In the wake of the recession, employers are often choosing to use independent contractors instead of hiring permanent employees. It's a cost savings strategy but it can also result in lawsuits or hefty fines: Federal agencies and private law firms are going after businesses that improperly classify employees as contractors.
"One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees," wrote Steven Greenhouse in The New York Times.
From MPR News' Annie Baxter:
Doing so can produce big cost savings for employers because they typically don't have to pay for health benefits, overtime or certain taxes. From workers' perspectives, there are advantages, too. Contract work might allow them to get a foot in the door of a company that otherwise wouldn't hire them and earn more money on an hourly basis than in a salaried job.
But this arrangement, if mishandled, can carry a steep price for companies. The U.S. Department of Labor and the Internal Revenue Service are investigating businesses that misclassify workers as contractors. Some workers have filed lawsuits that allege businesses denied them benefits by wrongly classifying them as contractors.
We speak with local attorneys about the intricacies of laws that govern contract work and how businesses take advantage of it.