Within the IRS and Department of Labor, red flags start flying from any number of triggers.

Consider the example of a legal secretary who presented herself as an independent contractor to a prominent Colorado law firm. After her project with the firm ended she filed for unemployment benefits. An investigation into her claim revealed she had no clients other than the law firm, worked hours as dictated by the firm, performed all her work on the firm’s premises using the firm’s equipment, and was under the direction and control of the firm’s attorneys. The Colorado Department of Labor and Employment, therefore, considered her to be an employee – not an independent contractor – and deemed her eligible for unemployment benefits. Additionally, the law firm was held liable for back payroll taxes and penalties.

Well-intentioned employers can easily end up on IRS and DOL radar screens when a Worker’s Comp claim is filed by a contract worker. This happens with surprising frequency despite the logical assumption that an independent contractor should understand the implications of a business-to-business relationship.  One key aspect of a true B2B relationship is that a worker’s business activity exists independent of the employer.

As an employer, if you’re an IC’s only client, an “audience of one” so to speak, you should start thinking red flag.  Admittedly, compliance issues are complicated stuff.  There is no predetermined formula that yields a definitive answer to the employee versus contractor question. 

But red flags are that color for a reason.  If you spot one while dealing with your IC’s, seek help.  The IRS and DOL have taken off the gloves.

Sometimes it’s a good idea to get away from the office to recharge your batteries, to sharpen the axe, to network with colleagues, and to lose a few bucks in a casino.  PayReel’s CEO, Heidi McLean, and I managed to do just that last month in Las Vegas while attending an Executive Forum sponsored by Staffing Industry Analysts.  SIA has become for us an invaluable source of information and insights on the global contingent workforce marketplace.

The conference, held at the Red Rock Resort, was extremely well-attended by hundreds of staffing professionals from all four corners of the globe.  The SIA team flawlessly executed their 4-day agenda by providing a well rounded mix of industry, strategic, and tactical topics.  I could have also used a primer on Blackjack betting strategy.  Alas, the best lessons in life are often expensive.

Here’s a brief recap of our top three takeaways from the conference:

1.       Things Really Are Looking Up!

Our economy’s jobless recovery has finally begun to create jobs.  That’s the good news.  The other news is that job creation following “the great recession” is occurring at the slowest rate since the 1974/75 downturn.  Industries showing the best job growth are health care and manufacturing.  Construction jobs remain hard to come by.

 2.       The World of Work is Changing

Technology is reinventing work.  It is changing where work happens, worker employment models, and the structure and dynamics of teams.

Moreover, since older workers are delaying retirement and fewer young workers are entering the labor force, companies now face the challenge of managing and motivating multi-generational workforces.  Most have found that HR policies aimed at baby boomers don’t necessarily translate to Gen X and Gen Y employees.

3.       Social Media Marketing is No Longer an Option

YouTube is now the world’s second most popular search engine.  If you didn’t know YouTube was even considered a search engine, you’re in good company … but don’t stay there.

Business to Consumer marketing is no stranger to social media.  But now B2B marketers are increasingly leveraging the power of social media.  If your business is absent from LinkedIn, Facebook, or Twitter you’ve put yourself at a disadvantage relative to your competition. 

I’m really looking forward to the 2013 SIA Executive Forum.  I made several new friends during this year’s event.  And I promise to send you all the money I owe asap.  The threatening emails really aren’t necessary.

Once you get past all the legal jargon, it’s a really simple question:  Does the Constitution of the United States give Congress the power to compel every citizen to either purchase health insurance or pay a penalty?

Our Supreme Court justices listened to arguments for three days in late March and are expected to hand down a decision in June.  The smart money is on a 5 to 4 decision … either way.  If the Affordable Care Act is struck down, the federalists will shout “Freedom!” in their best Mel Gibson/William Wallace accents.  If “ObamaCare” survives intact, the liberals will proclaim “Four More Years!” in their best Ted Kennedy.

At this point in the proceedings, it looks as if Justice Anthony Kennedy will be the swing vote.  His comments and questions during the three days of hearings have supporters of the law on an emotional roller coaster.  And just in case he begins to lean too far in opposition, the Obama administration has already fired a shot across his bow.  Last week, the President (a constitutional law scholar in case you’ve forgotten) raised another simple question for us simple-minded citizens to ponder … Does the Supreme Court even have the authority to overturn legislation passed by Congress? 

Are you even remotely interested in how our republic functions (or dysfunctions)? If so, the drama doesn’t get any better than this.  Imagine the fallout if the Supreme Court declares the law unconstitutional.  Our healthcare system will still be in need of reform.  It’ll still be an election year.  And the voting public will quickly begin asking “So now what?”

Let the finger pointing begin!

How are social media-savvy companies rising to the communication challenges presented by YouTube?  One way is by recognizing and embracing YouTube’s emphasis on content versus presentation.

