Businesses using non-employee workers should heed the recently announced expansion of the Internal Revenue Service (IRS) Voluntary Classification VCS Program (VCS Program) as yet another warning to clean up their worker classification practices and defenses for all workers performing services for the business in any non-employee capacity. 

Relying upon misclassifications of workers as nonemployed service providers presents many financial, legal and operational risks for businesses.  When businesses treat workers as nonemployees who render services in such a way that makes the worker likely to qualify as a common law employee, the business runs the risk of overlooking or underestimating the costs and liabilities of employing those workers.  The enforcement records of the U.S. Department of Labor Wage & Hour Division contains a lengthy and ever-lengthening record of businesses subjected to expensive backpay and penalty awards because the business failed to pay minimum wage or overtime to workers determined to qualify as common law employees entitled to minimum wage and overtime under the Fair Labor Standards Act.  See, e.g.,  Employers Should Tighten Worker Classification Practices As Obama Administration Moves To Stamp Out Misclassification Abuses; $1 Million + FLSA Overtime Settlement Shows Employers Should Tighten On-Call, Other Wage & Hour Practices;  Employer Charged With Misclassifying  & Underpaying Workers To Pay $754,578 FLSA Back Pay Settlement. 

Originally announced on September 22, 2011 in Announcement 2011-64,  the VCS Program as modified by Announcement 2012-45 continues to offer businesses a carrot to reclassify as employees workers misclassified for payroll tax purposes as independent contractors, leased employees or other non-employee workers backed by the enforcement stick of the IRS’ promise to zealously impose penalties and interest against employers caught wrongfully misclassifying workers.  While the IRS’s VCS Program and stepped up audits of worker classification provide a strong incentive for business to address their worker classification risks, the IRS is only one of many agencies on the alert for worker misclassification exposures.  Worker misclassification also impacts wage and hour, safety, immigration, worker’s compensation, employee benefits, negligence and a host of other obligations. 

All of these exposures carry potentially costly compensation, interest, and civil and in some cases even criminal penalty exposures for the businesses and their leaders.  Consequently, businesses should act prudently and promptly to identify and address all of these risks and move forward holistically to manage their misclassification exposures.

Agencies charged with enforcement of these other laws as well as private plaintiffs also are on the alert for and pursing businesses for aggressive misclassification of workers in these other exposure areas.   Since most businesses uniformly classify workers as either employees or non-employees for most purposes,  business leaders must understand and manage the full scope of their businesses’ misclassification exposures when charting and implementing their strategy in response to the VCS Program or another voluntary compliance program, responding to an audit or other agency action, addressing a private plaintiff suit or conducting other risk management and compliance activities impacting or affected by worker classification concerns. 

VCS Program Offers  Limited Worker Misclassification Exposure Relief

Worker misclassification impacts a broad range of tax and non-tax legal obligations and risks well beyond income tax withholding, payroll and other employment tax liability and reporting and disclosure. A worker classification challenge or necessity determination in one area inherently prompts the need to address the worker reclassification and attendant risks in other areas.

Typically, in addition to treating a worker as a non-employee for tax purposes, a business also will treat the worker as a non-employee for immigration law eligibility to work, wage and hour, employment discrimination, employee benefits, fringe benefits, worker’s compensation, workplace safety, tort liability and insurance and other purposes.

Health Care Reform To Increase Worker Classification Risks

Businesses can look forward to these risks rising in 2014, when the “pay or play” employer shared responsibility, health plan non-discrimination, default enrollment and other new rules take effect under the Patient Protection & Affordable Care Act (ACA).  Given these new ACA requirements and the government’s need to get as many workers covered as employees to make them work, as well as existing laws, IRS and other agencies are expanding staffing and stepping up enforcement against businesses that misclassify workers.

Whether and how ACA’s “pay-or-play” employer shared responsibility payment, default enrollment, insured health plan non-discrimination and other federal health plan rules apply to a business’ health plan requires a correct understanding of what workers considered employed by the business and how these workers are counted and classified for purposes of ACA and other federal health plan mandates.  

