The Department of Labor and Industry has been handing out more and more fines based on employee misclassification issues. When workers perform services for a business, they may be classified as independent contractors or employees. Choosing the wrong label for your workers is considered employee misclassification. It is critical to the Department that workers be classified correctly. If the worker is an employee, generally the employer must withhold and deposit income taxes, Social Security taxes and Medicare taxes. In addition to these taxes, the employer must pay unemployment taxes and carry worker’s compensation insurance. This is generally not required for independent contractors. As such, many times employers will declare workers as independent contractors, but you had better be sure that the Department of Labor and Industry would classify them the same way.
The Department of Labor and Industry has been ramping up its pursuit of employers who misclassify their workers. From January 1, 2014 to February 16, 2014, 12 contractors have been fined anywhere between $2,000 and $30,000 for wrongfully classifying employees. Sometimes it is difficult to determine whether one of your workers is an employee or an independent contractor, but seeking help to make that determination could save you thousands of dollars. Factors that are considered in making the determination are behavioral control, financial control, and the relationship of the parties.
If you have the right to direct or control the manner and means in which services are performed, you have behavioral control over the worker. If you have the right to direct or control the administrative aspects of the work, you have financial control over the worker. If the worker can be fired, quit without liability, and receive employee benefits, your worker is likely an employee.
For more information on employee misclassification or help determining what status your workers have, feel free to contact our office.
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