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Benefits in the News > By Subject >

Leased, contract, contingent workers


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Recent Headlines

Independent Contractor or Employee? Six Factors to Consider in Making the Classification (PDF)
"The determination of whether a worker is an employee or an independent contractor is complex.... [M]any factors can be used to determine the classification and no one 'bright-line rule' exists. Extreme care must be taken by employers and workers to closely examine their relationships." (Ascensus)
The Misclassified Worker: Employee Benefit Plan Considerations
"[M]any plans include a provision which provides that if a leased employee or independent contractor is reclassified as an employee by a government agency or a court, then such worker shall not become eligible to become a participant in the plan by reason of such reclassification. These types of plan provisions may be drafted to exclude participation on a retroactive basis or on both a retroactive and prospective basis, provided applicable plan coverage and nondiscrimination tests can be met. Such a provision is meant to evidence the clear intent of the plan sponsor." (Epstein Becker & Green, P.C.)
Fed Agencies Closely Watching Independent Contractor vs. Employee Debate -- and Plan Sponsors Should, Too (PDF)
"If DOL, the states and IRS truly share information and coordinate compliance efforts as intended, it will not be long before employee benefit plans are targeted for independent contractor treatment.... Excluding eligible employees is a qualification issue that could lead to serious financial consequences for retirement plan sponsors." (ERISAdiagnostics, Inc.)
Employee vs. Independent Contractor and Retirement Plan Impact
"Due to the employer tax implications, all employers should work with appropriate counsel to make certain that no employee is ever misclassified as an independent contractor. However, 403(b) plan sponsors should recognize the additional exposure related to the universal availability requirement of such plans, and 457(b) plan sponsors should recognize the special rules regarding such plans." (National Tax-Deferred Savings Association [NTSA])
Independent Contractor Misclassification: States Are Cracking Down
"[A]lthough the [DOL] and the IRS have increased their efforts to curtail the use of misclassified independent contractors (ICs), state legislators and regulators have taken a leading role in cracking down on companies that continue to classify workers as ICs without properly documenting or structuring their relationships with these individuals. Indeed, companies that use freelancers, consultants, per diems, long-term temps, and other contingent workers may be unaware that their greatest exposure is from violating state laws, not federal statutes." (Pepper Hamilton LLP)
Independent Contractor Misclassification: How Companies Can Minimize the Risks
"This white paper ... examines the risks posed to private businesses and governmental entities that have business models reliant upon the use of [independent contractors, or "ICs"] and other contingent workers.... address[es] how those risks typically arise and the costly consequences those risks may pose to companies and organizations using ICs.... [and] discusses the steps businesses can take to avoid or minimize IC misclassification liability, including restructuring, re-documenting, and re-implementing their business models, voluntary or government-sponsored reclassification, or redistribution of ICs through the use of a knowledgeable workforce management or staffing firm." (Pepper Hamilton LLP)
DOL and IRS Intensify Focus on Worker Misclassification
"The [DOL's] employee misclassification initiative is making noticeable progress. Since September 2011, the Department has entered into agreements with twelve states (and is pursuing agreements with others) to reduce employee misclassification, help reduce the tax gap, and improve compliance with Federal labor laws. So far, agreements have been entered into with California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington." (Deloitte)
Obama Declines to Order Ban on Anti-gay Bias by Employers with Federal Contracts
"The executive order, which activists said had support from the Labor and Justice Departments, would have applied to gay, bisexual and transgender people working for or seeking employment from federal contractors. Current law does not protect against discrimination based on sexual orientation or gender identity, and legislation to do so, which Mr. Obama endorses, lacks sufficient votes in Congress." (The New York Times; free registration required)
Employees vs. Independent Contractors: A Benefits Perspective
"Employers and their advisors have used several techniques to limit the group of workers that are covered by benefit plans. Before the enactment of [ERISA], some employers divided their operations into multiple business entities with one business employing high-paid employees who earned generous benefits and another business employing rank-and-file employees who earned no or minimal benefits. This technique was limited by ERISA's controlled group rules, which resulted in the aggregation of employee groups for discrimination testing purposes." (Society for Human Resource Management)
AARP Attorneys Represent Allstate Agents Alleging Age Discrimination
"The cases arise from Allstate's forced termination of more than 6,200 older employee-agents. Approximately 90 percent of those terminated were over age 40, and their median age was 50. Allstate took several approaches in its job termination efforts." (AARP Foundation)
Congress Trying Again to End 'Safe Harbor' for Businesses that May Have Misclassified Employees as Independent Contractors
"On March 1, 2012, 27 co-sponsors in the House introduced the Fair Playing Field Act of 2012 ..., a bill that appears to be identical to the Fair Playing Field Act of 2010 ..., which was never acted upon by Congress.... A bill with the same text was introduced in the Senate ... by Sen. John Kerry (D-Mass.) along with eight co-sponsors. The White House is likely to quickly endorse the Fair Playing Field Act of 2012, just as it did when the 2010 bill was introduced." (Pepper Hamilton)
Worcester, Massachusetts, Suspends Contractor Requirements for Health Insurance, Apprentice Training
"[The city manager] is suspending enforcement of apprenticeship training and health insurance provisions in the city's 15-year-old responsible employer ordinance. His action follows a recent federal court decision striking down similar provisions in Fall River's responsible employer ordinance. This means that certain contractors for the city no longer need to provide apprentice training, or give workers health insurance." (telegram.com)
IRS Newsletter Highlights Leased Employee Compliance Project, Electronic Signatures, and More
"The newsletter also includes a discussion of current priorities of the IRS Employee Plans Examinations office, including the 401(k) Compliance Check Questionnaire Project. And there is a summary of recent changes to Form 5300, including a requirement to provide information on pending IRS or DOL Voluntary Correction Program applications." (Thomson Reuters/EBIA)
IRS Compliance Initiative Finds Most Plan Sponsors Correctly Applying Leased Employee Rules
"Fully one-fourth of the plan sponsors were found to have correctly applied the rules. Somewhat surprisingly, 65 percent of the plan sponsors were found to have incorrectly indicated that they used leased employees (i.e., by checking Box 3F on Form 5500)." (Deloitte via BenefitsLink.com)
IRS's Employee Plans Compliance Unit Completes Project on Leased Employees
"The [Unit] has completed a project to determine if plan sponsors properly considered leased employees for qualified plan purposes. Most of the plan sponsors contacted either misunderstood the leased employee rules or misapplied these rules, the IRS found." (Wolters Kluwer Law & Business / CCH)
Health Care for a Changing Work Force: The Freelancers
"Today, the Freelancers Insurance Company . . ., which is wholly owned by the Freelancers Union (a nonprofit), has revenues of roughly $100 million and covers 25,000 independent workers and their family members in New York State, offering them premiums that the company calculates are more than a third below the open market rate." (The New York Times; free registration required)
[Opinion] Supercommittee Should Look at Pensions
"Here's one idea: Stop reimbursing the costs of pensions and other retirement benefits at huge, and hugely profitable, defense contractors. Over 10 years, such a move could save an estimated $30 billion -- the amount by which these pensions are collectively underfunded." (The New York Times; free registration required)

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