There are many factors to consider when deciding whether the person should fall into the independent contractor category, or the employee category. Some of those factors include training, integration, supervision, set hours work, where the work is done, type of work involved, how the person is paid and whether travel expenses are reimbursed, whether tools are provided, among many others. For a complete list, please email me at Cindy@HacklerFlynnLaw.com.
We recently handled a case where our client had over 40 independent contractors working for the business and one independent contractor filed for unemployment. This sent a red flag to the Employment Development Department and as a result, our client was audited by the Employment Development Department. Don’t let this happen to you.
The penalties for misclassifying a worker can be huge. Not only does the business owner have to pay the worker as an employee for past all the work they’ve done, which includes back employment taxes and possibly overtime wages, but it includes civil penalties as well, ranging from $5,000-$25,000 per penalty for each violation. Additionally, if found guilty, the business owner may be required to post on their business website that they’ve engaged in employment misclassification – so all employees can see and the general public.
Simply put: The key is to look at the entirety of the relationship, weigh how much direction and control there is over the worker and document each factor used in coming up with the determination. If you have questions about whether your workers are independent contractors or employees, we can help.