What a beautiful city!    As mentioned in our July Newsletter, Corporate Cost Control attended the UWC convention in Boston last month.   One of the topics that was presented five times during the sessions, was the independent contractor issue.    Why is this so important to the state agencies?  It is viewed as a loss in contributions and an increase in hearing and audits.   In a word, revenue!  A special task force was established to streamline the audit process of all states involved who focused mostly on the independent contractor.

Early in July, Alexandra Acosta (Secretary of Labor) announced the USDOL is withdrawing their guidance issued regarding the classification of independent contractors and joint employment standards.  The guidance was issued during the Obama administration.  The action of removing this guidance is thought to be one of the first concrete steps the Trump Administration has taken to free up employers to conduct business.

So, will the unemployment agencies reduce their search of the misclassified worker?   The answer is probably not.  A push for the integrity has grown as a way most states will becoming more solvent.   The good news is that few states expect to increase their unemployment tax rates for 2018.   Instead, the agencies are finding other ways to correct the solvency issues.    One method is by through the collection of erroneously paid unemployment benefits.   The error during the Great Recession was almost 13%.  The current rate is 11% and the overall goal is to get erroneously paid benefits under 10%.   Another method is the search for misclassified workers through claimants and audits.    In the long run, the employer still pays as the unemployment audits takes up the time of an individual who gathers the data and also penalty and interest can be assessed if a worker is misclassified is very costly.

The removal of the guidance by the USDOL merely removes the burden of the classification of employees from the federal agency to the state agencies.  The wheels have already started turning with most agencies moving full speed ahead with legislation, hearing and audits regarding the age old issue of integrity.

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