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Contracting out to avoid paying employee benefits?

In Minnesota, many large and small businesses alike have been forced to make significant changes to how they function in order to weather this extended season of financial instability. Such changes often include pay cuts and/or layoffs for employees. And while many Minnesota workers have braced themselves for the unfortunate prospect of losing their jobs in recent years, some are facing another type of threat to their livelihood. Employment law investigations are currently under way to determine if some Minnesota organizations may actually be misidentifying workers in an effort to skirt funding some key benefits.

The heart of this issue lies in the difference between a contracted worker and an employee. When an individual is a contractor, he or she is primarily responsible for deciding who performs their work and how it is done. An employee, however, must abide by the restrictions and standards set by their employer. Another fundamental difference between these two types of job statuses is that employees typically receive benefits like unemployment compensation and workers' comp, while contractors do not.

Since it can be more expensive for companies to maintain a permanent staff of employees, some are relying on contract workers instead. And some others may be falsely claiming employees as contractors. The state of Minnesota is working with the IRS and the Department of Labor to investigate instances where workers who've been labeled as contractors should be eligible for benefits as employees.

Mounting pressure from the government to curb this type of employee rights issue coincides with a noticeable increase in related lawsuits filed against employers. Many Minnesota employees could potentially be erroneously working as contractors right now. Anyone who thinks they may have been misclassified as a contractor can seek legal counsel to help ensure they have access to the employee benefits they deserve.

Source: grandforksherald.com, "Officials scrutinize employer use of independent contractors," Annie Baxter, March 25, 2013

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