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As companies take advantage of alternative staffing options, they need to be aware of legal implications on both state and national levels.
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HERE ARE SOME VERY ATTRACTIVE REA-
sons why companies hire workers who aren’t on the payroll or who work in locations beyond the companies’ offices. Chief among them are opportunities to reduce costs and increase the retention and satisfaction of staff members. Yet at the same time, there are legal implications related to three different outside-the-general-workforce options: independent contractors, remote workers and temporary workers that are contracted through staffing agencies. Let’s look at the issues, and attractive aspects, of each one in turn.
INDEPENDENT PROS & CONS There are some compelling reasons why companies hire independent contractors. In doing so, they can avoid significant wage, tax and benefit obligations associated with full-time staff members. They also don’t need to worry about payroll taxes, overtime, workers’ compensation and unemployment insurance, or paid sick leave. However, misclassification of workers as independent contractors deprives workers of important benefits, as well as the protection of anti-discrimination and workplace safety laws that often only protect “employees.” In addition, misclassification adversely impacts state and local governments, which claim to lose millions of dollars in foregone tax and benefit contributions. As a result, independent contractor audits and lawsuits have become increasingly common, resulting in significant costs and penalties. Unfortunately, proper classification of workers as independent contractors is not as simple as a written agreement between the parties. An all-purpose test to determine independent contractor status does not exist. And compliance is often complicated by the fact that different federal and state tests apply. Recently, California and New Jersey have taken
The Financial Manager • May/June 2020 15
