At Populus Group’s First Annual Customer Summit Conference in Nashville (May 9-11, 2016), Denis S. Kenny (Scherer Smith & Kenny LLP) presented on the hot-button topic of independent contractor misclassification including his attempt at prognostication about possible near-term legislative changes needed to address the on-demand/gig/sharing economy.

1. Presented by Denis Sullivan Kenny
Scherer Smith & Kenny LLP
© 2016 Scherer Smith & Kenny LLP
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2.  Effects and implications of U.S. Department of
Labor Administrator’s Interpretation No. 2015-1
 Misconceptions that lead to misclassification: “on
demand companies” in the “sharing” or “gig”
economy
 Consequences and ways to reduce risks of
misclassification
 Prognostication for 2016 and beyond. . .
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3. No Single Federal or State Test
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4.  On July 15, 2015, United States Department of
Labor, Wage and Hour Administrator issued
Administrator’s Interpretation No. 2015-1
(“Interpretation”).
 This test looks to whether worker is
economically dependent on or independent of
the hiring company (the “Company”)
 Interpretation’s message is clear: most workers
are employees under FLSA, not independent
contractors.
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5. Agencies, courts and juries frequently apply the
same test with differing results.
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6.  “The worker wants to be an independent contractor.”
 “The worker created a LLC or S-Corp to do business
with us.”
 “We have a written contract.”
 “The worker only performs occasional services for us.”
Reality: Classification is a legal determination that parties
cannot displace by a written contract. “Form over
substance” will not be allowed.
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7. CAUSE: $2.7B “Tax Gap”
EFEECT: Government Focus on misclassification and enforcement
 Increased legislation at federal and state level
• Inter-agency (state and federal) cooperation is growing.
• Upsurge of audits tied to DOL budget increases
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8.  Comments from “the bench.”
 Settlements without closure.
 RESULT: misclassification tests are antiquated
and uncertainty remains!
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9. Everyone is a potential adversary:
 Government agencies
 Plaintiff lawyers
 Customers
 Unions
 Workers’ compensation carrier
 Contractors themselves
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10.  Total of Unpaid Taxes
 Penalties
 Fines
 Punitive Damages
 Compensatory Damages
 Liquidated Damages
 Equitable Relief
 Back-Pay
 Reinstatement
 Expenses including attorneys’ fees and costs (even a “win”
will be costly!)
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Defense of case:
 Expect to pay $200,000+ in your
attorneys’ fees, alone!

12. Pending State and Federal Legislation
 The California 1099 Self-Organizing Act (AB 1727)
 H.R. 2483: Independent Contractor Tax Fairness and
Simplification Act of 2015
The Future: Need for Legislative Creation of a “New” Type of
Worker?
 the “Dependent Contractor”
 Licensed or certified “self employed” worker(s)
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14. Please feel free to email or call me with
any follow-up questions or comments
about this presentation.
Thank you,
Denis Sullivan Kenny
(415) 433-1099
140 Geary Street, 7th Flr., San Francisco, CA 94108
denis@sfcounsel.com
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