There were several relatively new Court Decisions handed down from the Courts in New York that increases the stakes for companies that are using or thinking of using Independent Contractors. To make stakes even higher and what few realize is that there was proposed NYS legislation involving drivers in a specific industry that performed a delivery service. This legislation passed the House and the Senate, supported by both sides of aisle, only to be vetoed by Governor Cuomo.
It’s a little scary, but here are the factors that led the Courts to rule in favor of employment vs favoring independent contractors. (Note: these are not all inclusive.)
- Company advertised for drivers.
- Drivers were required to sign a standard contract.
- Company provided orientation and training.
- Company ensured that safety standards were followed.
- Company established delivery routes.
- Company supplied drivers with daily manifests.
- Drivers were required to wear photo identification and uniforms reflecting company logo.
- Drivers were required to lease specific scanners to track their locations and movements.
- Company would contact driver if they were not on schedule.
- Drivers were required to accept additional unscheduled deliveries by Company.
- Company would not allow the use of substitute drivers.
- Company billed and collected amounts due from customers.
How This Could Affect You
At first glance and based on the factors listed above, it may seem obvious how the Courts reached their Decision. However, if one were to review the testimony and transcripts, many of the factors as listed above are distorted, and some relevant facts were simply left out. That alone could be a frightening consideration for any business with independent contractors.
Additionally, it is important to understand that once a company exhausts their appeal rights, the chances of being audited are almost a certainty. The audit period begins from the time in which an initial determination was rendered, so if you have an initial determination that was rendered in 2009, the period covering an audit would be from 2009 through the current year. Using 100 independent contractors over a seven year time frame, when those ICs are all subject to being reclassified, the state unemployment insurance tax exposure alone would be over $250,000. That substantial expense is excluding interest, and fraud penalties could be imposed as well.
What You Should Do
These Court Decisions and the risks of being audited after an appeal could make it seem too scary, risky, or complicated to use independent contractors at all within your business model. But even though you should exercise caution, do not take these Decisions to mean that companies should move to an employee model. Businesses can thrive with a successful and compliant independent contractor model. However, based on these indicators, companies that use an independent contractor model should take care to ensure that they are pro-active instead of re-active.
Reach out to Consultech for our expertise to help you reinforce a compliant independent contractor business model. If you have had an adverse NYS Court Decision and you have exhausted your Appeal Rights, contact us today and we can guide you through this process. We will assist you from the standpoint of representing your Company in dealing with an audit, as well as from a pro-active perspective to share with you a more compliant model for your company.
With over 30 years of experience, our Preferred IC Consultants at Consultech are best suited to handle these matters efficiently and economically. Contact us today!
Call: (800) 769-2994
Email: [email protected]