1099s won’t instantly create independent contractors
Q. We hire seasonal temps and have them sign a policy that says their employment will end at 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? –B.B., New York
A. Labeling temporary workers as independent contractors and issuing them Form 1099s won’t do the trick. Instead, the Labor Department will examine the “economic realities” to determine the worker’s status. The economic realities test examines a number of factors. In most cases, the key factor is the degree of control you exercise over the worker in connection with the performance of his or her duties.
If you tell your seasonal employees what to do, when to do it and how it should be done, then they are employees, not independent contractors. If the economic realities establish that you are the employer (or a joint employer), you face significant potential liability if you misclassify these workers as independent contractors.