 “In the midst of a fabulous array of historically unprecedented and utterly mind-boggling stimuli … whatever.”  Thomas de Zengotita

Put in less poetic terms, we’ve been so bombarded by high-def, high-speed, high-concept content, less really has become more.  Sincere, unscripted content will stop us in our tracks and grab our attention.  We find raw or casually edited footage somehow more believable, and in some cases more enjoyable than its polished counterpart.  And it’s a lot cheaper, which means corporations can afford to do more communicating closer to the events which trigger it.

Enlightened companies also understand that YouTube-enabled, ridiculously honest communication runs in both directions.  At once beautiful and frightening, comments (aka “What did you think of my video?”) give us an unfiltered view into the minds of our audience … instantly.  It’s hard to assign value to the heartfelt words “You suck!” in response to your latest product announcement video.  If you’re truly fortunate, the commenter will elaborate on your product’s shortcomings in a way that is genuinely useful.  And thanks to tools like YouTube’s Insight, companies can access a plethora of demographic data, statistics on content popularity, hot spots within videos, etc.

Then there’s SEO.  We can’t get enough of it.  So preoccupied are we with how much traffic comes to our websites from Google, we hardly noticed that YouTube is now the world’s second largest search engine.

So what is to become of slick and scripted video content?  Well, I still have suits and ties hanging in my closet.  I look forward to most occasions that still call for them.  Likewise, I can’t imagine a Super Bowl Sunday populated exclusively by homemade videos of somebody’s cat falling on a bag of chips.  The world has changed, that’s all.  It’s gotten faster and easier to communicate in the visual medium, but there will always be a place for professionally produced content.  In fact, I can attest to the fact that a steady diet of hamburger heightens one’s appreciation for steak.

That all-too familiar shaky cell phone video has changed forever how information and ideas are shared.  Once the bastion of the MTV generation, YouTube has now enabled (or forced) the evolution of corporate communications.

Ask any recent MBA grad and they’ll extol the virtues of timely, relevant communication in motivating a company’s workforce.  During the 1990’s, only the largest corporations could afford the luxury of widespread video communication to keep employees and investors informed about the latest products and strategic initiatives.  This was a time when corporate communication managers were the gatekeepers of information flowing from the mountaintop.  Whether in the form of a live broadcast or a professionally produced video, information was vetted and polished to a high corporate gleam.

Then, in 2005, three friends launched YouTube.com and changed everything.  By the summer of 2006, YouTube was the fifth most popular site on the internet.  Every minute, 20 hours of video is uploaded to the site.  That’s 1,728,000 minutes of content per day … every day.  It’s hard to imagine anything that can’t be found on YouTube. There’s everything from changing a tire, to heart bypass surgery, to the latest Beyonce’ video, to Tim Cook’s first message to Apple employees as their CEO.

But why is an Apple internal corporate video even on YouTube?  Perhaps the more interesting question is “how many people put it there?”  Corporate Communication Managers are no longer gatekeepers of information.  The cell phone camera and YouTube have effectively RIF’d that job title. Today’s Corporate Media Coordinators have necessarily evolved into wranglers of information, guardians in the battle against misinformation.  New media have created new ways of relating ideas and facts, and the sheer speed of information flow makes it all too easy to confuse ideas as facts.

Whether it’s a revolution in Libya or a layoff in Finance, people (employees) are turning to social media for insight and answers.   And just because your company is small doesn’t mean a video of last week’s fist fight on your loading dock isn’t about to go viral.  Now, more than ever, in corporate communication … speed can kill.  A slow response to a negative video can kill reputation, brand equity, and employee morale.

So, how are enlightened companies rising to this new media challenge and even benefiting from the YouTube effect?

Stay tuned for “Part Two – Ridiculously Honest Communication.”

If you’ve come anywhere near an HR newsletter in the last six months, you know there’s a big crackdown in progress targeting misclassification of employees as independent contractors.  The heat has risen to the point where one piece of pending legislation would make misclassification a federal offense regardless of whether the infraction was intentional or not.

Why do the IRS and DOL have their collective knickers in a bunch over misclassification?

It all comes down to simple economics.  Federal and state tax revenues are down.  Not a good thing if you’re in charge of balancing budgets.  Meanwhile, non-compliance with IRS and DOL regulations governing which workers are classified as W-2 employees versus 1099 contractors is going up.  This equates to fewer tax dollars coming from employers without a corresponding increase in tax revenues from independent contractors.

Combine this with historic federal and state budget deficits, and you’ve got a recipe for stepped up surveillance and enforcement.  Witness two recently introduced bills:  The Payroll Fraud Prevention Act, and The Employee Misclassification Prevention Act.  Both bills are still in committee, but they underscore how much attention this issue is getting in Congress.

Still not convinced this iron is hot? Allow me to remind you about the widely announced partnerships between the IRS, DOL, and several state agencies who are now sharing employer information with the goal of tracking down practitioners of worker misclassification.

The U.S. economy’s jobless recovery has improved over the past few months to a mostly jobless recovery.  While most pundits are cautiously optimistic about the employment outlook, employers in many states are still facing increases in unemployment insurance taxes.  Yes, you read that right.  Unemployment is down and unemployment insurance taxes are going up.

