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May 13, 2010
Misclassification Penalties for Organizations Regarding Independent Contractors

Maria Anastas describes misclassification penalties in a BLR webinar entitled ‘Employee versus Independent Contractor: Where’s the Line? How to Make the Proper Call and Stay Out of Court’. She explains that organizations can get penalized for the misclassification of workers as independent contractors. There are reasons for employers to very careful with their independent contractor classifications. These reasons include the following:

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  • President Barack Obama's federal budget proposal for fiscal year 2011 includes $25 million for an initiative targeting the misclassification of employees as independent contractors
  • Federal officials say the additional funds would be used to hire 100 additional enforcement personnel and to provide grants to states that are trying to curb the problem
  • Both the Department of Labor and Treasury Department are pursuing a joint proposal that eliminates incentives in law for employers to misclassify their employees and enhances the ability of both agencies to penalize employers who misclassify
  • The misclassification of employees as independent contractors has been a big topic as of late. President Obama has said in public statements that the practice deprives workers of overtime and unemployment benefits and that some employers have used the practice to cut labor costs and save on taxes

Maria Anastas is a partner in the San Francisco office of law firm Ogletree, Deakins, Nash, Smoak & Stewart, PC ( www.ogletreedeakins.com ). She represents employers in labor and employment law matters exclusively, with a primary emphasis on traditional labor matters. She also devotes a substantial portion of her practice to providing employers with practical advice on a wide variety of employment law issues. She can be reached at maria.anastas@ogletreedeakins.com.

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