ACA and other federal health plan rules decide what rules apply to which businesses or health plans based on the number of employees a business is considered to employ, their hours worked, their seasonal or other status, and other relevant classification as determined by the applicable rule.  The ACA and other rules vary in the relevant number of employees that trigger applicability of the rule and how businesses must count workers to decide when a particular rule applies.  Consequently, trying to predict the employer shared responsibility payment, if any under Internal Revenue Code (Code) Section 4980H or model the burden or cost of any other federal health benefit mandates requires each business know who counts and how to classify workers for each of these rules.  Most of these rules start with a “common law” definition of employee then apply rules to add or ignore various workers.  Because most federal health plan rules also take into account “commonly controlled” and “affiliated” businesses’ employees when determining rule coverage, businesses also may need to know that information for other related or commonly owned businesses.  

For instance, when a business along with all commonly controlled or affiliated employers, if any, employ a combined workforce of 50 or more “full-time” and “full-time equivalent employees” (Large Employer) does not offer “affordable,” “minimum essential coverage” to every full-time employee and his dependents under a legally compliant health plan that provides “minimum essential value” within the meaning of ACA after 2013, the business generally should expect to pay a shared responsibility payment under Code Section 4980H for each month after 2013 that any “full-time” employee  receives a tax subsidy or credit for enrolling in one of ACA’s health care exchanges.  The amount of this required shared responsibility payment will be calculated under Code Section 4980H based on the plan design and coverage the employer health plan offers and the required employee contribution for employee only coverage.

If the business intends to continue to offer health coverage, it similarly will need to accurately understand which workers count as its employees for purposes of determining who gets coverage and the consequences to the business for those workers that qualify as full-time, common law employees not offered coverage.

In either case, ACA uses the common law employee test as the basis for classification of workers both to determine what businesses have sufficient full-time employees to become covered under these rules, the payment, if any, required under Code Section 4980H’s new employer shared responsibility payment requirements, as well as the workers entitled to benefit from these rules under employer sponsored health plans.  Accordingly, These the already significant legal and financial consequences for employers that misclassify workers will rise significantly when ACA gets fully implemented beginning in 2014.

Consider VCP Program Relief In Context Of Other Worker Classification Risks

As part of a broader effort to get businesses properly to classify and fulfill tax and other responsibilities to workers, the IRS is offering certain qualifying businesses an opportunity to resolve payroll liabilities arising from past worker misclassifications under the VCS Program. The VCS Program settlement opportunity emerged in 2011 as worker misclassification amid rising scrutiny and enforcement by the IRS and other agencies against businesses for misclassification related violations of the Code, wage and hour, safety, discrimination, immigration and various other laws.

Touted by the IRS as providing “greater certainty for employers, workers and the government,” the VCS Program offers businesses that meet the eligibility criteria for the program the option to resolve past payroll tax liability for the misclassified workers by paying a settlement payment of just over one percent of the wages paid to the reclassified workers for the past year and by meeting other program criteria. When a business meets the VCS Program requirements, the IRS promises not to conduct a payroll tax audit or assess interest or penalties against the business for unpaid payroll taxes for the previously misclassified workers covered by the VCS Program.  For more detail, see New IRS Voluntary IRS Settlement Program Offers New Option For Resolving Payroll Tax Risks Of Misclassification But Employers Also Must Manage Other Legal Risks; Medical Resident Stipend Ruling Shows Health Care, Other Employers Should Review Payroll Practices; Employment Tax Takes Center Stage as IRS Begins National Research Project , Executive Compensation Audits.

The IRS hoped the threat of much larger liability if the IRS catches their misclassification in an audit would induce businesses to settle their exposure and come into compliance by participating in the VCS Program. 

Part of the low participation stemmed from restrictions incorporated into the VCS Program.  Not all businesses with misclassified workers qualified to use the program.  The original criteria to enter the VCS Program established in 2011 required that a business:

• Be treating the workers as nonemployees;
• Consistently have treated the workers in the past as nonemployees;
• To have filed all required Forms 1099 for amounts paid to the workers;
• Not currently be under IRS audit;
• Not be under audit by the Department of Labor or a state agency on the classification of these workers or contesting the classification of the workers in court; and
• To agree to extend the statute of limitations on their payroll tax liabilities from three to six years.

After only about 1000 employers used the VCS Program to voluntarily resolve their payroll tax liability for misclassified workers, the IRS modified the program in hopes of making participation more attractive to businesses in Announcement 2012-45.  As modified by Announcement 2012-45, employers under IRS audit, other than an employment tax audit, now qualify for the VCS Program. Announcement 2012-45 also eliminates the requirement that employers agree to extend their statute of limitations on payroll tax liability from three to six years.   

