Employers may unknowingly trigger risks of labor violation penalties and fines by improperly classifying individuals as independent contractors. By doing so, employers may also be denying workers certain employee benefits (e.g., overtime and the federal Family Medical Leave Act). In fact, a 2007 Cornell University study had estimated the average unemployment insurance taxable wages (from 2002-2005) that were left underreported due to employers misclassifying workers as independent contractors was $4.28 billion for the state of New York alone.
Classify Employees and Independent Contractors Correctly
Employers need to take the following steps to respond proactively to recent changes:
- Become aware of developments and efforts relating to the “Worker Classification Initiative,”
- Know the various types of tests such as the 20-factor test used by the Internal Revenue Service (IRS) to distinguish between employees and independent contractors, and
- Take certain immediate actions in light of increased enforcement by the US Department of Labor.
Find Out More About Conducting Your Contractor Classification Check-ups Now
For more information, be sure to read the featured article by the HR pros at MyHRSupportCenter, Time to Conduct Your Contractor Classification Check-ups. If you’re not yet signed up or would like a free trial of MyHRSupportCenter, contact Vision Payroll today.