Join leading employment attorney Eric Rumbaugh from the law firm Michael Best & Friedrich for this seminar covering the risks and requirements for using independent contractors in your organization. Contingent workforce, 1099 risk, reclassification, coemployment, and more. Find more resources for independent professionals at www2.mbopartners.com/ic-resources

1. Independent Contractor Compliance
What You Need to Know in 2009
Featuring guest expert, Eric Rumbaugh, Esq.
Partner, Michael Best & Friedrich, LLP
April 28, 2009

2. The full screen icon
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3. Moderator
Gene Zaino
President & CEO
MBO Partners
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4. Making it easy for independent contractors and their
clients to work together, safely and efficiently.
Independent Contractor
Engagement Specialists
Risk Assessments
Engagement Solutions
Cost Savings
Embraced by Consultants
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5. Our Guest Expert
Eric Rumbaugh, Esq.
Partner
Michael Best & Friedrich, LLP
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6. Understanding the Landscape

7. Fastest Growing Segment
“We expect small and
personal businesses
will grow from 21
million today to more
than 32 million by
the year 2018.”
- Intuit, Future of Small Business
Report, 2008
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8. There are over 10 million
independent contractors,
and this number is on the rise.
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9. According to HCI, over 85% of HR and Procurement
decision makers plan to maintain or increase
their use of contractors.
It’s about
AGILITY (and cost).
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10. What Are the Risks?

11. Business Risk
Security
Immigration
Business Insurances
Intellectual Property
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12. Tax Reclassification Risk
IRS and State Tax Agencies
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13. Co-employment Risk
stock options
title vii
benefits
massive pain in general
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14. What Are the Consequences?

15. Tax reclassification can be costly.
add it up:
Back taxes
15.3% FICA Tax
20.00% Federal Income Tax
Up to 6.2% Unemployment Insurance
Total = 41.50% of contractors pay*
Other penalties
Failure to file W-2 or 1099 form
Failure to file quarterly returns
Failure to pay taxes
*Does not assume any legal liabilities if contractor
files suit.
for three years . . .
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16. Penalties can add up, but it’s the
class action you might want to be
watching for.
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17. The IRS may be the
least of your worries.
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18. Mistakes can be costly.
Microsoft paid $97 million
FedEx paid $26.8 million (and growing)
OC Register paid $22 million
Time Warner paid $5.5 million
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19. How Are Investigations Triggered?

20. be concerned about
unemployment
claims
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21. think about
workers’ compensation
claims
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22. Other investigation triggers:
individual legal claims
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23. Before we continue,
a brief pause for questions . . .
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24. Myths and Conventional “Wisdom”

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26. Emerging Compliance Trends

27. “ Within the past 3 years, the IRS has signed agreements with
state workforce agencies in 32 states to share
employment tax compliance information. About 90% of
the information shared is related to worker
“
classification issues.
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28. a new administration
new leaders are heading up agencies
everyone intent to make their mark
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29. Approaching Legislation

30. In the last Congress, several bills were
written to deal with this issue. One of them
– S. 2044 – was co-sponsored by
Obama.
change we expect:
Section 530 might go away
More teeth for enforcement
More rigorous reporting
Changes to COBRA
Temp Worker Bill of Rights
Sales Tax on specific services
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31. And don’t forget E-Verify . . .
Not certain, but you need to understand it.
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32. Eric’s Predictions

33. Assessing Compliance

34. Understand the 3 Areas of Control
BEHAVIORAL
FINANCIAL
RELATIONSHIP
But there are different tests for Title VII, Workers’
Compensation, and other risk areas. And all of these differ by state.
Got it?
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35. Mitigating the Risks
Establish and enforce policies and process
Educate your organization
Maintain accurate records for audit defense
Put non-compliant workers on a W-2
Inoculate benefit plans
Require workers’ comp for everyone
Self-audit regularly
Re-assess frequently
Get expertise –in house or partner
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36. Discussion

37. Last Words and Next Steps

38. Eric Rumbaugh Gene Zaino
1-414-225-2742 1-800-220-0469
ehrumbaugh@michaelbest.com gene@mbopartners.com