A business that meets these adjusted criteria for participation now follows the following steps to enter the VCS Program:

• Files the Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before the business plans to begin treating the workers as employees;
• Adjusts its worker classification practices prospectively with respect to the previously misclassified workers;
• Pays the required settlement fee; and
• Properly classifies workers going forward. 

While these changes may make participation in the VCS Program more attractive to some employers, many employers may view use of the VCS Program as too risky because of uncertainties about the proper classification of certain workers in light of the highly fact specific nature of the determination, as well as concerns about the effect that use of the VCS Program might have on the businesses non-tax misclassification exposures for workers that would be reclassified under the VCS Program.

Uncertainties Complication Worker Classification Risk Management

One of the biggest challenges to getting businesses to change their worker classifications is getting the businesses to accept the notion that long-standing worker classification practices in fact might not be defensible. 

Although existing precedent and regulatory guidance makes clear that certain long-standing worker classification practices of many businesses would not hold up if scrutinized, business leaders understandably often discount the risk because these classifications historically have continued with little or no challenge in the past.

Even when business leaders recognize that changing enforcement patterns merit reconsideration of historical worker classification practices, they may be reluctant to reclassify the workers. 

The common law employment test applied to decide if a worker is an employee for payroll, income tax, employee benefit plan and other purposes under the Code often relies on a subjective, highly fact-specific analysis of the particular circumstances of the worker.  Employment status typically is presumed under the common law test for purposes of the Code and most other laws.  This means that the business, rather than the IRS or other agency, generally bears the burden of proving the correctness of its classification of a worker as a non-employee for purposes of these determinations. 

Given the business typically bears the burden of proving a worker is not an employee, a business receiving services from workers performing services in a capacity other than as a employee should ensure that the position in structural form and operation will withstand scrutiny under the common law and other applicable tests and retain the necessary evidence to support this characterization in anticipation of a potential future audit or other challenge.

Since the business can expect to bear the burden of proving the appropriateness of a nonemployee characterization, businesses also should exercise special care to avoid relying upon overly optimistic assessment of the facts and circumstances when assessing the defensibility of their characterization of the position. 

When the factual evidence creates significant questions about the defensibility of a worker’s classification as a non-employee, an employing business generally should consider reclassifying or restructuring the position to be more defensible pursuant to a process designed to mitigate or resolve risks of the prior classification.  Often, it also may be desirable for the business to incorporate certain contractual, compensation and other safeguards into the worker relationship, both to support the nonemployee characterization and to minimize future reclassification challenges and exposures.

Consider Importance of Attorney-Client Privilege As Risk Management Tool

Because of the broad reaching and potentially significant liability exposures arising from misclassification, business leaders generally should work to ensure that their risk analysis and decision-making discussion is conducted in a way that positions these discussions for protection under attorney-client privilege and attorney work product privilege.

The availability of the attorney-client and other evidentiary privilege to help shield the investigation and associated decision-making is particularly important because of the potentially significant civil and even criminal liability exposures that often arise from worker misclassification under various relevant laws. 

The interwoven nature of the tax and non-tax risks merits particular awareness by business leaders of the need to use care in deciding the outside advisors and consultants that will help in the evaluation of the risks and structuring of solutions.  With the VCS Program and other tax exposures in the limelight, businesses can expect that their accounting and other consultant advisors will recommend and even offer to lead the review.  While appropriately structured involvement by these non-legal consultants can be a valuable tool, the blended nature of the misclassification exposures means that the evidentiary privileges that accountants often assert to help shield their tax related discussions from discovery in certain federal tax prosecutions are likely to provide inadequate protection against discovery given the broad non-tax related exposures inherent in the misclassification problem.  For this reason, business leaders are urged to require that any audits and other activities by these non-legal consultants to evaluate or mitigate these exposures be engaged and conducted whenever possible within attorney-client privilege to protect and promote the ability to assert evidentiary protections against disclosure and discovery of sensitive discussions. Accordingly, while businesses definitely should incorporate appropriate tax advisors into the evaluation process, most businesses before commencing meaningful discussions with or engaging assessments by their accounting firm or other non-attorney tax advisor will want to engage counsel and coordinate  their accounting and other non-attorney tax advisors” involvement and activities through qualified legal counsel to protect and maximize the ability to conduct the analysis of their risks and options within the protection of attorney-client privilege.

