5 Tips for Proper Classification

5 Tips for Proper Classification

Failure to accurately classify workers can cost any business owner a significant amount of time and money.  For instance, look at Uber Technologies Inc. they fell prey to misclassifying their drivers as independent contractors and as a result of their misclassification Uber has to pay a $20 million misclassification settlement.  Business owners need to be diligent and adequately classify workers using knowledgeable, trustworthy counsel to avoid unnecessary liability. 

Here are five tips to help you avoid the misclassification of an employee:

1.  Know the Law.  There are Federal and State guidelines with which all business owners should follow and know.  The guidelines will assist the business owner in adequately structuring its relationships and avoid liability for misclassifying them.

2.  Use the Right Agreement.  Consult with an attorney to make sure you have the right agreement in place.   A written agreement creates a presumption of an independent contractor relationship that writing alone will not prove a worker is an independent contractor.  You must always be able to satisfy the ultimate inquiry – freedom of the independent contractor from control.

3.  Use the right type of Independent contractors.  Workers who are performing services for multiple businesses that are the same or similar to yours are more likely to be considered independent contractors instead of employees.

4.  Do not use Independent Contractors to perform your core services.  Do not hire independent contractors to accomplish the same or similar functions as your regular employees.  Remember, if it looks like a duck, quacks like a duck, the IRS and state will likely view it as a duck.

5.  Do not treat a former employee as an independent contractor.  If an employee returns to work at your business and will be performing the same or similar tasks as he/she did previously, do not treat him/her as an independent contractor, for this will only increase the likelihood that misclassified the worker.

Our other Article’s & Resources relating to the classification of Independent Contractors:

IRS 3 Part Test

Business Owners Beware

Colorado Employment Law 

If you are still unsure or have any questions regarding the proper classification of an independent contractor, please don’t hesitate to ask us at MB Law: info@mb-law.law
 

 

 

* This information is for general purposes only and is not intended to constitute any specific legal advice of any type.