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Practice Management

The "Fine"-ancial Side of Human Resources Regulations

by Mark Opperman, CVPM
    Money and pen

    The article 2012—What the Year Holds for Human Resources,” by Sheila Grosdidier, describes some big changes—especially new regulations—ahead in the area of human resources (HR). How these changes might affect your hiring and employment policies is clear, but what do new and upcoming regulations mean for practices on a financial basis?

    For one thing, with any regulation comes enforcement. What happens if you do not use E-Verify when it is required, or if you do a criminal background check in a state that prohibits it? Usually, the penalty for not complying with such a law is a fine, which could be hefty enough. However, the cost of the fine might be negligible compared with the cost—in time and money—of defending yourself against the charge. Personally, I think that the US government has found a solution to the national deficit: enforce regulatory issues on small and medium-size businesses like never before. Small and medium-size businesses do not normally have dedicated and trained HR or Occupational Safety and Health Administration (OSHA) compliance departments, yet they still must abide by the same laws as big companies that do. So if you wanted to make some money by enforcing regulatory issues, who would you go after, a company with an HR department or one that has none?

    More and more veterinary professionals are telling me about their OSHA, drug, Internal Revenue Service (IRS), and labor board audits. And some penalties for being found noncompliant are set to get bigger in impending legislation. Are you aware of the following federal bills?

    What’s in the Works

    The Fair Playing Field Act of 2012 is a reintroduction of a bill that was originally introduced into Congress in 2010. It is the second bill to be introduced into the current congress on the topic of independent contractor misclassification (the first, the Employee Misclassification Prevention Act, was reintroduced in October 2011). The Fair Playing Field Act would allow the IRS to impose new penalties on companies that misclassify certain employees as “non-employees,” or independent contractors, and therefore do not withhold payroll taxes, etc., as required for employees. This bill would also eliminate “safe-harbor” provisions that some companies feel give them protection from independent contractor misclassification.1

    (By the way, it’s not just the federal government—more than 20 states have already turned a keen eye to this issue as well. See if yours is one of them here.) 

    You might be wondering who is going to enforce these acts, if they are passed. Well, the federal budget for 2013 allocates an additional $14 million to the Department of Labor to “detect and deter” independent contractor misclassification.2 This provision underlines the federal government’s determination to crack down on independent contractor misclassification and increase tax revenues.

    What It Means for You

    So how do these decisions relate to veterinary practices? Check out the employment practices section in the “examination techniques” chapter of the IRS audit guide on veterinary medicine, and you will find a question specifically pertaining to correct classification of independent contractors. Some veterinary practices have tried to classify associate veterinarians and/or groomers as independent contractors when, in fact, they may not meet the criteria for this classification. If your practice is one of these, and if the new bills pertaining to independent contractor misclassification pass, you may find yourself in even more trouble than before.

    Unfortunately, many people are not aware of all the laws and regulations surrounding the independent contractors they employ. But that is no defense if you are caught breaking them, just as not being aware of the speed limit does not exonerate you if you are caught speeding. With scrutiny of independent contractors increasing, every veterinary practice manager and practice owner needs to be up-to-date on the criteria used to classify these individuals and the rules regarding them.

    Stay on Top of the Issues

    The Web sites presented in Sheila’s article can provide information on some of the specific laws and regulations affecting HR issues, but there are many more. I would suggest that managers keep up on their regulatory issues by attending continuing education courses and workshops. In addition, VMC has a complimentary newsletter devoted to keeping readers updated on policies, procedures, and laws that affect the veterinary profession. (You can sign up for it here.) We also have a blog (vmcnotes.net) that is intended to immediately inform practice owners and managers of important management information.

    It is my sincere hope that no one reading this experiences the “joys” of an IRS audit or OSHA review, but I can tell you that it does happen, and the fines can be severe. About 10% of my lecture audience members raise their hands when I ask, “who has undergone an audit of one sort or another?” Ignorance is not bliss in this case. Become aware of the laws and regulations, bring your practice into compliance, and use your money to improve your business—not pay fines.

    References

    1. Reibstein R, Petkun L, Rudolph A. The Fair Playing Field Act of 2012: Congress is trying once again to end ‘safe harbor’ for businesses that may have misclassified employees as independent contractors. Independent Contractor Compliance Web site. http://independentcontractorcompliance.com/2012/03/04/the-fair-playing-field-act-of-2012-congress-is-trying-once-again-to-end-safe-harbor-for-businesses-that-may-have-misclassified-employees-as-independent-contractors/. Published March 4, 2012. Accessed May 2012.

    2. US Department of Labor. FY 2013 Department of Labor budget in brief. US Department of Labor Web site. http://www.dol.gov/dol/budget/2013/PDF/FY2013BIB.pdf. Accessed May 2012.

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