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Debbie FledderjohannThere’s a new sheriff in town when it comes to worker misclassification.

Many employers use 1099 independent contractors (ICs) to reduce the costs associated with workers. By utilizing ICs, employers avoid paying the employer share of payroll taxes, the expenses associated with Workers’ Compensation and unemployment, employee benefits costs, and the time and money associated with administering various employment tasks.

However, employers can’t just call a worker an IC to avoid those costs. The worker must meet certain criteria to qualify as an IC.

The Obama administration has been particularly concerned about cracking down on the misclassification of ICs who really should be W-2 employees.

Worker misclassification robs both state and federal governments of taxes and unemployment funds.  Up until now, most of the news about worker misclassification enforcement has come out of the IRS.  But according to a Forbes column titled “Independent Contractor Enforcement: There’s More Than The IRS To Fear” by attorney John Thomas, the U.S. Department of Labor (DOL) has stepped up its own enforcement efforts against the misclassification of independent contractors.

This is all part of the Misclassification Initiative in which the DOL announced they would work with the IRS and share information to crackdown on worker misclassification.

This effort has resulted in several recent high dollar judgments against employers.  Most recently, the DOL announced it had recovered more than $1 million in back wages for workers at a Kentucky-based cable installation company. The Forbes column warns that many more DOL investigations are being conducted now.

It is important that you educate your clients of the ever-increasing focus on worker misclassification. Encourage them to look at their IC workforce and determine if those workers truly qualify as ICs.  In general, government agencies will be looking at the degree of control a company has over a worker and how financially dependent the worker is on the company when determining a worker’s correct classification. The best place to learn about correct IC classification is the IRS website.

Recruiters can help their client companies by offering to convert current 1099 ICs to W-2 employees.  You can offer to put those workers on contract assignments and outsource their employment to a contracting back-office that serves as the W-2 Employer of Record.

That way, your clients can still escape the administrative and financial burdens of employing their workers without the risk involved with making them ICs.

Debbie FledderjohannAccording to a recent Society for Human Resource Management (SHRM) article, I-9 audits are on the rise (SHRM membership may be required to access this article).  In 2004, only three audits were conducted compared with 3,004 in 2012.  Simple paperwork errors can cost employers up to $1,100 per violation.

If you serve as the W-2 employer for your contractors, YOU are responsible for I-9 compliance . . . and any fines assessed in an I-9 audit.  Here are some tips for making sure your I-9s pass muster.

  1. The newest version of Form I-9 must be used exclusively starting May 7, 2013.
  2. Make sure the employee completes Section 1 on their first day of work.  Inspect it to be sure that all the required information is provided and that Section 1 is signed and dated.  If anything is incomplete, don’t fill in the missing information.  Only the employee can complete or correct Section 1.
  3. Be sure that you complete Section 2 within three days of the employee’s start date.  So if a contractor starts an assignment on a Monday, Section 2 must be complete by Thursday.
  4. Remember that you must physically view each original document the employee presents in order to complete Section 2.  So what if you are too far from the employee to meet them?  The I-9 does allow for an “authorized representative” to complete Section 2 instead of the employer.  You could ask the client or a Notary Public to serve as the authorized representative.  If you encounter a lot of reluctance, you may want to work with an attorney to draw up a disclaimer that assures them they will not be held liable for I-9 penalties.
  5. Conduct annual I-9 audits and make corrections where needed.  But remember, don’t white out mistakes.  Cross them off, initial, and date any changes.  Don’t make changes to Section 1—again only employees can make changes there, so if you find a mistake, ask the employee to make the correction.  And be sure not to back date anything.  While correcting I-9s may not eliminate penalties, they could reduce them.
  6. U.S. Immigration and Customs Enforcement (ICE) normally audits companies that are connected to the nation’s “critical infrastructure,” such as power plants, food-service businesses, airports, etc., according to SHRM.  But complaints to ICE from disgruntled employees can also now initiate an audit, so don’t assume that your firm is flying under the radar.

Disclaimer: This article is for informational purposes only and should NOT be construed as legal advice.

