New Jersey Work Misclassification Infographic

Misclassified Workers In New Jersey Infographic

Are You A Worker Or Employee? Below is a detailed cheat sheet on classification & misclassifications

New Jersey Misclassified Employees & Contractors Infographic

 

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Additional Mapped Resources for New Jersey Truck & Transport Drivers

Below are a number of additional resources mapped out for transport drivers including:
– New Jersey truck stops
– New Jersey truck service Centers
– New Jersey truck sale centers
– New Jersey employment lawyer’s office
– other New Jersey employment resources

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Misclassification Details

The misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers and the entire economy.

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

By some estimates, contingent or temporary workers could reach 30%50% of the U.S. workforce.

A federal study contends that an estimated 3.4 million employees are classified as independent contractors when they should be reported as employees.

A 2009 study by the treasury inspector general estimated that misclassification costs the United States

$54 billion in underpayment of employment taxes and $15 billion in unpaid FICA and unemployment taxes.

Who Controls Whom?

  • Generally, if the employer can determine not only the end product, but also the means by which it is

accomplished, the individual likely is an employee.

  • If the employer can only dictate the finished product, the individual likely is an independent contractor.

Why Do Employers Misclassify Employees?

The simple answer is money. By classifying a worker as an independent contractor instead of employee, an

employer avoids the following expenses:

  • Employer’s share of Social Security and Medicare taxes
  • Overtime pay
  • Employee benefits, including vacation, holiday, and sick pay
  • Unemployment compensation tax
  • Workers’ compensation insurance

Independent Contractors, by Class of Worker, 1995-2005

 

Independent

Contractors

Other

Alternative

Employment

Total

Alternative

Employment

 

Traditional

Employees

Percent of Total Employment
Independent

Contractors

All Alternative

Employment

Truck transportation273,13066,521339,6511,635,57513.8%17.2%
Driver/sales workers and truck drivers301,909120,793422,7022,944,6909.0%12.6%

 

 

19951997199920012005
Total, 16 years and older8,30984568247858510342
Wage and Salary1,234104496311561375
 
Government6356407970
Private, For Profit1,10394687610311240
Private, Nonprofit6841484765
Self-Employed 7,0757413728474288968
Self-Employed, Incorporated1,6081718176417312506
Self-Employed, Unincorporated5,4675695552056986462
      
Self-Employed As Percent of Total85.1%87.7%88.3%86.5%86.7%

 

Common Law Rules

According to the IRS, the facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral:

Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial:

Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship:

Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Transport Drivers: Classification & Other Challenges

Challenges of the companies: Can they continue to treat many of their truck drivers as “independent contractors” as they have in the past?

  • The 273,000 independent contractors BLS estimates work in the truck transportation industry constitute one of the largest distinct groups of IC workers in the workforce.
  • This accounts for nearly 14% of all truck transportation workers.
  • Among all “driver/sales workers and truck drivers,” the CAWA survey reported a total of nearly 302,000 independent contractors; another 121,000 workers were in other forms of alternative employment                   arrangements.

Paying Hourly Wages

Many truck drivers have been treated as independent contractors to avoid the costs and complexities of tracking their hours and paying hourly wages, including, where applicable, overtime pay, and also federal and state employment taxes.

This issue came into sharp relief in 2014 when Federal Express lost its appeal in the Ninth Circuit in Alexander v. FedEx Ground Package Sys.

It is expected that the costs to FedEx associated with this decision will exceed $250 million.

Truck driver safety has come under increased scrutiny in the wake of recent serious accidents, including anaccident in New Jersey which caused serious injury to actor Tracy Morgan andanother in Georgia which caused multiple fatalities.

Addressing the Issue Now

Trucking companies should analyze their current independent contractor drivers and make sure that their classification is defensible under IRS guidelines and the recent case law.

The U.S. Department of Labor recently awarded a total of $10.2 million to 19 states for the purpose of improving worker classification compliance.

New Jersey received the 3rd largest total award of $838,621. This sum included the second-largest bonus, $496,399, for its performance in identifying instances of worker misclassification.

In spite of such accolades, New Jersey remains the state with the third-highest rate of improper unemployment insurance payments in the nation.

Consequences of a New Jersey Determination of Misclassification

Employers May Be Liable for Penalties

If premiums are paid late, a 1.25% per month interest is added to the total On top of additional principal and interest, penalties may apply.

For failing to timely file NJ-927, an employer is liable for the lesser of $10 per day or 25% of contributions due.

For a late or incomplete WR-30 the penalties range from $5 to $25 per form.

An employer or employer’s officer or agent who knowingly makes a false statement, or fails to disclose a material fact, to reduce the payment of unemployment benefits is liable for the greater of a $100 fine or 25% of the amount fraudulently withheld, per day.

New Jersey’s “ABC Test”

In order to demonstrate that the worker is actually an independent contractor, the employer must now satisfy all three prongs of the ‘ABC Test.’

Employers must show that:

  • The worker has been and will continue to be free from control or direction over the performance” of the work he or she is responsible for.
  • Such work is either outside the usual course of business for which it is performed, or that it is performed outside of all the places of business of the enterprise for which it is performed, and,
  • The worker is customarily engaged in an independently established trade, occupation, profession or business.

 

Sources:
http://njbmagazine.com/monthly_articles/crackdown-on-employee-misclassification/
http://dpeaflcio.org/programs-publications/issue-fact-sheets/misclassification-of-employees-as-independent-contractors/
http://www.insurance-advocate.com/2014/12/22/the-consequences-of-misclassifying-employees-as-independent-contractors-in-new-jersey/
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
http://www.americanbar.org/content/newsletter/publications/youraba/201107article05.html
http://www.lexology.com/library/detail.aspx?g=1a388746-277a-4a60-8d9a-8c0fbc288395