Like you, I have a pretty good idea of how the unemployment insurance system is funded … via taxes that employers pay into a dedicated state account.  But what happens when those accounts run dry?  Because of our economy’s tepid recovery, ongoing claims for unemployment insurance remain high.  In some states, the cash reserves to pay these claims have long since been depleted.

Yet people in these states continue to receive unemployment checks.  Where’s the money coming from?

Title XII of the Social Security Act allows states to borrow money from the U.S. Treasury to cover the cost of these claims.  Now, however, Uncle Sam wants his money back.  If it takes your state longer than two years to make good on its Title XII loan, you can expect an increase in the federal portion of your unemployment insurance tax (FUTA).  If your company is located in Indiana, Michigan, or South Carolina you already know what I’m talking about.  Plus, some state constitutions require an increase in their SUTA (and other) rates to accelerate repayment of Title XII loan balances.

By my count, 22 states have outstanding balances more than two years old and are facing increased FUTA rates. So, forewarned is forearmed.  Keep an eye on your state’s Title XII balance.  You can find it at the following DOT website:

http://www.treasurydirect.gov/govt/reports/tfmp/tfmp_advactivitiessched.htm

• Unemployment is down, but state and federal unemployment insurance tax rates are still heading up.  What’s up with that?
• Fed and states continue to step up enforcement of employee misclassification penalties.  A hot topic gets even hotter.
• The “YouTube Effect” – That shaky cell phone video has already redefined how information is consumed.  Now it’s evolving and finding its way into the corporate boardroom.  What does that mean for the future of corporate communications?
• An Audience of One? – Don’t be your “independent” contractor’s only client.  If you’re alone, the IRS may take a seat right behind you.
• SCOTUS is on the case.  The Supreme Court hears arguments on the constitutionality of the Affordable Health Care Act (aka “ObamaCare”).  With all due respect to Messrs. Ali and Frazier, this is shaping up to be “The Thrilla On the Hilla.”
• Bold as ICE – Immigration and Customs Enforcement is serious about properly documenting workers.  Is an audit or (shudder) a site visit in your future?
• Managing independent contractors and corporate red tape can be a neat trick.  What are some best practices from people who lived through it?

And like last year, from time to time I’ll hand over my keyboard to some guest bloggers.  So buckle up, stay tuned, and Happy New Year!

Very early in my career I got a good piece of advice:  “Never do a business deal you wouldn’t want your kids to read about in the morning paper.”  Alas, if only the Madoffs, Murdocks, and Nacchios of the business world had been privy to such sage wisdom.

Still, how many of us risk getting our 15 minutes of fame the hard way when it comes to hiring so-called Independent Contractors?  Let me quickly say that some of my best friends are IC’s … legitimate IC’s.  Contractors fill an indispensible role in our economy by providing highly-skilled, variable-cost resources.  As with many professions however, the dishonest or misinformed few cast a cloud of suspicion over the rest.

Okay, so let’s come clean.  Haven’t we all, at some point or another, done a mental calculation of the odds of getting caught misclassifying a worker?  Or rationalized the potential fines and penalties simply as a cost of doing business?  Or even convinced ourselves that we can interpret complex labor law better than some fresh-faced IRS auditor?

Sure I have.  But then I come back to this image of my son flipping through the morning paper and seeing this headline:  “Your Dad Knowingly Broke The Law.  Mom’s Pissed.”

It’s the “knowingly” part that I wonder how I’d explain.  Even though federal and state labor laws are complex, there are plenty of resources available to help figure them out … Just Google “misclassifying workers.”

This is more than the corporate equivalent of a speeding ticket I’m talking about here.  Company reputation, your credibility, employee morale, average penalty of $80,000 per misclassified employee, your kid’s respect … that’s what’s at risk.

At the risk of understatement, The Federal Affordable Care Act of 2010 (or, depending on your politics, ObamaCare) has become sort of a lightening rod issue. 

One of the more controversial elements of the act is the assessment of taxes on businesses that choose not to offer their employees health insurance coverage.  If your company employs more than 50 people on a full-time basis (at least 30 hours/week), you, dear reader, have a decision to make.  You’ll need to do the math and then choose either:

1. Begin (or continue) offering “comprehensive” health insurance coverage to each of your employees, or
2. Don’t offer your employees insurance coverage and pay a $2,000 per employee penalty (after your first 30 employees).

Not to say your decision will be driven solely by arithmetic.  There’s the competitiveness of your employee compensation package to consider.  Will you be able to attract and retain top talent if you don’t offer a health plan?  What about the composition of your workforce?  Lots of temporary workers on your roster mean this may be a non-issue for you.

But most of us will be crunching numbers to determine how the cost of offering health coverage compares to the tax bill we’ll get if we don’t offer it.

But wait!  The debate in Washington rages on about how much (if any) of the Affordable Care Act of 2010 will actually see the light of day.  Hence, the head fake.  Our federal government fakes left then moves right (pun intended), leaving us standing here with our, uh, business plan in our hands.

To be sure, there’ll be more head fakes, end-arounds, and flea-flickers before this all gets settled.  But I, for one, am ready to see Congress take this political football right up the middle and score one for all the sick people who can’t find any humor in this issue.