SlideShare a Scribd company logo
Independent Contractor or Employee?
November 2018
Jaime Lizotte
HR Solutions Manager
ComplyRight, Inc.
Shanna Wall, Esq.
Compliance Attorney
ComplyRight, Inc.
Understanding the Risk of Misclassification
and How to Avoid It
What You’ll Learn…
 Practical benefits of using independent
contractors
 Legal tests government agencies use to
determine worker status
 Penalties for classifying workers incorrectly
 The types of events that can trigger an
investigation
 How to manage contractors so you don’t
cross the line
Employee vs. Contractor
It really comes down to control.
 Independent contractors are responsible for
delivering a certain result
 Contractors decide what to do and how to do
it to achieve that result
 Employees do what you tell them, when you
tell them and how you tell them to do it
Why Use Contractors
Using independent contractors is a practical and
common tactic for U.S. businesses.
 Offers flexibility
 Limits legal obligations and liability
 Reduces administrative burdens
 Can save time and money
Why Use Contractors Cont’d
 Using independent contractors is not a
legitimate way to avoid complying with labor
and tax laws
 You can’t treat everyone as an independent
contractor
 You must follow the rules for classifying
workers
Why Classification Matters
Many federal and state agencies watch for
misclassification.
Consequences can be steep if you get it wrong.
 Back taxes (e.g., Social Security, Medicare,
unemployment) plus penalties
 Back wages, including overtime pay, for up to
three years (sometimes doubled) plus penalties
 Back premiums for workers’ comp insurance
 Possible employee lawsuits
Why Classification Matters Cont’d
What Triggers an Investigation?
 IRS conducts an audit
 DOL or state agency conducts a random
investigation
 Worker gets hurt on the job
 Worker files for unemployment
 Worker requests IRS review (Form SS-8)
 Disgruntled worker files lawsuit
Consider This …
 A national study found that 30 percent of
businesses got it wrong
 In most cases, misclassification wasn’t
intentional
 Independent contractor use continues to rise
 Agencies are cracking down and sharing info
What Are the Rules?
Independent contractor status is determined by
certain tests.
 Federal and state agencies – and courts – use
different tests
 Rules overlap but there are meaningful
distinctions
 In all cases, the totality of the circumstances is
what matters
Right to Control Test
The “Right to Control” test (also known as the
“Common Law” test) looks at the degree of control
exerted over the worker.
It considers 3 categories of control:
1. Behavioral Control
2. Financial Control
3. Relationship of the Parties
Behavioral Control
In the Behavior category of the Right to Control
test, the main question is whether you are
acting like the worker’s boss.
 Do you instruct the worker on how, when and
where to do the work?
 Do you provide training to do the work in a
particular way?
 Is performance closely monitored or
documented?
Financial Control
In the Financial category of the Right to Control
test, these are the questions to ask:
 Are business expenses paid by the worker?
 Does the worker own his or her own equipment?
 Does the worker have other customers?
 Does the worker have potential for profit or loss?
 Is the worker paid by the project?
Relationship Category
In the Relationship category of the Right to Control
test, these are the questions to ask:
 Is there a written contract specifying an
independent contractor relationship?
 Is the relationship temporary or permanent?
 Does the worker provide core business
services?
 Is the worker eligible for benefits?
Economic Reality Test
The second test is the “Economic Reality Test.”
 Preferred by the Department of Labor and
OSHA
 Focuses on the economic relationship with
the worker
 Comprised of six factors
Six Factors of the ERT
1. Right to control: Does the worker control
how the work is performed?
2. Investment: Who pays for equipment,
materials and helpers?
3. Length of relationship: Is the relationship
permanent or temporary?
Six Factors of the ERT Cont’d
4. Skill: Does the work require special skills?
5. Level of risk: Does the worker’s ability to
make money depend on his or her
managerial skills?
6. Level of integration: To what extent are the
worker’s services an integral part of the
employer’s business?
Contractor Don’ts
When it comes to working with a contractor
make sure to NOT do the following:
 Let the worker decide if he or she is a contractor
 Set or track work hours
 Give company business cards or an email address
 Provide PTO or other benefits
 Assign helpers or support workers
Contractor Don’ts Cont’d
When it comes to working with a contractor
make sure to NOT do the following:
 Provide a dedicated office or phone line
 Pay hourly or salary
 Withhold taxes
 Issue a W-2
 Use full-time for an extended amount of time
Contractor Do’s
When it comes to working with a contractor
make sure to DO the following:
 Choose contractors with skills and expertise to
work independently
 Work with contractors who don’t require
training or supervision
 Pay by the project
 Treat as a vendor under accounts payable
ComplyRight Solutions
Easily File and Deliver 1099 and W-2 Forms Online
For more info visit
Watch the recording of this webinar here.
Interested in more FREE webinars?
Check out our webinar topics here.
Connect With Us
@ComplyRight
@ComplyRight
ComplyRight,Inc.
Wait… there’s more!

