In light of the rapidly changing coronavirus (COVID-19) situation, Troutman Sanders and Pepper Hamilton have postponed the effective date of their previously announced merger until July 1, 2020. The new firm – Troutman Pepper – will feature 1,100+ attorneys across 23 U.S. offices. Read more.


Independent Contractor Misclassification and Compliance

LEADERSHIP: Michael J. Crumbock, Matthew V. DelDuca and Lisa B. Petkun

We provide clients with holistic advice to enhance compliance with the laws and regulations governing the use of independent contractors and other types of contingent workers, and we have successfully defended clients in misclassification challenges throughout the country.

Private and governmental employers have substantially increased their use of independent contractors, long-term temporary employees, consultants and other contingent workers — either as part of their business models or to supplement their regular workforces. Many tech start-ups have also resorted to the use of independent contractors as part of the on-demand economy. When independent contractors are properly classified, state and federal law allows employers to exclude them from income tax withholding, FICA and Medicare contributions, and unemployment and workers’ compensation premiums. Bona fide independent contractors may also be excluded from participation in employee benefit plans, such as pension and group medical plans, and are not included in the computation of “employees” for purposes of the Affordable Care Act.

Responding to mounting evidence that many employers nationwide have misclassified employees as independent contractors as a cost-saving measure, state and federal labor departments, the IRS and plaintiffs’ class action lawyers have taken action. Legislative attempts to curtail the use of independent contractors and increase the penalties for misclassifying workers also are increasing.

Meeting Legal Challenges for Employers

Pepper helps employers meet challenges to the valid use of independent contractors and other types of contingent workers. We focus on the interrelated legal issues involving independent contractors by using an interdisciplinary approach to both diagnose and enhance companies’ compliance with independent contractor laws and defend businesses caught in the misclassification crackdown.

Our team includes more than 30 employment, tax, employee benefits and class action attorneys. Our approach helps organizations use independent contractors in compliance with employment, tax and employee benefits laws, and to minimize the likelihood of legal challenges to their use of independent contractors. Should disputes arise, we are experienced in defending employers against misclassification claims in civil litigation and government audits.

Our Process

Our lawyers understand that an audit by an unemployment or workers’ compensation agency of a company’s use of independent contractors also may lead to legal challenges to a company’s tax and employee benefits practices, and vice versa. When asked by clients to enhance their compliance with independent contractor laws, we examine the issues from an interdisciplinary perspective and propose practical measures that will comply with the requirements of all applicable laws. Our practice is nationwide and, where applicable, we work with lawyers in specific states.

A Leading Voice

Our lawyers have conducted seminars and presentations and written articles on the issue of independent contractor compliance and misclassification, including how to enhance compliance with laws permitting the use of independent contractors, conduct due diligence into companies that use 1099 contractors, minimize independent contractor misclassification liability, and other matters of vital interest to organizations that make use of independent contractors and other types of contingent workers.

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