Mergers and acquisitions (M&A) trends are growing on a global scale, and the benefits are many. M&A create cost efficiencies through economies of scale and also lead to tax gains. They often increase revenues and can reduce cost of capital. And while the benefits of M&A are significant to businesses, there is often an overlooked factor that can potentially collapse the upsides to these benefits. As M&A continue to trend upward, so does the contingent worker population. According to the Bureau of Labor Statistics (BLS) the total number of flexible workers exceeded 2.6 million in late 2013 with projected growth to continue full steam in the coming years. Contingent labor growth is a direct result of the changing overall workforce landscape, and companies are making considerable investments in their contingent workforces to reduce costs and remain nimble. To that extent it's important to recognize that during a merger between companies, independent contractor (IC) liability is often times overlooked. This "hidden exposure" can be devastating to any company as state and federal agencies are increasing their efforts to uncover unknown ICs and penalize the companies responsible for misclassifying these workers. Individual states are also establishing harsh consequences as IC misclassification continues to be a growing problem, and ICs themselves are becoming empowered with information on how to secure their rights as an independent business. Ultimately the acquiring company inherits the ICs as well as the risk associated with those IC engagements. Because the level of IC validation (if any) with the selling company is unknown, it's critical to include discovery of the IC population as a part of the overall M&A due diligence process.
Dan Evanoff, Director of Compliance, Synergy Services