Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
States Increase Scrutiny on Construction Companies That Mislabel Workers
Author: Scarinci Hollenbeck, LLC
Date: November 4, 2013
Key Contacts
Back
The construction industry was one of the hardest-hit sectors when the recession struck, and state investigations indicate that many contracting firms may have broken federal and state tax laws by mislabeling employees as independent contractors.
The tax treatment for contractors differs greatly from that of employees, as companies that employ the former are not required to withhold payroll taxes, make Social Security and Medicare tax payments to authorities, or provide health and retirement benefits. However, misclassification of workers comes with a number of federal and state penalties, which include fines, tax payments, interest and, in more severe cases, legal action.
Many states suffering from budget constraints have now taken a more proactive approach toward discovering and penalizing that companies that skirt their tax obligations through mislabeling workers, especially as these crimes cost states millions in potential tax revenue. For instance, Connecticut conducted a 12-month audit of its construction sector, which prompted it to reclassify 3,487 workers and uncover $68.2 million in unreported payroll, representing $1.3 million in lost payroll taxes, Bloomberg reported. Earlier in 2013, New York officials announced that an investigation found 20,200 instances of workers treated as contractors in 2012, representing more than $282.5 million in unreported wages, the news source added.
As states come to realize the prevalence of this problem across a number of industries, more are introducing or updating worker misclassification laws to curb the issue and strengthen their ability to prosecute companies. One issue that some employers find is that the guidelines that govern worker classification can be hazy, making it difficult to determine whether the employee or contractor status applies.
With more states investigating companies and the job market growing, companies that are uncertain of how to classify individuals might benefit from consulting a legal professional. Gaining a firmer understanding of state and federal rules may help lower the risk of tax issues in the future.
- Practices: Tax and Trusts & Estates, Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Buying Commercial Property in New Jersey: Legal Guide for Small Businesses
Small businesses considering buying commercial property in New Jersey must evaluate a range of legal, financial, and operational factors. While ownership can offer long-term value and control, it also introduces significant risks if not properly structured. This guide outlines key considerations to help New Jersey business owners make informed decisions, minimize legal exposure, and successfully […]
Author: Robert L. Baker, Jr.
The SEC’s Latest Guidance on Applying Federal Securities Laws to Tokenized Securities
On January 28, 2026, staff of the U.S. Securities and Exchange Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets issued a joint statement clarifying how existing federal securities laws apply to tokenized securities. The SEC’s “Statement on Tokenized Securities” does not establish new law, but it does provide greater clarity on the […]
Author: Dan Brecher
Common Legal Mistakes NYC and New Jersey Business Owners Make
Operating a business in the New Jersey and New York City metropolitan region offers incredible opportunities, but it also requires navigating a dense and highly regulated legal environment. From entity formation to regulatory compliance, seemingly minor legal oversights can expose business owners to significant risk. In our work with businesses throughout the region, our attorneys […]
Author: Dan Brecher
What Founders Can Learn From Start-up Suits
High-profile founder litigation is more than just a media spectacle. For startup founders, these cases underscore the legal and structural risks that can arise when rapid growth outpaces formal oversight. While launching a new company can be both an exciting and deeply rewarding endeavor, founders must be mindful that it also comes with significant risks. […]
Author: Dan Brecher
Corporate Governance Reviews: A Practical Guide for New Jersey Companies
Every New Jersey company should periodically evaluate its governance framework. Strong corporate governance protects directors and officers, builds investor confidence, reduces litigation exposure, and positions a company for sustainable growth. The first quarter of the year is a great time to evaluate your corporate governance practices and perform any routine maintenance needed to keep that […]
Author: Ken Hollenbeck
What to Do After Being Served with a Lawsuit: Steps to Protect Your Legal Rights
Being served with a lawsuit is one of the most stressful legal events a business or individual can face. Whether the claim involves a contract dispute, an employment matter, an intellectual property issue, or another legal challenge, the actions you take in the first few days can significantly shape the outcome of your case. Acting […]
Author: Robert E. Levy
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.