How a Fortune 500 Retail Company Mitigated Misclassification Risk (Case Study)

By MBO Partners • March 11, 2022

3 MIN

Key points

When an enterprise engages independent talent such as freelancers, consultants, or contractors, they must abide by compliance regulations specific to these types of workers.
Building a comprehensive compliance program that takes into account individual worker qualifications, current laws and regulations, and proper worker management is one of the best ways to minimize exposure to misclassification liability.
Learn the three ways that this retail company implemented best practices and programs to mitigate misclassification risk.

CASE STUDY

Vertical: Specialty Industries | Type: Misclassification and Compliance

Compliance, at its core, takes many forms—preventing harassment and discrimination, safeguarding sensitive data, and ensuring workplace safety, just to name a few. When an enterprise engages independent talent such as freelancers, consultants, or contractors, they must abide by compliance regulations specific to these types of workers. To put it simply, different rules apply to independent contractors, because by law independent contractors are a different category of worker than your typical, W-2 employee.

Why Worker Classification is Important

Properly classifying workers is incredibly important. If a company misclassifies an employee as an independent contractor, it can result in costly legal consequences, audits, fines, penalties, and lawsuits—not to mention, reputation damage. Building a comprehensive compliance program that takes into account individual worker qualifications, current laws and regulations, and proper worker management is one of the best ways to minimize exposure to misclassification liability. A compliance program can help give enterprises peace of mind, provide legal protections, and make the company an attractive place for independent contractors to work. Of course, navigating all of the laws surrounding independent contractor classification is quite a complex process. That’s why many organizations choose to work with a firm that specializes in independent contractor engagement to help them properly assess their existing contingent workforce to ensure workers are compliantly engaged, paid, and managed.

How a Fortune 500 Retail Company Mitigated Risk by Implementing Best Practices

A Fortune 500 retail company was struggling with contingent labor compliance. They were beginning to see heightened awareness around worker misclassification at a federal level and wanted to take a closer look at their own classification practices. MBO discovered that the majority of their existing freelance workforce did not meet the standard level of self-employability to qualify for work as 1099 independent contractors. This put the organization at risk for worker misclassification. The company quickly realized that they needed a stricter background check system and a way to compliantly engage a diverse population of freelance workers.

The company worked with MBO to implement the following best practices:

Developed a variety of engagement programs to fit the diverse needs of the company’s independent contractor population
Increased cost visibility
Allowed independent contractor talent to work the way they want

Read the case study to learn more about how the company doubled program spend and achieved total risk mitigation with MBO’s management. You can also contact our team of experts today, or view our case study library to see more success stories.