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Seasonal work, temps and 1099 status: Are we liable for unemployment comp?

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in Compensation and Benefits,Employee Benefits Program,Human Resources

Q. We hire seasonal temps and have them sign a policy that says their employment will end on a certain date. We’re aware of the unemployment responsibilities that come with being the last employer on record. If temps are hired with 1099 status, will our company still be responsible as the last employer on record and held liable for unemployment benefits? If we use a temp agency, are we liable?

A.
Being the “last employer” doesn’t necessarily mean you’re liable for unemployment comp.

Unemployment compensation is determined on the applicant’s “base year,” which is generally the first four of the last five completed calendar quarters prior to the claim date. The amount of money an employee was paid by all employers covered by the Unemployment Compensation Law during the base year determines whether the applicant qualifies for benefits and for what amount.

For example, if the effective date of application for benefits was in October, November or December 2007, the applicable base year began July 1, 2006, and ended June 30, 2007. If a seasonal worker who was employed only in November and December applies for benefits, the seasonal employer is not a base-year employer and is not liable for benefits.

An employer that is the “last employer on record” does not necessarily result in liability. The last employer will be responsible for submitting the documentation to determine whether the separation from employment is a qualifying event. Only if the employment was during the base year will the seasonal employer be liable for its proportion of the benefits.

It probably won’t make a difference if you hire seasonal workers “with 1099 status”—meaning as independent contractors. In order to be an independent contractor under the Unemployment Compensation Law, the person must regularly engage in the type of activity as an independent contractor and generally hold himself or herself out to the public as an independent contractor. Your situation does not seem to fit that bill.

If you use a temp agency to fill these positions, the temp agency may be the employer for unemployment compensation purposes, but not the seasonal employer.

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