Legislation would protect employers from unclear worker classification rules

Worker classification disputes can be time consuming and expensive for employers to resolve.  The Internal Revenue Service (IRS) is giving closer scrutiny to the classification of workers and independent contractors and has delivered crippling retroactive penalties on employers who have intentionally or unintentionally misclassified workers.

According to some employers, misclassification occurs in Missouri because the rules provided by the Missouri Department of Labor and Industrial Relations are not clear or consistent.  That would change under legislation sponsored by Rep. Kurt Bahr, a Republican from St. Charles.  This week, Rep. Bahr presented to a House committee House Bill 1642, legislation that would make it easier to determine when a person is an employee or independent contractor.

“The penalties and fines involved in worker classification disputes can be significant, yet the rules that employers are to use to determine how a worker should be classified are not clear,” said Jay Atkins, Missouri Chamber general counsel and director of legislative affairs.  “This legislation would provide greater clarity and help employers stay in compliance.”

The bill would require the Missouri Department of Labor to provide clear and concise rule for defining “independent contractor” and a procedure for changing an individual classification from an independent contractor to an employee.

Employers would have 60 days to comply with the reclassification of an employee following an audit, without being fined or assessed back taxes.

The legislation also gives employers the opportunity to request an opinion letter from the DOL regarding worker classification, which would protect the employer from future fines if the department subsequently determines that the person is an employee.

For more information on labor issues, contact Jay Atkins, Missouri Chamber general counsel and director of legislative affairs, at jatkins@mochamber.com, or by phone at 573-634-3511.