Comp Corner: Being mindful with contract help
Barre Montpelier Times Argus
Employers, beware. While you think you've retained an independent contractor for a project, for worker's compensation purposes you may have just hired an employee.
Sherry Griffin's insight:

Vermont is pretty similar to many other states in that it is throwing a very broad net in order to cover as many workers as possible.  The reasons are both money and social responsibility based.  The result is that it is quite easy for the independent contractor you just hired to file a claim under your policy.

 

The most important thing you as a business can do to protect yourself in this case is to require that contractors provide a copy of their workers comp insurance policy.  Depending on your state, owners may not be required to hold a policy if they are the only employee(s) of the business but you can verify that they are a legitimate business (meaning, they are a real entity, have other clients, market their business, etc) and require them to write a letter on their company letterhead explaining why they are not required to hold a policy.  Some states even have a form that the contractor can complete that declares to the state that they have elected to not participate and understand that they are not covered if injured.

 

Be aware, do your homework, and don't assume.

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San Jose: Former dancers sue Pink Poodle strip club over wages - San Jose Mercury News

San Jose: Former dancers sue Pink Poodle strip club over wages
San Jose Mercury News
In a twist that may resonate with Silicon Valley's tech workers, the strippers contend they were treated as "independent contractors" instead of employees.
Sherry Griffin's insight:

Add California to the states with strippers suing to be reclassified as employees.  California is probably the top state  when it comes to protecting workers.  Chances are very high that the Pink Poodle will not escape this. 

 

Some thoughts to consider... What is the project that these contractors are being hired to do?  What is the compensation for completing the project?  If you hire a contractor to redo your kitchen, do you pay the contractor based on how many complements your kitchen receives?  When a venue brings a band in to play a concert, is the objective to make money off of the band or for the band to draw in customers and make money by charging them entry fees and a profit off of food, drinks, and other merchandise?  How is having someone strip in your club different than hiring a band to play Friday night?

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Dudley roofers settle labor violation claims - Worcester Telegram

Dudley roofers settle labor violation claims Worcester Telegram Settlements were reached and citations issued to S.O.M. Construction Enterprises Inc. and M.D.M.
Sherry Griffin's insight:
If you don't think you can afford to pay unemployment insurance or workers compensation now, how will you afford to pay thousands of dollars later? Here are a couple companies answer that question now.
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Port truckers: 'We are employees' - Savannah Morning News

Long Beach Post Port truckers: 'We are employees' Savannah Morning News But Ed Crowell, president and CEO of the Georgia Motor Trucking Association, asserts that the majority of independent contractors and owner-operators in the state are happy...
Sherry Griffin's insight:

Business owners need to take the classification of their workers seriously. That means taking the steps needed to verify that they are classified correctly and checking their paperwork to make sure that all their ducks are in a row.

 

The reality is that there are workers that are blatantly and intentionally misclassified.  There are also many currently misclassified that could be correctly classified with just a few changes.  Small items that go unchanged add up to misclassification.

 

Business owners in industries that heavily utilize independent contractors, such as the trucking agency, need to show extra diligence.  Being able to show that you take classification seriously and have done everything possible to ensure that your workers are classified correctly goes a long way with agencies and juries.

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Federal Judge May Give Madame 2nd Chance - The Chattanoogan

Federal Judge May Give Madame 2nd Chance The Chattanoogan ... argued that Tatiana Valencia Wallace had not been involved in coercion of any form. She argued her client had not been any kind of "leader" at all.
Sherry Griffin's insight:
Lol! This Madame tried to argue she wasn't guilty of human trafficking because the girls that work for her are independent contractors. Any questions now as to why classification is under fire?
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Arbitration Clause Survives Termination of Contractor Agreement, Sixth Circuit ... - The National Law Review

Arbitration Clause Survives Termination of Contractor Agreement, Sixth Circuit ... The National Law Review Hilltop Companies, LLC, hired Cynthia Huffman as an independent contractor to review files of mortgage loans.
Sherry Griffin's insight:
Make sure to include arbitration in the "survives termination" section of your contracts with independent contractors. This court upheld it but the business paid a lot in legal fees to get to that point. Save yourself some money and just include it.
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