Is our new worker an employee or independent contractor? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Is our new worker an employee or independent contractor?

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in Employee Benefits Program,Human Resources

Q. I recently was talking with another manager at the company who told me that we had hired an independent contractor to work in our records room doing filing and data storage tasks. We also have employees performing that job. Could that cause any problems?

A. Yes. Since the individual is performing the same job as your company’s employees, there could be a risk that the person may really be an employee who is misclassified as an independent contractor.

When companies misclassify a worker as an independent contractor, they usually have not treated the person as an employee for tax purposes. The company can be subject to back-tax obligations, penalties and interest.

Plus, if the contractor was really an employee, he or she may have a legitimate claim that he or she should have participated in the company’s various benefits plans (medical, dental, retirement, profit sharing, etc.). In addition, if employees generally participate in bonus, commission or stock-option programs, it is also possible that the worker could make claims to be paid these types of compensation or benefits.

You may also be liable for unpaid wages and overtime, for not covering the employee under your workers’ compensation plan and for unemployment benefits.

Work with your attorneys to decide whether someone is a true independent contractor or an employee.

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