For Help With These Or Other Matters

If you need assistance in conducting a risk assessment of or responding to an IRS, Labor, HHS, DOJ, ICE, private claim or other legal challenges to your organization’s existing workforce classification or other labor and employment, employee benefit, compensation practices, compliance, or other internal controls and management concerns, please contact the author of this update, attorney Cynthia Marcotte Stamer.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experience worker classification and other employment, employee benefits and workforce matters,  Ms. Stamer has more than 25 years experience advising and representing employer, employee benefit and other clients before the Internal Revenue Service, the Department of Labor, Immigration & Customs, Justice, and Health & Human Services, the Securities and Exchange Commission, Federal Trade Commission, state labor, insurance, tax and attorneys’ general, and other agencies, private plaintiffs and others on worker classification and related human resources, employee benefit, tax, internal controls, risk management and other legal and operational management concerns. 

Ms. Stamer works extensively with employers, employee benefit plan sponsors, insurers, administrators, and fiduciaries, payroll and staffing companies, technology and other service providers and others to develop and run legally defensible programs, practices and policies that promote the client’s human resources, employee benefits or other management goals.  

A Fellow in the American College of Employee Benefits Council, the immediate past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, the Vice Chair of the ABA TIPS Employee Benefits Committee, the Gulf States Area TEGE Council Exempt Organizations Coordinator, past-Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, and the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, Ms. Stamer also is a widely published author and highly regarded speaker on these and other employee benefit and human resources matters who is active in many other employee benefits, human resources and other management focused organizations who is published and speaks extensively on worker classification and related matters.   She is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications.

You can learn more about Ms. Stamer and her experience, find out about upcoming training or other events, review some of her past training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer at www.CynthiaStamer.com.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources available at www.solutionslawpress.com including:

• Alert Employees Claiming Qualified Adoption Expenses and Education Credits About Changed IRS Procedures
• 13 Employer Tips For Coping With Health Care Reform Now!
• Sequester Will Cut ACA Small Businesses Health Care Tax Credits
• Premier Insurance Services Pays $120,000 In Back Wages, Damages, Penalties Because Commission-Only Comp Violated Minimum Wage, Overtime Laws
• OSHA Citation Of Michigan VA Reminder To Manage Workplace Safety
• Labor Department Targeting Businesses Violating Overtime, Other Wage & Hour Laws
• Wal-Mart Settlement Shows ADA Risks When Considering Employee Return To Work Accommodation Requests & Inquiries
• HHS Releases Final Rule on Health Insurance Market, Rate Review, Pre-Existing Conditions & Other ACA Market Reform Rules
• FTC, HIPAA Rules Require Health Plans & Employers Strengthen Data Security on Mobile Devices and Applications
• 3/13 JCEB Teleconference Explores Foreign Transferees: Outbound, Inbound, Equity And Treaty Issues
• Stamer Talks on “What the Wind Blew In: Coping with Health Care Reform: 2013 and Beyond” May 2 At 24th Annual RPTE Spring Symposia In Washington, D.C.
• IRS Will Begin Accepting Returns Claiming Education Credits By Mid-February
• IRS Shares Procedures Employers Use To Claim Increased Monthly Transit Benefit Exclusion Allowed By Administrative Taxpayer Relief Act
• Employers ACA Health Reforms Prohibit Using HRAs To Pay Individual Medical Policy Premiums & Impact Other HRA Arrangements

For important information about this communication click here.   THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2013 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.

Program Another Sign of Growing Audit & Enforcement Risks.   Businesses Urged To Strengthen Their Worker Classification Defenses

The September 22, 2011 launch by the Internal Revenue Service of a new Voluntary Worker Classification Settlement Program (“Settlement Program”) is the latest warning to businesses using independent contractors, leased employees or other non-employee workers of the need to review critically within the scope of attorney-client privilege the defensibility of their existing classification and treatment of those workers as non-employees in light of the in light of stepped up scrutiny and enforcement emphasis by the IRS and other federal and state regulators as well as workers and others in private litigation.

Coupled with growing scrutiny and challenges to businesses efforts to avoid employment-related liability and obligations through the use or workers that the business characterizes as non-employees by other federal and state agencies and plaintiff attorneys, the Settlement Agreement announcement is another sign that businesses using workers who are not employees need to be prepared to defend their worker classification and the legality of their dealings with these workers under applicable federal and state laws.

