Compensation Solutions Blog » Independent Contractors

New Jersey and Other States Required to Report Independent Contractors

Teresa DeSousa — Mon, 21 Feb 2011 21:58:21 +0000

Although not required by federal law, New Jersey state law requires independent contractor reporting. All entities contracted for services in New Jersey must be reported as a new hire. There are no exceptions to this rule. As with all new hires, independent contractors must be reported within twenty (20) days of the hire date. Those who submit reports magnetically or electronically must report every fifteen (15) days.

There are ten (10) additional states that require independent contractor reporting. See below for basic information and links for more information.

State	Timeframe	Requirements/Comments
California	Within 20 days from date of hire	Contracted or actual payments of $600 or more
Connecticut	Within 20 days from date of hire	Services valued at $5,000 per year. Contractors who register with the State Dept. of Labor are exempted.
Iowa	Within 15 days from date of hire	For construction work; earnings of $2,000 per year.
Maine	Within 7 days from date of hire	Includes all contractors and subcontractors.
Massachusetts	Within 14 days from date of hire	Contractors for whom the payor is required to submit a Form 1099.
Minnesota	Within 20 days from date of hire	For state employers only.
New Hampshire	Within 20 days from date of hire	Sole proprietors entering into a contract valued at $2,500 or more.
Ohio	Within 20 days from date of hire	Contracts valued at $2,500. Licensed professionals excluded.

Proposed Legislation Will Make it Harder for Employees to Classify Workers as Independent Contractors

Teresa DeSousa — Wed, 13 Jan 2010 17:59:09 +0000

Citing lost revenue due to misclassification of workers, budget challenges and workers’ rights, Senator John Kerry introduced a bill designed to reduce the misclassification of workers as independent contractors. The Taxpayer Responsibility, Accountability and Consistency Act of 2009 is a companion bill to the one introduced in Congress in August 2009.

The bill would require businesses that pay more than $600 annually to corporate service providers to file Forms 1099, and would significantly increase penalties for a company’s failure to do so. It would also revise Section 530 of the Internal Revenue Code by limiting its safe harbor provisions for businesses that classify workers as independent contractors.

Under the proposed legislation, a business would have a reasonable basis for treating an employee as an independent contractor only if 1) no other classified employee held a similar position after 1978; or 2) the IRS did not conclude, in writing or by personal interview with the worker in question, that the worker is an independent contractor.

It is now more important than ever to classify your employees correctly. It is tied to wage and hour laws, specifically payment of overtime, which is a fast-growing area of contention and litigation. Non-compliance with the rules can lead to government fines, penalties and enhanced government presence in your workplace.

The text of the bill can be found at http://www.govtrack.us/congress/billtext.xpd?bill=s111-2882

Third Circuit Holds Company Liable for Discrimination Against an Independent Contractor

Teresa DeSousa — Mon, 21 Dec 2009 19:43:57 +0000

In a precedent-setting case, the 3^rd Circuit ruled that a company can be held liable for the discriminatory acts committed by its employees against independent contractors. The plaintiff, an African-American woman, alleged that, after she signed the independent contractor agreement with the Pennsylvania-based company, the company’s recruiting manager made racially discriminatory statements to her after she refused to shake his hand. He complained about her behavior and the company terminated her contract. She filed a claim with the EEOC under Title VII, the Civil Rights Act of 1866 and the Pennsylvania Human Rights Act (PHRA). The District Court ruled for the plaintiff because, among other things, she was not an employee of the company and therefore not entitled to protection under Title VII. The Third Circuit, however, held that the plaintiff could bring an action even if the plaintiff is an independent contractor, and remanded the case back to the District Court for further proceedings. See Brown v. J. Kaz, Inc., http://caselaw.lp.findlaw.com/data2/circs/3rd/082713p.pdf

Wage & Hour Lawsuits In Full Swing

Teresa DeSousa — Thu, 19 Nov 2009 20:50:13 +0000

The owner of a maintenance service company was sentenced to 10 years in prison in Michigan for a number of workplace violations, including not paying their employees overtime that was due them, and failure to withhold federal income tax, unemployment tax, Social Security and Medicare from their wages. As a result of the investigation, the owner also pled guilty to harboring a significant number of illegal aliens. The defendant tries to expatriate his assets and flee the U.S., but his efforts were unsuccessful. The jail sentence was upheld on appeal.

———————————-

Over 350 workers at a California maid service and carpet cleaning company were awarded $2.5 million in back wages, including unpaid overtime, after the U.S. Department of Labor found that their employer wrongly classified them as independent contractors. The owners were also fined $1 million in liquidated damages. The owners disregarded the court order, and were recently taken into custody for failure to make the required payments. They were later released pursuant to their promise to pay the required fines within a week’s time.

———————————–

Wal-Mart won final approval of an $85 million settlement to pay workers who sued for unpaid wages. The settlement is part of a global $640 million settlement reached in December. Workers in 30 states filed actions against Wal-Mart, claiming the company denied them rest breaks and manipulated their timecards to reduce their wages.