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Mintz 4th Annual Employment Law Summit – The High Cost of Worker Misclassification

Join us in a discussion on the increasingly complex landscape of employee misclassification as we explore best practices to help your company avoid the costly pitfalls and time consuming litigation that can result from this expensive mistake.

An estimated 3.4 million employees are misclassified as independent contractors when they should be reported as employees. The Department of Labor (“DOL”) has been cracking down on misclassification in the past several years and federal and state regulators have been targeting specific industries known for utilizing independent contractors. In 2014, the New York Department of Labor completed more than 12,000 audits and investigations, revealing 133,000 misclassified workers. As a result, the New York Department of Labor assessed more than $40 million in unpaid unemployment contributions.

With the growing on-demand economy, the use of independent contractors has increased exponentially since the 1990s. In most cases the increase can be attributed to a combination of economic advantage to the employer and perceived lax regulatory enforcement from the government.

However, if an employee is misclassified, the consequences to the employer may outweigh any economic benefits they may have obtained. Employers may be held liable for wage law violations under the Fair Labor Standards Act, tax penalties, I-9 violations, unemployment insurance shortfalls, worker’s compensation violations, liability for improper benefit exclusions, anti-discrimination violations, and FMLA violations.

While some employers may intentionally misclassify an employee to reap the financial benefits, the majority of employers simply do not understand the complex laws in this area. This should come as no surprise given that the tests used to determine whether a worker is an independent contractor or an employee are complex, subjective, and differ from law to law.

So how can employers ensure they are not misclassifying new hires, or confirm that they have not misclassified current independent contractors? And if an employer believes they have misclassified an individual, what is the most cost-effective way to remedy the error? These questions and others will be addressed during our presentation as we share tips for risk mitigation, best practices in employee classification, and steps a company can take to proactively avoid becoming the DOL’s next target.

You can read more about the April 19 Summit and our agenda here. We hope you can join us!

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David R. Lagasse is a Mintz attorney who handles compensation issues in mergers and acquisitions, venture capital investments, private equity financing, and other transactional contexts. He represents buyers, sellers, and management teams in compensation and equity arrangements.