To guard against these and other growing risks of worker classification, employers receiving services from workers who are not considered employees for purposes of income or payroll should review within the scope of attorney-client privilege the defensibility of their existing worker classification, employee benefit, fringe benefit, employment, wage and hour, and other workforce policies and consult with qualified legal counsel about the advisability to adjust these practices to mitigate exposures to potential IRS, Labor Department or other penalties associated with worker misclassification.

Settlement Program Establishment Should Prompt Review Defensibility of Worker Classifications

The new Settlement Program established under Announcement 2011-64 reflects the widespread emphasis by the IRS and other federal and state regulators on uncovering and redressing misclassification of workers as non-employees by businesses for purposes of tax and other laws.  IRS scrutiny of worker classification practices by businesses has risen significantly over the past decade. 

The IRS’ launch of the Settlement Program follows its announcement in September, 2010 of plans to conduct approximately 6,000 payroll tax audits over a three year period focusing on the appropriateness of employer worker classification and other payroll tax practices.  The announcement of the new Settlement Program signals that the IRS perceives that worker misclassification by business in violation of Federal tax laws is sufficiently widespread and pervasive to merit both efforts to incentive voluntary correction through participation in the Settlement Program, as well as stiff enforcement against businesses that fail to self-correct worker classification compliance concerns.

Designed to increase tax compliance and provide what the IRS says will be “greater certainty for employers, workers and the government,” the IRS says the Settlement Program offers eligible employers concerned about potential worker misclassification exposures that might arise from a payroll tax audit the opportunity to come into compliance by making the required filing, adjusting their practices and paying the required settlement fee effectively equaling just over one percent of the wages paid to the reclassified workers for the past year.  If this settlement fee is paid and the other requirements of the Settlement Program are met, the Settlement Program specifies that employers accepted into the program will not be assessed interest or penalties and not be audited on payroll taxes related to these workers for prior years.

For businesses that can meet applicable requirements for participation, participation in the Settlement Program may offer an attractive option for resolving payroll related tax risks.  However, not all employers will qualify for the Settlement Program.  Employers must meet the eligibility requirements for participation.

Also, employers electing to use the Settlement Program need to understand the implications of that participation on the Statute of Limitations on their payroll tax liabilities. For the first three years of participation in the program, the Settlement Program specifies that participating employers will be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.  Businesses will need to weigh the benefits of using the Settlement Program, if available, against the risk of reclassification and the availability of other resolution options that may be available under applicable Internal Revenue Code and IRS rules and procedures. Furthermore, many businesses evaluating worker classifications also may find it difficult to determine with certainty the risk of reclassification for certain categories of workers. Whether a worker is properly classified as an employee for most purposes under the Internal Revenue Code’s income tax withholding and reporting, payroll tax and most other employment tax turns on a highly fact specific analysis of under a common law employment test.  When an analysis of the evidence reflects a high degree of certainty that the classification of a worker as a non-employee was not defensible under existing tax authorities, use of the Settlement Program or other tools to resolve liability definitely merits consideration.  Because of the factual nature of the analysis, however, the decision whether to use the Settlement Program where the circumstances under which the worker renders services are less clear may be more difficult.  When making these assessments, businesses should avoid the temptation of being overly optimistic in their assessment of the facts and circumstances given that the Internal Revenue Code generally assigns responsibility to the business to prove the appropriateness of its classification of a worker as a non-employee.  While this allocation of the burden of proof means businesses should exercise caution when engaging workers in non-employee capacities, where the facts support this characterization, classification of a worker as a non-employee can be appropriate.  When deciding to continue the non-employee characterization for purposes of the Internal Revenue Code, however, businesses are urged to document the evidentiary basis and evidence supporting that determination in anticipation of a potential future audit or other challenge.

Learn more about the Settlement Program and worker classification risk management here.

Businesses Should Address Other Worker Reclassification Risks When Conducting Settlement Program Risk Analysis

As welcome as the opportunity to resolve potential payroll tax exposures through participation in the Settlement Program, businesses considering using the Settlement Program also will need to understand and prepared to address various non-tax legal concerns.   Because worker misclassification tends to impact on a broad range of legal obligations and risks, businesses evaluating or planning to use the Settlement Program are act quickly, but carefully, to evaluate and determine whether and how to use the Settlement Program and to identify and take appropriate steps to address both the tax-related liabilities targeted for resolution under the Settlement Program, as well as misclassification exposures likely to arise with respect to workers to be reclassified in connection with the use of the Settlement Program.

