Denis S. Kenny shares updates in the world of Independent Contractor compliance including recent legislation and the impact of the gig economy.

2. DENIS S. KENNY
ATTORNEY, SCHERER SMITH & KENNY LLP
2016: THE CURRENT & FUTURE
STATE OF INDEPENDENT
CONTRACTOR COMPLIANCE
& USAGE

3. AGENDA
• Effects and implications of U.S. Department of
Labor Administrator’s Interpretation No. 2015-1
• Misconceptions that lead to misclassifications: “on
demand companies” in the “sharing” or “gig”
economy
• Consequences and ways to reduce risks of
misclassification
• Prognostication for 2016 and beyond. . .

4. EVOLVING & DIVERSE LEGAL STANDARDS
No Single Federal or State Test

5. “NEW” WAGE & HOUR ADMINISTRATOR’S
INTERPRETATION
• On July 15, 2015, United States Department of Labor,
Wage and Hour Administrator issued Administrator’s
Interpretation No. 2015-1 (“Interpretation”).
• This test looks to whether worker is economically dependent
on or independent of the hiring company (the “Company”)
• Interpretation’s message is clear: most workers are
employees under FLSA, not independent contractors.

6. REAL LIFE EXAMPLES
Agencies, courts and juries
frequently apply the same
test with differing results.

7. MISCONCEPTIONS
• “The worker wants to be an independent contractor.”
• “The worker created a LLC or S-Corp to do business
with us.”
• “We have a written contract.”
• “The worker only performs occasional services for us.”
Reality: Classification is a legal determination that parties
cannot displace by a written contract. “Form over
substance” will not be allowed.

8. WHY IS THIS TOPIC IMPORTANT RIGHT NOW?
CAUSE: $2.7B “Tax Gap” EFFECT: Government Focus on
misclassification and
enforcement
Increased legislation at
federal and state level
• Inter-agency (state and
federal) cooperation is
growing.
• Upsurge of audits tied
to DOL budget
increases

9. LESSONS FROM THE UBER & LYFT CLASS
ACTIONS
• Comments from “the bench.”
• Settlements without closure.
• RESULT: misclassification tests are antiquated
and uncertainty remains!

10. CONSEQUENCES OF MISCLASSIFICATION
Everyone is a potential adversary
• Government agencies
• Plaintiff lawyers
• Customers
• Unions
• Workers’ compensation carrier
• Contractors themselves

11. POSSIBLE PENALTIES & COLLATERAL DAMAGES
Overview of Possible Penalties and Collateral Damages
• Total of Unpaid Taxes
• Penalties
• Fines
• Punitive Damages
• Compensatory Damages
• Liquidated Damages
• Equitable Relief
• Back-Pay
• Reinstatement
• Expenses including attorneys’ fees and costs (even a “win” will be costly!)

12. SINGLE WORKER MISCLASSIFICATION CASE
Defense of case:
Expect to pay $200,000+ in your attorneys’
fees, alone!
$$$

13. PROGNOSTICATION:
WHAT MIGHT THE FUTURE HOLD
Pending State and Federal Legislation
• The California 1099 Self-Organizing Act (AB 1727)
• H.R. 2483: Independent Contractor Tax Fairness and
Simplification Act of 2015
The Future: Need for Legislative Creation of a “New” Type of
Worker?
• The “Dependent Contractor”
• Licensed or certified “self employed” worker(s)

14. QUESTIONS?

15. Please feel free to email or call me with
any follow-up questions or comments
about this presentation.
Thank you,
Denis Sullivan Kenny
(415) 433-1099
140 Geary Street, 7th Flr., San Francisco, CA 94108
denis@sfcounsel.com
http://www.sfcounsel.com/