NH Steps Up Efforts to Ferret Out Employee Misclassification

December 1, 2010

(Published in Concord Chamber News, December 2010)

For some time now the issue of employee classification or misclassification has been in the forefront in New Hampshire and throughout the nation.  Administrative agencies charged with the responsibility to enforce wage and hour, unemployment and insurance laws are carefully looking at whether individuals being characterized as independent contractors or consultants should properly be treated as employees.  Employers in industries going well beyond construction, which has faced this issue for years, have found themselves responding to Department of Labor, Department of Employment Security and worker’s compensation audits costing them thousands of dollars. 

The most recent attempt to focus on employee misclassification in New Hampshire occurred on September 17, 2010 when Governor Lynch issued Executive Order 2010-3, “An Order Directing the Coordination of Agency Action on Employee Misclassification and Establishing a Joint Agency Task Force on Employee Misclassification Enforcement.” The Governor has essentially ordered the various state agencies which touch the issue of employee classification to pool and focus their efforts on identifying, investigating and enforcing breaches of the law.  The New Hampshire Department of Labor, (“NHDOL”) has been identified as the lead agency for the enforcement efforts and is charged with the responsibility to coordinate the work and share information.

What this signals for an employer who hears from one agency such as New Hampshire Employment Security, (“NHES”) is the likelihood that it will hear from others such as the NHDOL, the Department of Revenue Administration, the Department of Transportation, the Department of Insurance or other agencies who have an interest in how employees are classified.
There is no sign that state and federal authorities are lightening up on this issue, and a number of well known companies have been forced to modify their business models to avoid further run ins with regulatory authorities.  Settlements reached with the State of New Hampshire and the Commonwealth of Massachusetts have also included payment of significant back wages and civil penalties. 

Once again businesses should be reminded to review their arrangements with independent contractors carefully and to become fully familiar with the different test used by the administrative agencies and the Internal Revenue Service to assess worker classification.  Taking proactive measures including using carefully worded independent contractor agreements and acting in accordance with them, contracting with established businesses rather than individuals, and negotiating business terms at arms length will assist a company in avoiding legal liability.  When in doubt it is always best to consult with legal counsel or speak directly with representatives of the NHDOL or NHES about these issues. 

Charla Bizios Stevens is a Director and Shareholder in the Employment Law Practice Group at the law firm of McLane, Graf, Raulerson & Middleton, P.A. and is the Director-Elect and Legislative Affairs Director for the NH State Council.   Charla can be reached at 603-628-1363 or charla.stevens@mclane.com.  The McLane Law Firm is the largest law firm in the State of New Hampshire, with offices in Concord, Manchester, Portsmouth and Woburn, Massachusetts.