Independent Contractor Misclassification and Compliance News: September, 2018

By MBO Partners | September 28, 2018

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As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we’ll bring you the latest news stories from around the web.

1. New York Considers Uber Drivers Employees for Unemployment Claims

The New York State Unemployment Insurance Appeal Board said that three Uber drivers were employees for the purposes of unemployment claims. These drivers had filed for unemployment, were denied, and then appealed. The administrative law judge said “the overriding evidence establishes that Uber exercised sufficient supervision, direction, and control” over the drivers to create an employer-employee arrangement.

Uber appealed, and the Unemployment Insurance Appeal Board arrived at the same conclusion. Uber views this decision as only applying to these drivers because Uber has changed its practices. If this decision applies to all Uber drivers, Uber would have to pay unemployment insurance taxes.

This is a reminder for all companies that engage with independent contractors to determine the results that are desired but to leave the decisions about the manner and means of providing the services to the independent workers.

2. Virginia Creates Task Force on Worker Misclassification

With an Executive Order, Virginia Governor Ralph Northam created a task force to focus on misclassification of workers as employees. A legislative committee reported that one-third of audited employers in certain industries misclassified workers. The committee estimated that worker misclassification cost Virginia over $28 million in lost tax revenue.

The taskforce is expected to develop a plan to reduce worker misclassification and payroll fraud in Virginia. The governor asked the taskforce to review statutes and regulations, evaluate enforcement practices, improve inter-agency cooperation, recommend changes in the laws, and recommend other ways to deter worker misclassification.

3. California Labor Commissioner Issues $1.2 million in Citations to Nail Salon for Misclassifying Workers

After an investigation of Young’s Nail Spa, the California Labor Commissioner determined that the nail salon had misclassified its workers as independent contractors and had not paid overtime, issued final paychecks, or provided properly itemized wage statements. The citations included both amounts payable to workers for unpaid overtime and not paying minimum wage and civil penalties.

4. Washington DC Attorney General Sues Electrical Contractor for Misclassifying Workers

The District of Columbia is suing an electrical contractor and two labor brokers for misclassifying 500 workers as independent contractors. Under the Workplace Fraud Act, a worker is presumed to be an employee unless the employer demonstrates that

(A) The individual who performs the work is free from control and direction over the performance of services, subject only to the right of the person or entity for whom services are provided to specify the desired result;

(B) The individual is customarily engaged in an independently established trade, occupation, profession, or business; and

(C) The work is outside of the usual course of business of the employer for whom the work is performed.

This standard is commonly known as the ABC test and was recently adopted by the California Supreme Court. Companies that engage with independent contractors must be able to show that the independent contractors are performing services that are similar to services performed by their employees.

For more information, check out our resources page on misclassification and compliance, or contractor engagement best practices. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.

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