Debbie FledderjohannOne of the trickiest things about running your own back-office is navigating the complex web of state and local laws.  Paid sick leave (PSL) is an area where recruiters need to be especially careful.  With no paid leave laws on the federal level, some states and cities are taking matters into their own hands.  Most recently, the city of Portland, Ore., passed a sick leave ordinance that will go into effect on Jan 1, 2014, according to HR Hero. If you’re running your own back-office, you are responsible, as the employer of your contractors, for providing PSL when required.  Here is a quick breakdown of the PSL laws currently on the books in specific areas: Portland, Ore.—Employers with six or more employees will be required starting 1/1/2014 to provide PSL to those working 240 or more hours per year within the city limits.  This will apply to employers even if they are not based in Portland and even if the employee only works in the city occasionally, as long as they meet the 240 hours per year requirement.  Employees will earn one hour of paid leave for every 30 hours worked up to a maximum of 40 hours per year.  They can also carry up to 40 unused hours over.  This law will also require employers with less than six employees to provide them with one hour of UNPAID sick leave for every 30 hours worked up to 40 hours per year. San Francisco—All San Francisco employers are required to provide one hour of PSL to employees for every 30 hours worked.  The maximum is 40 hours per year for small businesses (10 or fewer employees) and 72 for larger employers (more than 10).  Unused leave carries over every year, not to exceed the maximum limit.  Visit the City & County of San Francisco Labor Standard Enforcement site for more details. Seattle—Seattle’s PSL law applies to employers with a total of five or more full-time employees.  If any of those employees work at least 240 hours per year within Seattle’s city limits, the employer is required to provide one hour of leave for every 40 hours they work.  The maximum hours range from 40 to 72, depending upon the size of the company.  This law is unique in that it not only allows employees to use the time to care for themselves or a family member in the case of injury or illness, but it also can be used as “safe leave” if their place of business has been closed by a public official for health or safety reasons. Washington, D.C.—Under the Washington D.C. Paid Sick Leave Act, employees must be employed for a year without a break in service and work at least 1,000 hours prior to their request to take time off.  The law excludes the following types of workers: independent contractors, students, health care workers who have opted into a premium pay program, and restaurant servers and bartenders who receive both wages and tips.  The number of hours accrued depends upon the employer’s size, but cannot exceed seven days a year. Connecticut—With the only state-wide PSL law so far, Connecticut requires employers with 50 or more employees in the state to provide up to 40 hours of PSL.  The tricky part about this law is that it only applies to “service workers,” those who are not exempt from the Fair Labor Standards Act (FLSA) requirements and who fall into one of the positions listed in the legislation.  You can view a list and other details about the law by clicking here. Just because you don’t have contractors working in these areas doesn’t mean you don’t need to be concerned.  New York City is also close to passing legislation, and Philadelphia is considering its own PSL law.  Chances are that more will follow suit.  As a contract staffing recruiter running your own back-office, it’s important that you stay on top of these developments and make sure you’re following any applicable PSL laws. This article is for informational purposes only and should NOT be construed as legal advice.

Debbie FledderjohannA lack of qualified health IT professionals could prevent some healthcare providers from receiving government funding to implement Electronic Health Records (EHRs) at their facilities, according to Staffing Industry Analysts, citing data from a PricewaterhouseCooper (PwC) Health Institute Report.

The Health Information Technology for Economic and Clinical Health Act (HITECH Act) has been providing funding to healthcare providers for the adoption and “meaningful use” of EHRs.  That funding is contingent upon healthcare providers meeting specific deadlines.

But according to the PwC report, 67% of healthcare CEOs said they are experiencing IT staff shortages, and 59% said those shortages will negatively impact their ability meet those deadlines to receive the meaningful use incentives.

The need for Health IT professionals is so severe that many healthcare providers are seeking IT professionals from other industries.  But that is not the ideal solution.

Recruiter Raymond Gooch, who works the health IT niche, told Top Echelon Contracting that healthcare providers need IT professionals who have the ability to communicate with medical professionals, which is a hard combination to come by.  That is why many healthcare providers are turning to recruiters to help them fill these positions, making health IT a hot niche for recruiters.

“I’ve had hospitals tell me, word for word, ‘I have no problem finding quality IT professionals on my own, but I can’t find quality IT professionals who understand healthcare,’” said Gooch.  “Hospitals would strongly prefer individuals who have a healthcare background and have crossed over into IT.  That’s a slim pool of people.”

So it’s clear that recruiters are needed in this niche, but they need to be able to provide contractors to be successful.  Healthcare providers often need a lot of people to implement an EHR system, but only need one or two health IT professionals to maintain the system on an ongoing basis, Gooch said.

Contracting allows them to quickly ramp up to implement the project and then ramp down when it’s complete.  The PwC report found that 75% of healthcare providers are looking to hire health IT talent, so the potential is there for recruiters interested in this area.