The New York Department of Labor is auditing more and more businesses and issuing fines that can hurt a company’s bottom line. Much like no citizen wants to be audited by the IRS, no employer wants to be on the receiving end of a Dept. of Labor audit. When running a business, most owners think it is just easier to pay the fines and go on with life. That, however, may not be the best plan of action.
Why Is My Business Being Audited?
There are many triggers than set off a Department of Labor audit. It could be as innocuous as a former employee filing for unemployment insurance. If this worker was on the books as an independent contractor without benefits, that may cause the Labor Dept. to more closely examine if your contractors are being categorized fairly.
One of the biggest penalties being handed down after these audits is for businesses to reclassify workers from contractors to employees. In so doing, they must start paying payroll taxes, and offer insurance benefits. If your record keeping is not up-to-date to show the actual hours and circumstances that defend your right to pay workers as independent contractors, you may not be able to fight the audit.
What Can I Do If I Disagree with the Results of the Audit?
Your first reaction may be to simply pay the fines (if you can afford them) and move on with running your business. However, by paying fines, you are agreeing that you are guilty of mismanaging your employees, payroll, and/or benefits. This admission could force you to make future changes that could potentially harm your company.
Instead, be sure you keep accurate records of contractors’ and employees’ hours, pay scales, and classifications. Then use your records to justify the way to run your business. Hiring an experienced employment law firm could serve as the best way to keep your business running the way you see fit.
One such company in Texas hired an employment law firm to fight back (and win!) against a Labor Department audit to the tune of $6 million. The Department of Labor challenged that the company’s use of independent contractors went against regulations and ordered them to pay workers over $6 million in back pay, while reclassifying them as employees. Instead, the oil-field services company, Gate Guard Services, fought back and sued the Labor Department saying that replacing contractors with employees would drive them out of business.
The assumption that large numbers of independent contractors are misclassified is a trend coming out of the Department of Labor. If you can prove that your business has correctly classified your employees and that you are adhering to regulations and pay standards, you may be better off fighting instead of blindly paying post-audit.
If your business has been audited by the New York Department of Labor, contact the experienced employment law firm of Castronovo & McKinney. Call today for a free consultation: 646.755.3781.