New York State Department Of Labor Audit Lawyers
Introduction
Business owners that employ the services of contractors, freelancers, or consultants can at any given time receive a letter from the Division of Taxes and Unemployment Insurance for the Labor Department in the state of New York informing them that their company has been selected to be audited. These notices should be taken very seriously as the response to this one-page letter will go a long way in determining the future outlook for the company in question.
One needs only to look at the current situation with Uber, who is fighting several cases involving the misclassification of employees, to understand the serious nature of this issue. In most cases, these audits will include a careful scrutiny of whether or not the company has correctly classified its workforce, or instead misclassified them as either interns or independent contractors.
The frequency with which these audits are taking place has risen sharply in recent years, and more than 12,000 audits were executed in New York State alone a year ago.
Reasons for an Audit
What triggers a Department of Labor audit?
A particular company can be selected for these audits for a number of reasons. The audit can simply stem from a random initiation due to an industry review or could be the result of an angry ex-employee filing a complaint. In any event, the reason that the company was selected is not nearly as important as it is for the company to get out in front of the situation and deal with the matter properly.
Securing Legal Representation
The first step a business owner should take when faced with an audit by the New York Department of labor is to secure representation from a skilled and experienced employment attorney. A business owner that finds himself in this position can choose to represent himself in the matter or choose to have his accountant speak in his place. This may not be the wisest course of action, however, as any negative results that come from a Department of Labor audit can lead to future ramifications in other legal forums.
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For instance, if an employee of a company is determined to be misclassified as a contractor, the business owner can then be made liable for any overtime that should have been paid as the result of the employee's previous labor. This is but one of many example scenarios of why it is of great importance to assure that a company's business practices are compliant with current labor laws and for that company to mount a strong case when asked to prevent evidence of their compliance.
Preparing for the Audit
Business owners should continue preparations for the audit by requesting all documents associated with the process. Most owners will find that this task is much more arduous than they originally perceived, as it will many times become apparent that recordkeeping practices are in need of an upgrade. Payroll and time records will become an essential part of the business owner's defense, and each business should launch a comprehensive internal review to gain an accurate assessment of potential exposure before taking part in a meeting with an auditor.
Worker Classification
A common misconception among business owners is that they are in no danger of wrongdoing on their part being determined in cases where a worker classified himself as an independent contractor and requested an IRS form 1099 for tax purposes from the company.
The Department of Labor will conduct its own inquiry into the nature of a worker's relationship with a business, and even when both the worker and the business owner are in agreement that the relationship is that of a contractor, the DOL can be in disagreement with this classification. For this reason, it is prudent for business owners to develop a strong understanding of the rules and regulations governing these matters to ensure their own compliance, as business owners with the best of intentions have found themselves in hot water with the labor department.
It is important to also note that even when workers provide an employee with a signed agreement stating that they are working as an independent contractor, there is no guarantee of protection to the business owner. These signed agreements can be used as evidence when being audited by the Department of Labor and can be helpful to the business owner's case, but are not in themselves definitive or conclusive evidence that will absolve the business owner from potential judgment.
Seeking Legal Expertise
Worker Classification audits are complex matters that require expertise at a very specific area of law. Business owners that find a notice of this pending action in their mailbox should consult with an attorney's office that is skilled in these matters before the visit of a New York State Investigator to their office takes place.
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