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Independent Contractors: Employees by Another Name?

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Donald R. Scherer, Esq.

Earlier this year, both Houses of Congress introduced the Employee Misclassification Prevention Act. This new legislation is intended to target employers who misclassify employees as independent contractors. Employers frequently misclassify employees as independent contractors to save money on employment taxes, benefits, insurance premiums and other expenses.

Among other things, this new legislation imposes civil and administrative penalties on businesses that misclassify employees as independent contractors. In addition, the legislation provides for audits of employers by both state unemployment insurance agencies and the Department of Labor.

Whether the legislation passes or not, it makes good business sense to periodically evaluate whether your employees and independent contractors are properly classified. For example, if an evaluation reveals that a worker is incorrectly classified as an independent contractor, an employer can use this information to make changes to the employee’s status and comply with the law before federal or state agencies get involved or the worker files a lawsuit. In contrast, if an evaluation reveals that a worker is properly classified as an independent contractor, then it may be a good idea to formally document the relationship by entering a written independent contractor agreement. Being proactive and ensuring your employees are properly classified can minimize the risk and consequences of misclassifying workers.

For assistance in evaluating your employee and independent contractor classifications, please contact your Stark & Knoll attorney, or, Donald Scherer, at dscherer@stark-knoll.com, (330) 572-1317. 
 

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