Naperville Business Law Attorney Warns Against Misclassifying Workers
In my experience as a business law attorney, I have seen many well-intentioned employers make mistakes that cost them dearly. One of the most common mistakes that employers fall victim to is misclassification of workers. There are major differences in the rights and responsibilities associated with employees versus independent contractors. If you classify a worker as an independent contractor and he or she is actually an employee, you could be subject to a number of financial penalties and costs. The best way to ensure that you are not breaking any employment laws through worker misclassification is to consult with a business lawyer experienced in employment concerns.
When Is a Worker an Independent Contractor?
One of the reasons many employers make worker misclassification mistakes is because the law is somewhat vague about how to determine when a worker should be considered an employee and when he or she is a contractor. The main difference between an employee and a contractor is the amount of control the employer has over the staff member’s work schedule and how the staff completes work tasks. For example, if an employer requires a worker to adhere to a certain work schedule or specifies the equipment the worker must use, the worker should most likely be considered an employee.
If a worker is, in fact, an employee, the employer is responsible for social security and Medicare taxes, employee benefits, workers compensation insurance, overtime pay, and unemployment compensation tax. Some employers may purposely misclassify employees in an attempt to avoid these expenses, but often, worker misclassification is the result of an employer simply misunderstanding the law.
Penalties for Misclassifying Workers
If a worker has reason to believe that he or she has been misclassified, he or she may file a complaint with the state or U.S. Department of Labor (DOL). Worker classification may also be discovered during an audit conducted by the DOL or Internal Revenue Service (IRS). The severity of penalties the employer faces for misclassification depend upon whether the misclassification is categorized as intentional or accidental. Even if the misclassification was unintentional, the employer is subject to major financial consequences. If the IRS believes that the employer intentionally or fraudulently misclassified workers, additional fines and criminal penalties may apply.
Contact a DuPage County Employment Lawyer
Mistakes regarding worker classification can be detrimental to your business’s success. To learn more about worker classification or for help preparing contractor agreements, contact the Gierach Law Firm. Call our office at 630-756-1160 and schedule a confidential consultation with a knowledgeable Naperville business lawyer today.