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New York State Department of Labor Audit Lawyer (UI Tax Division): Defend and Protect Your Business If You Use Contractors or Consultants

Audit.Magnifying.Glass.Dollar.Photo.Club.jpgOur Award-Winning New York Employment Lawyer has represented many small business who were facing an audit by the NY Department of Labor (DOL). This audit can be a significant moment for small businesses who use freelancers, independent contractors, consultants, and paid interns. It is prudent for companies to be represented by an experienced NY employment law attorney because not only are the payroll tax consequences, they could also be a domino effect of other unintended consequences. If you have received a letter from the New York Department of Labor regarding an upcoming audit contact our office to learn your options, potential legal exposure and determine best compliance practices. Unlike most employment discrimination, an intent to violate the law is not a factor in misclassification cases – even well meaning companies who were ignorant of the law can face exposure and penalties.

Why Is the State Doing an Audit & Why Was My Company Selected?

Misclassification of workers is a significant issue for the state because, among other reasons, it deprives the state of employment-related payroll taxes and deprives workers of employee rights and protections. Your company could have been selected for several reasons which include but are not limited to an random audit or an due to an individual’s complaint. Regardless of the reason for the audit, you should take immediate steps to prepare yourself for the audit and protect your business. The audit willl include a fact specific analysis of whether your workers are employees or contractors. It is advisable for you to do your own internal audit or review with experienced counsel early in the process. Below are some of the factors from the start regarding the classification of a worker.

What Factors Will Support an Employer-Employee Relationship?

Payroll.Picture.Bought.From.Dollar.Photo.Club.Feb.2015.jpgNo one factor is dispositive; rather a totality of circumstances is reviewed including but not limited to the degree of supervision, direction and control exercised over the worker’s services. In general, an employment relationship exists when a company controls what will be done, i.e. the manner, means, and results. According the the DOL, an employment relationship may be found if you:

  • Choose when, where, and how the workers perform services
  • Provide facilities, equipment, tools and supplies to workers
  • Directly supervise the services
  • Set the hours of work
  • Require exclusive services
  • Set the rate of pay
  • Require attendance at meetings and/or training sessions
  • Ask for oral or written reports
  • Reserve the right to review and approve the work product
  • Evaluate job performance
  • Require prior permission for absences
  • Have the right to hire and fire

How an individual is compensated is another indicator of worker status. Employees typically are paid a salary, an hourly rate of pay or a draw against future commissions with no requirement for repayment of unearned commissions. Employees may also receive certain fringe benefits, including an allowance or reimbursement for business or travel expenses.

What Factors Will Support an Independent Contractor Relationship?

Freelancer.Image.Dollar.Photo.Club.3.9.15.jpgIn general, contrary to an employment relationship, independent contractors or consultants are free from: supervision, direction and control. The following are some factors that the DOL states are indicative of an contractor role:

  • The worker has an established business and provides its services to the general public
  • Advertises in the electronic and/or print media
  • Buys an ad in the Yellow Pages or other media
  • Uses business cards, stationery and issues invoices on its letterhead
  • Carries required insurance policies
  • Keeps a place of business and invests in facilities, equipment, and supplies
  • Pays their own expenses
  • Assumes risk for profit or loss
  • Sets their own schedule
  • Sets or negotiates their own pay rate
  • Offers services to other businesses (competitive or non-competitive)
  • Is free to refuse work offers
  • May choose to hire help and assign its services to others

The above factors are not weighed equally. If you have received an audit notice, contact our office immediately for an internal review of your workforce and ensure that your practices are compliant with wage and hour laws.

Disclaimer: Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced attorney in your state or jurisdiction. From time to time, a blog post may discuss a legal case – please note that the post may not contain the most to update information on the case as developments may have occurred after it was created.