“Choose Wisely”:Independent Contractor Misclassification Update

TJ Eaves, Higher Education Law FellowCarrie Johnston, Staff Attorney

Joanna Carey Cleveland, Vice President for Legal Affairs and Deputy General CounselUNC General Administration

October 26, 2015

Overview• (Raiders of) The Lost Ark

– A quick overview of the independent contractor framework– What does it mean to be an independent contractor v. employee?

• The Temple of Doom– Growing alliances among the federal DOL, IRS, and States to

discover and remedy “misclassifications”

• The Last Crusade– Review of university policies and practices– Understand your independent contractor processes– Role of legal counsel

• Questions/Discussion

The Lost Ark

• Background on independent contractor rules• Independent contractor v. employee– Responsibility for tax payments– Responsibility for workplace injuries– Other key differences

• Traditional IRS test– Common law rules: behavioral, financial, type of

relationship

The Temple of Doom

• Growing alliances among the federal DOL, IRS, and States– DOL currently partnered with 26 states (NC not one… yet)– Increased funding for enforcement activities– Federal IRS audits and DOL investigations

• Employer liability

• NC bill introduced this past session (S694 – “Employee Fair Classification Act”)

• Examples of recent voluntary classification settlements or other outcomes

The Last Crusade• Review your university policies and procedures

– Time to update your IC policy?– Good campus examples

• Understand your independent contractor processes– How are independent contractors added? – Which offices are involved in reviewing/approving?– Addressing common issues:

• Rehired TSERS retirees• Your employees in two different roles on your campus• Other UNC or State employees engaged on your campus

• Role of Legal Counsel– Helping assure there is a defensible process in place– Resource for Procurement, HR, Internal Audit as needed– Educating clients on ongoing federal/State enforcement efforts

Questions/Discussion

Links• Department of Labor

– Misclassification of Employees as Independent Contractors http://www.dol.gov/whd/workers/misclassification/

– Fact Sheet 13: Am I an Employee? http://www.dol.gov/whd/regs/compliance/whdfs13.htm

– Administrator’s Interpretation No. 2015-1 (July 15, 2015) http://www.dol.gov/whd/workers/Misclassification/AI-2015_1.htm

• IRS– Government Workers: Employees or Independent Contractors http

://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/Government-Workers:-Employees-or-Independent-Contractors%3F

– Independent Contractor (Self-Employed) or Employee? https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee