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Independent Contractor Compliance
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Independent Contract Compliance

W2 Payrolling Services

Independent Contractor Compliance

A company has many choices regarding how it engages with its workforce, from a traditional salaried or hourly worker to an independent contractor. As a result, companies have varying responsibilities and restrictions in classifying, onboarding, managing, paying, and offboarding their workers.

 

Unlike an employee, an independent contractor completes the work assigned with limited oversight or control over the performance and delivery of the work. Courts and regulatory agencies use different compliance tests to determine whether an independent contractor meets the minimum criteria to be classified as a bona fide independent contractor or if that contractor must be ‘reclassified’ as an employee.  For example, for purposes of determining whether a worker is eligible for overtime premium under the Fair Labor Standards Act, the US Department of Labor uses a different test to make that determination than the Internal Revenue Service may use to determine if that same worker is subject to employee withholdings and tax obligations.  Accordingly, it is important to ensure that each independent contractor is tested for compliance with the various laws that may be applicable.

 

An independent contractor is a self-employed individual performing services for a company under contract. Unlike an employee, an independent contractor completes the work assigned with limited oversight or control over the performance and delivery of the work. Courts and regulatory agencies use different compliance tests to determine whether an independent contractor meets the minimum criteria to be classified as a bona fide independent contractor or if the worker must be ‘reclassified’ as an employee. ‘Reclassified’ means that the company initially classified the worker as an independent contractor. Still, the worker did not pass a compliance test and must be reclassified as an employee for purposes of that test.

 

For purposes of the Fair Labor Standards Act (FLSA), the US Department of Labor uses a different test to determine whether a worker is a bona fide independent contractor than a state may use to determine if a worker is eligible for unemployment compensation after their work ends. For instance, the FLSA governs whether a worker is eligible for overtime premium pay; a bona fide independent contractor is not suitable for overtime pay while an employee is qualified. If a company is compelled to reclassify a worker, the liability can be significant, ranging from back pay and penalties to attorneys’ fees and mandatory compliance training. 

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ICON resolves the compliance challenges and concerns relating to the engagement and management of independent contractors.  ICON steps in and deploys its technology to vet each contractor for compliance with applicable law, and provide complete end-to-end compliance from onboarding through offboarding. Further, ICON substantially decreases onboarding times and increases worker readiness, both critical factors to a successful program. 

 

Following are some of the key features of ICON’s compliance technology - ICONpliance™:

  • ICONpliance™ is built with proprietary technology, wholly-owned and provided by ICON.
  • ICONpliance™ is built on the law, from statutes to case law decisions to regulatory guidance.
  • ICON takes meticulous care to ensure that the content in the compliance tool is written in standard English for non-lawyers. No, "legalese". 
  • ICONpliance™ tests for compliance with laws on the Federal, state, and, if applicable, local level (or, in Canada, on the Provincial level.
  • ICONpliance™ is customizable to each of our clients' individual compliance needs.
  • ICONpliance™ is designed for scale, and is ready to work with a broad range of customers, from mid-sized to large enterprises.
  • The remediation process is automated (remediation means a worker who is non-compliant is brought into compliance through a series of automated corrective actions).

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Key Resources

Using Independent Contractors in California After AB2257

Assembly Bill 2257 (“AB 2257”) was signed into law on September 4, 2020, a mere 247 days after AB5 went into effect. AB 2257 repealed and replaced AB5, Read ICON's blog for more information on what this new bill will mean to hiring entites and independent contractors.

Read More

The Agile Workplace - Gig workers

The talent landscape has become increasingly more substantial over the past few years. Workers are in perpetual search of meaningful engagements that reflect their core values. ICON is positioned to help companies just like yours with onboarding, candidate communication, and compliance automation in this new “gig economy.”

Read More

Handling Independent Contractors....the ABC's

California Labor Laws grow more stringent. This article highlights the latest changes.

Read More

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