The number of job openings have reached a 15-year-high, according to the Bureau of Labor Statistics. In fact, there are an estimated 15 million active job postings on LinkedIn alone. With so many postings online, it can be a challenge for yours to stand out—especially...
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There are plenty of reasons that some people choose to go out on their own and work as independent contractors: flexible hours, unlimited income potential, control over income taxes, and control over the trajectory of their careers. There are also many reasons companies like to hire independent contractors, two of the most common being scalability and cost.
Some companies question when they should begin to transition from hiring independent contractors to full-time employees, but a more serious question should be, are your independent contractors already employees who have been misclassified? According to the U.S. Department of Labor (DOL), most workers are employees. The DOL issued a guidance in July of 2015 stating that the “misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States…”. The guidance goes on to state that when employees are improperly classified, those workers may not receive protections common in the workplace, such as minimum wage pay, overtime compensation, unemployment insurance, and workers’ compensation. The reality is that this is another one of the situations where “it’s good until it’s not.” Thus, the problem is that employees classified as independent contractors will request to be classified as such until they realize that they are in dispute with their employer, e.g., they are terminated and request benefits normally provided to employees.
The subject of independent contractors is a hot political topic right now, drawing attention from President Obama and Hillary Clinton. Both political figures have made it a priority to crack down on employers who are misclassifying employees as independent contractors to dodge compliance regulations and cut costs. Earlier this month the Department of Labor (DOL) came out with detailed guidelines to address misclassification, making it very clear when a company is in violation. For employers, the best practice is to classify everyone as an employee unless they can clearly be defined as an independent contractor.
Employers may be classifying individuals as independent contractors, rather than employees, to avoid providing them with a range of benefits. The recent DOL release states that “when employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.” This has led to lawsuits and litigation against numerous companies around the treatment of independent contractors. Let’s take a closer look to understand why this issue is receiving so much scrutiny lately.