From the AP:

“By classifying its armed guards and other personnel as independent contractors instead of employees, Blackwater has apparently evaded withholding and paying these taxes,” Waxman, D-Calif., wrote in a letter to Blackwater chief Erik Prince.

You can read the letter here, and Blackwater’s response, here.

Senators Durbin (D-IL) and Obama (D-IL) announced in a recent Chicago Sun-Times op-ed that they have introduced the Independent Contractor Proper Classification Act of 2007 (S. 2004). Their op-ed cites a study that claims that hundreds of millions of dollars are lost in tax revenue and insurance premiums over recent years. (h/t George’s Employment Blawg.)

S. 2004 focuses on the lost tax revenue aspect of misclassifications more than other wage/hour or employee benefit aspects, like some of the other bills and cases. Still, I think this is, again, a part of a larger trend. Last time it was exempt/non-exempt misclassification which became such a growth market for lawsuits. (Frankly, that probably drove, at least in part, the increase in independent contractor misclassifications.)

If we ever get a bill with teeth, this could be the new “thing” in employment law. Given that, my cautious instincts tell me that it is time for businesses who use independent contracts in a non-business-to-business context to take a very intense look at that relationship, and re-factor their cost-benefit analysis given the increasing risk of future liability.