Many employers use independent contractors as a means of supplementing their regular workforce or to perform specific tasks outside the employers’ core business. In particular, the trucking industry utilizes independent contractors extensively. Using independent contractors may provide a cost-efficient means of meeting employer’s needs while providing the employer flexibility in maintaining its workforce. Employers, however, should proceed with caution when using independent contractors, as this classification has stringent requirements which vary among different state and federal agencies. Misclassification of an employee as an independent contractor may create substantial liability for the employer. When an employee is misclassified as an independent contractor, the employer may be liable for federal payroll taxes, state and local taxes, as well as Social Security and Medicare taxes under the Federal Insurance Contributions Act and the Federal Unemployment Tax Act. The employer may also be liable for any applicable penalties and interest. Misclassification of employees as independent contractors may also create liability for ERISA governed benefits plans, including insurance, retirement and 401K benefits. In addition, employers may be liable for unpaid contributions to the state unemployment fund and workers’ compensation benefits.
Polsinelli Shughart’s attorneys have extensive experience advising clients regarding the proper classification of their workers. We work with clients to properly structure the clients’ relationships with their independent contractors to avoid the challenges and exposure of misclassification. Our attorneys also have substantial experience in defending clients’ classification of workers as independent contractors. Our attorneys have defended clients before federal and state agencies regarding the classification of workers as independent contractors, and have successfully defended class action litigation challenging an employer’s classification of workers as independent contractors.