Classification of Employees
Workers continue to file lawsuits alleging that employers have incorrectly failed to include them in the employer’s benefit programs, including the retirement plans.
The best known case in this area is Vizcaino v. Microsoft Corp. In the Microsoft case, the workers were classified as independent contractors by Microsoft, but it was later determined that they were common law employees and were entitled to be treated as such for purposes of the benefit programs. Earlier this year, a class action lawsuit was filed against Hewlett-Packard Co. with similar claims.
If you are classifying individual workers as independent contractors, agency employees, temporary employees, provisional employees, and so on, you should review the issue with your ERISA attorney. The law recognizes only three categories: employees, non-employees and leased employees. All of those other industry labels will be re-categorized into one of the three legal definitions. Depending on how your plan document is worded, two out of those three could cause you serious problems, up to and including plan disqualification.
We have worked with the IRS on a number of cases involving employee misclassification and would be glad to discuss the issues with you. Also, we recommend that you include language in your plan document which specifically covers the issue of reclassified workers. A one-paragraph provision could avoid a considerable amount of misery in the future.
© 2003
Reish Luftman Reicher & Cohen. All rights reserved. The ERISA Report for Plan Sponsors is published as a general informational source. Articles are general in nature and are not intended to constitute legal advice in any particular matter. Transmission of this report does not create an attorney-client relationship. Reish Luftman Reicher & Cohen does not warrant and is not responsible for errors or omissions in the content of this report.
Learn more about R&R related practice areas:
Employee Benefits
ERISA Litigation
