12 JANUARY 2021 To be noticed, give us a call: (850) 547-0102 or e-mail: wwdr@worldwidedrillingresource.com Drilling Into Money Not Boring by Mark E. Battersby Independent Contractors (2020) It may soon be time to say goodbye for workers calling themselves “independent contractors” and the drilling businesses using them. Although much has been written about the advantages and disadvantages for both workers and businesses based on how a worker is classified, controversy continues about who is and isn’t truly “independent.” Those drilling operations and businesses utilizing independent contractors to minimize payroll taxes and headaches have long battled the Internal Revenue Service (IRS) and other government agencies over who is and who isn’t an independent contractor. Obviously, being labeled as an employee can have a profound impact on everything from overtime pay to fringe benefits and, of course, taxes. A California law, Assembly Bill 5 (AB5) imposed some of the most significant restrictions on independent contractors in American history. Intended to force businesses to hire freelance workers as employees with health care and other benefits typically afforded to full-time employees, AB5 is now a reality. Dozens of politically connected professions - musicians, translators, writers, producers, and photographers - have successfully lobbied for exemptions, and California voters recently approved Proposition 22, exempting Uber, Lyft, and other ridesharing and delivery providers from having to reclassify their drivers as employees. AB5 provides guidelines and strict definitions of independent contractors, definitions reportedly being considered by several other states. The three-part ABC test created by AB5 defines a worker as an employee unless the worker: jIs free from the control and direction of the hiring entity in connection with the performance of the work, jPerforms work outside the usual course of the hiring entity’s business, and jCustomarily engages in an independently established trade, occupation, or business of the same nature as the work performed. The Government Accountability Office estimates worker misclassification costs the federal government $2.7 billion per year, while both the IRS and the U.S. Department of Labor (DOL) believe up to 30% of employers are misclassifying workers. Unfortunately, there is no uniform test to distinguish employees from independent contractors. Numerous articles have been written about the advantages and disadvantages for both the worker and the drilling business of how individuals are classified. Government agencies such as the IRS, the DOL, and the NLRB (National Labor Relations Board) each use their own guidelines. And, as illustrated by California’s AB5, Proposition 22, the same may be true in the state where the drilling operation is located. Professional assistance may be needed by all parties involved. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com WorldWide Drilling Resource®
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