Pepper Hamilton announces that it updated the white paper entitled Independent Contractor Misclassification: How Companies Can Minimize the Risks, written by Richard J. Reibstein, Lisa B. Petkun and Andrew J. Rudolph. They report:
This 2015 update of our White Paper details three ways by which companies that use independent contractors can minimize or avoid future independent contractor misclassification exposure:
- bona fide restructuring and re-documentation, using IC Diagnostics™
- reclassification, either under a government program or voluntarily
- redistribution of independent contractors, using a workforce management or staffing company.
These alternatives work for virtually all companies that use independent contractors – whether to supplement their workforce or to refer or offer qualified service providers to customers or clients as part of their business model. The same proprietary tool used to minimize independent contractor misclassification liability can be used to defend against misclassification claims brought in the courts and before administrative agencies.
The three years since the last update of our White Paper, first published in 2010, coincides with the period when independent contractors have become an integral resource in the sharing economy, where organizations such as Uber and other tech start-ups have avoided or limited their use of employees in favor of on-demand contract workers. While on the one hand, new companies may wish to emulate the most successful on-demand business models, on the other hand they do not want to become a defendant like Uber, which was recently unable to dismiss a class action challenge to the allegedly imperfect structure, documentation and implementation of its driver relationships and is now scheduled to face scrutiny by a jury.
This 2015 update – a comprehensive expansion of the prior editions of this White Paper – also addresses how independent contractor misclassification has arisen; the recent crackdown by federal and state regulators and legislators, the difficulty experienced by companies trying to comply with various tests for independent contractor status, the costly consequences of misclassification, the proliferation of class action lawsuits resulting in multi-million dollar claims, settlements and judgments, and the potential for unionization of workers re-characterized as employees by the courts and administrative agencies.