Independent Contractors Gain Ground, Forcing Employers to Be Cautious

 A group of office workers holding clipboards in front of their faces

(DGIwire) Is this the beginning of the end for independent contractors? A flurry of legal battles over the issue of what constitutes an employee versus an independent contractor dominated headlines throughout 2015, and none is bigger than the FedEx case. On June 12, 2015, as reported on TruckingInfo.com, FedEx Ground announced that it had reached a class settlement in an independent contractor lawsuit that will award plaintiffs $228 million in damages.

The FedEx case illuminates the worst-case scenario of treating your independent workforce like employees. As noted in their lawsuit, the drivers had to dress in FedEx uniforms, meet FedEx grooming standards and drive a truck—sometimes their own—festooned with the FedEx logo. There was little distinction between the two, yet FedEx called them contractors and as such, they weren’t eligible for benefits to which the rest of the employees were entitled.

What does this mean, exactly? And how does this affect how a company operates? For one thing, it is the employer’s responsibility to accurately classify its workers. Secondly, the determination made by the employer has significant financial and operational implications that influence budgets—and the bottom line.

Companies engaging employees rather than independent contractors will pay much higher costs for work to be accomplished. Forbes described this issue in a June 16, 2015 article, noting that employee status triggers a litany of costs and obligations, including federal and state tax payroll taxes, fringe benefits, anti-discrimination, healthcare, pension, worker’s compensation and unemployment insurance. Employees may also be eligible for overtime, fringe benefits, paid sick time, and expenses. In addition, employers must provide employees with paid sick time and affordable health coverage, as required by federal or local laws. Hiring independent contractors might seem like an attractive alternative for companies looking to avoid these pricy obligations, but companies should be wary as the ramifications for misclassifying workers could result in very high financial penalties.

Many companies are diligent about evaluating and engaging independent contractors in a fair and compliant manner; it should be noted that some workers prefer to be independent contractors and qualify as such. The trick is for companies to be knowledgeable about the guidelines surrounding worker classification—which happen to be very complex on a federal level, and can vary from state to state. Acquiring this expert familiarity can be time-consuming and keeping up with the changes in the laws is daunting. That’s where companies such as Atrium Staffing can help.

“Companies, especially larger ones with multiple divisions, can often become confused by the muddy line between contractor and employee,” says Rebecca Cenni, founder and CEO of Atrium Staffing. “We ensure that doesn’t happen and that companies are legally protected.”

Atrium, based in New York City, is well-versed in how to hire and engage all types of employees. Atrium is focused on providing contingent workforce management services for mid-size and Fortune 500 companies in nearly every industry. Atrium’s expertise includes regional Temporary and Direct Hire Staffing, national Employer of Record Payrolling, national Independent Contractor Engagement and specialty Intern Recruiting Services.

“These are complex waters to navigate,” adds Cenni. “But Atrium’s mission is to act as a partner to help companies cross them safely.”

 

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