As I have discussed in prior blog posts (March 11, 2013, April 9, 2013 and December 9, 2013), worker classification has historically been a focus of attention of various government agencies as well as others. Misclassifying workers, even if unintentional, can create nightmares for businesses and their owners.
The worker classification rules are not always objective, making them difficult to apply. Additionally, the rules applicable to a particular business may vary depending on who is looking at the matter. For example, in many cases, the laws applied by the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) differ from the laws applied by state or local agencies. On top of that, the laws of the states are not uniform.
As a result of the COVID-19 pandemic, we have seen a significant worldwide change in the structure of workforces caused by the emergence of the remote worker. The number of remote workers has significantly multiplied in the last two years, adding one more factor to the worker classification analysis. In and of itself, having workers performing services from remote locations (usually their personal residences) does not make the workers per se employees or per se independent contractors. While the location where a worker performs services should be considered in making a classification determination (i.e., whether the business can or does control the worker), it is not a definitive factor. Nevertheless, with a changed workforce model, which is likely here to stay, businesses should invest the time and energy in revisiting their prior worker classification conclusions to see if they remain valid today.
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.