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 (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.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Supreme Court affirms that FLSA doesn't apply to all employees
- How losing 100 pounds sent one employee over the edge (and other wellness best practices)
- Employee leaves in ambulance: How much to disclose?
- 6 issues to consider when updating your employee handbook