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It is common for process serving companies to consider themselves "aggregators" who receive service assignments from a variety of clients and then subcontract the actual service to an independent contractor, commonly known as an IC. The advantage to the company is the avoidance (not evasion) of a number of taxes and associated paperwork. These include paying half the Social Security tax, all of the unemployment tax, part of the Labor & Industry tax, etc. In a number of ways it is easier and less costly to use IC's instead of employees. When done properly this system works and works well.
However, the government, at all levels, doesn't like the IC system. Various government entities have attempted, and are still attempting, to get rid of this system. The current situation includes a series of questions that are asked about the company / worker relationship. The answers to those questions are used to determine whether or not a worker is an IC or an employee.
Based on a recent telephone survey I made of WSPSA members I believe it is quite possible many of our members think they are using IC's when, in actuality, they have employees. This puts those members at grave risk of failing an audit and being forced to pony up thousands of dollars in back taxes when their IC's are reclassified as employees. Some of our membership has either already been through an audit or are actually in one at this time.
Unfortunately, different government entities use different tests and questions in deciding whether a worker is an employee or an IC. They never make it easy.
Based on recent statements made by representatives of the Washington State Department of Labor & Industries, we can expect an increase in the number of audits. If you haven't already done so you must quickly determine the status of anyone you have serving papers for you. L&I has an excellent booklet on this topic. Every member of WSPSA should read it. It is named A Guide to Hiring Independent Contractors in Washington State. You can either request it from L&I or you see a pdf version by clicking here.
If you use IC's you MUST NOT DELAY looking into this. You are at risk.
I'll look into how other government entities determine the company / worker relationship and report here in the near future.
Robin Mullins September 19th, 2009 11:22:16 AM