When conducting this evaluation and deciding whether to use the Settlement Program, businesses also need to keep the wider implications of the analysis and their decisions regarding how to handle a potential aggressive or misclassification as a worker as a non-employee.  A determination of potential aggressive or misclassification for purposes of the Internal Revenue Code’s payroll tax rules generally will necessitate the need to evaluate potential exposures that may arise from the worker misclassification under other federal and state laws. 

Typically, in addition to treating a worker as a non-employee for tax purposes, a business also will treat the worker as a non-employee for immigration law eligibility to work, wage and hour, employment discrimination, employee benefits, fringe benefits, worker’s compensation, workplace safety, tort liability and insurance and other purposes.   Consequently, a determination that reclassification is advisable for tax purposes generally will prompt the need to consider how to address the worker reclassification and attendant risk for purposes of other legal risks and requirements, as well as those covered by the Settlement Program.  Businesses will need to consider how the voluntary reclassification of workers and settlement under the Settlement Program may impact their exposures and obligations under other laws.  As the Settlement Program does not provide relief from the exposures arising from misclassification under other laws, businesses should be prepared to evaluate the advisability of reclassification of the worker for purposes of these other laws, the potential exposures attendant to misclassification of workers under those laws, and risks, challenges and opportunities for mitigating these exposures.

Businesses Cautioned To Conduct Evaluations & Discussions In Attorney-Client Privilege Due To Complexity & Significance of Potential Exposures

Conducting and discussing the Settlement Program and other related concerns within the scope of attorney-client privilege is particularly important because of the potentially significant civil and even criminal liability exposures that may arise from misclassification of workers for purposes of the various relevant laws.  Because of the broad reaching and potentially significant non-tax exposure inherent in these discussions, business leaders are cautioned that the evidentiary privileges that often provides protection against disclosure of certain discussions with accountants and certain other non-attorney tax advisors for purposes of certain tax laws may be inadequate in scope to protect discussions against discovery for purposes of these other laws.  Accordingly, while businesses definitely should incorporate appropriate tax advisors into the evaluation process, most businesses before commencing meaningful discussions with or engaging assessments by their accounting firm or other non-attorney tax advisor will want to engage counsel and coordinate the involvement of their accounting and other non-attorney tax advisors through qualified legal counsel to protect and maximize the ability to conduct the analysis of their risks and options within the protection of attorney-client privilege.

For Help With These Or Other Matters

If you need assistance in conducting a risk assessment of or responding to an IRS, Labor Department or other legal challenges to your organization’s existing workforce classification or other labor and employment, employee benefit or compensation practices, please contact the author of this update, attorney Cynthia Marcotte Stamer.

Ms. Stamer has more than 24 years experience advising and representing employer, employee benefit and other clients before the Internal Revenue Service, the Department of Labor, Immigrations & Customs, and other agencies, private plaintiffs and others on worker classification and related human resources, employee benefit, internal controls and risk management matters. 

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experience worker classification and other employment, employee benefits and workforce matters,  Ms. Stamer works extensively with employers, employee benefit plan sponsors, insurers, administrators, and fiduciaries, payroll and staffing companies, technology and other service providers and others to develop and operate legally defensible programs, practices and policies that promote the client’s human resources, employee benefits or other management goals.  

A featured presenter in the recent “Worker Classification & Alternative Workforce: Employee Plans & Employment Tax Challenges” teleconference sponsored by the American Bar Association Joint Committee on Employee Benefits, Ms. Stamer also is a widely published author and highly regarded speaker on these and other employee benefit and human resources matters who is active in many other employee benefits, human resources and other management focused organizations.

A Fellow in the American College of Employee Benefits Council, the immediate past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, the Vice Chair of the ABA TIPS Employee Benefits Committee, the Gulf States Area TEGE Council Exempt Organizations Coordinator, past-Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, and the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications.

You can learn more about Ms. Stamer and her experience, find out about upcoming training or other events, review some of her past training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer at www.CynthiaStamer.com.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources available at www.solutionslawpress.com. 

For important information concerning this communication click here.   THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2011 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.