"Refund cases into seven figures will always catch my eye. For it to be a refund of federal unemployment taxes there have to be a lot of people involved. Mainstay Business Solutions had around 39,000 employees in 2003 and 2004. It’s not a goup of employees or even Mainstay that is the plaintiff, though. Mainstay’s owner, Blue Lake Rancheria, sued for refund. Blue Lake Rancheria is a federally recognized Indian tribe with53 members. I think the story deserves a little background. If you are familiar with the concept of tribal sovereign immunity I apologize for the next few paragraphs. It is an unfamiliar concept to many of us. I’m sure my brief explanation will be inadequate, but I’m hopeful that I’ll get some comments from those more knowledgeable on the topic.

So if you are working for an Indian tribe or the wholly owned subsidiary of a tribe, your employer does not have to pay FUTA on your wages. In this case the federal government argued that the exception only applies to common law employees not statutory employees. You see Mainstay was in the “employee leasing” business. The idea of employee leasing is to relieve employers of the administrative and compliance hassles of having employees. An employer is essentially outsourcing its payroll and human resources functions. All the employees become legally the employees of the “leasing company” which issues their pay checks, pays over their withholdings and explains their benefits and the like."

Get the Story:
Peter J. Reilly: Tribe To Receive Millions In Federal Unemployment Tax Refunds (Forbes 8/19)