The misclassification of independent contractors will likely be one of the hottest wage and hour issues of 2012. The processes discussed below will assist in-house counsel in identifying potential high-risk contractors and reducing overall liability.
1. Identify Independent Contractors When the government conducts a misclassification audit, the Department of Labor (DOL) requests all 1099 tax forms and cash ledgers for the past three years. In-house counsel should review these documents for high risk contracts, paying particular attention to:
4. Examine Work Environment Even if the contract looks great, it is still important to get a sense of how work is actually performed. Some companies develop contractor surveys but, as surveys may result in the creation of evidence that could be used against the company, I recommend onsite visits.
During the visit, the company’s attorney should observe the following: