Computer Solutions of America and Workers Compensation ...

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In the span of a few days, Shelly Osterhout?s business was shut down, leaving employees without pay and the computer company without revenue ? all thanks to an anonymous tip.

In April, the Florida Division of Workers? Compensation visited her business, Computer Specialists of America, to see if it was misclassifying workers as independent contractors rather than employees. At first the division launched an investigation while the business remained opened, but later issued a stop-work order, which forced Osterhout?s business to close for a week and three days. She lost roughly $10,000 to $15,000 in revenue, she said.

?During the whole process your office is shut down, your business is shut down and unfortunately in this community the word starts, and you don?t know what that word is,? she said. ?Meanwhile your reputation is just being mutilated out there.?

Although the stop-work order was revoked and Osterhout?s business was cleared, some companies in Southwest Florida face hefty penalties for not having workers? compensation insurance in place for employees ? whether it?s on purpose or by accident. Some employers try to skirt the law and hide employees as independent contractors to cut their costs. And the businesses that check out OK still have to contend with the impact it has on their reputation and the loss of revenue.

?I don?t know how prevalent it is, but I do know that employees are often misclassified as independent contractors with the purpose of not paying taxes or not paying workers? compensation insurance,? said Christina Harris Schwinn, an attorney with Pavese Law Firm in Fort Myers.

The main reason employers try to hide employees as independent contractors are to avoid tax and other benefit liabilities, she said.

There is also a lot of gray area in the law, which can be confusing for employers, Harris Schwinn said.

Having a written contract that a person is an independent contractor can be meaningless. Investigators often look at the relationship between the independent contractor and the employer to determine what the true business relationship is.

She recommends employers use a standard ?economic realities? test as a starting point to evaluate whether a person is an independent contractor under the Fair Labor Standards Act, but also suggests they seek out legal advice.

The test looks at a variety of different points ranging from whether the employer furnishes the equipment used to do the work to whether the work is a key service of the business of the employer, such as an IT person who does work for an engineering firm or law office.

?There?s no brightline test,? she said. ?That?s one of the things that can complicate this area.?

State investigations

The Division of Workers? Compensation conducts investigations regularly to make sure employers are in line with the law and are supplying workers compensation, said Robin Delaney, the bureau chief of compliance for the division.

?More often than not, the employers do have the proper coverage in place,? she said.

Still, the agency investigates on a regular basis ? through random checks or referrals ? to make sure that employers follow the law. It also offers seminars on a quarterly basis to educate business owners about the law and offers some seminars online as well, she said.

In the 2010-11 fiscal year, the division conducted 34,252 investigations throughout the state, but only issued 2,174 stop-work orders, which are issued when the division determines a business isn?t in compliance, Delaney said.

In Lee County, there were 140 stop-work orders issued in the 2010-11 fiscal year, compared to 117 stop work orders issued in the previous fiscal year. In Collier, 65 stop-work orders were issued in 2010-11, and 51 were issued the previous fiscal year.

While a stop-work order may have been issued to a business, it doesn?t mean the employer was trying to hide employees or misuse the law.

Ways to stumble

Terry Henderson, owner-operator of Greater Graders Inc., got a stop-work order in February, when he brought a job candidate on a job site to see if he could run the grading equipment.

?Me, being new to hiring people, I didn?t know you had to have workers comp on somebody who is just trying out the machine,? he said.

But the law finds that not having workers? compensation insurance in place poses an immediate danger to public health, safety, and welfare, said Alexis Lambert, a spokeswoman for the Florida Department of Financial Services.

Henderson faced other issues when his liability insurance provider told him he couldn?t underwrite workers compensation insurance for only one person at a salary of about $35,000. As Henderson understood it, he?d need at least three employees to get the coverage, but he only needed one at the time, he said.

When an employer is in violation, the penalty is typically one-and-a-half times what the premium for workers? compensation insurance would have been if the employer had paid it, and can go back up to three years, Delaney said.

The division will also fine the employer $5,000 per employee, if regulators find an employer has misclassified an employee as an independent contractor.

?When people think that they are saving money by classifying someone as an independent contractor, or misclassifying someone as an independent contractor, they may be saving money in the short term,? Harris Schwinn said. ?But if they get caught it?s going to cost them significantly more than it would have in the first place.?

http://www.news-press.com/apps/pbcs.dll/article?AID=2012305200011

Computer Solutions of America

239?728-2721

http://www.csa4u.com/

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