More Related Content

What's hot

Employing Contractors and Contracting Employees
Employing Contractors and Contracting EmployeesEmploying Contractors and Contracting Employees
Employing Contractors and Contracting Employees
DLA Piper (Canada) LLP
 
What You Need to Know: State Law Update 2012
What You Need to Know: State Law Update 2012What You Need to Know: State Law Update 2012
What You Need to Know: State Law Update 2012
RyanSwansonLaw
 
A Practical Guide to Workers Comp Insurance
A Practical Guide to Workers Comp InsuranceA Practical Guide to Workers Comp Insurance
A Practical Guide to Workers Comp Insurance
Justin Fowler, MBA, CIC, LUTCF
 
Kdragonfly's Compliant Gig Toolkit
Kdragonfly's Compliant Gig ToolkitKdragonfly's Compliant Gig Toolkit
Kdragonfly's Compliant Gig Toolkit
Kathy Dotson
 
What Employers Can Do To Take Control
What Employers Can Do To Take ControlWhat Employers Can Do To Take Control
What Employers Can Do To Take Control
jsumsion
 
Virginia Unemployment Compensation Claimants Willful Misconduct
Virginia Unemployment Compensation Claimants Willful MisconductVirginia Unemployment Compensation Claimants Willful Misconduct
Virginia Unemployment Compensation Claimants Willful Misconduct
Susan Wuchinich
 
The 5 Hidden Causes of Employee Absenteeism – and What You Can Do About Them
The 5 Hidden Causes of Employee Absenteeism – and What You Can Do About ThemThe 5 Hidden Causes of Employee Absenteeism – and What You Can Do About Them
The 5 Hidden Causes of Employee Absenteeism – and What You Can Do About Them
ComplyRight, Inc.
 
Sample Learning Programs
Sample Learning Programs Sample Learning Programs
Sample Learning Programs
Paul
 
Michigan Alsp 2009(3)
Michigan Alsp 2009(3)Michigan Alsp 2009(3)
Michigan Alsp 2009(3)
Diversified Legal Staffing, LLC
 
Linda Webb aka The Fraud Dog, presents - Swarm interaction with Premium Audit
Linda Webb aka The Fraud Dog, presents - Swarm interaction with Premium AuditLinda Webb aka The Fraud Dog, presents - Swarm interaction with Premium Audit
Linda Webb aka The Fraud Dog, presents - Swarm interaction with Premium Audit
The Athletic Mindset
 
Chief legal officer survey 2013
Chief legal officer survey 2013Chief legal officer survey 2013
Chief legal officer survey 2013
Eliott&Markus
 
FLSA Lawsuits
FLSA LawsuitsFLSA Lawsuits
FLSA Lawsuits
iSolved
 
Avoid Termination Blunders: How to Fire an Employee Legally & Fairly
Avoid Termination Blunders: How to Fire an Employee Legally & FairlyAvoid Termination Blunders: How to Fire an Employee Legally & Fairly
Avoid Termination Blunders: How to Fire an Employee Legally & Fairly
ComplyRight, Inc.
 
The Australian redundancy process - a strategic guide for HR managers and emp...
The Australian redundancy process - a strategic guide for HR managers and emp...The Australian redundancy process - a strategic guide for HR managers and emp...
The Australian redundancy process - a strategic guide for HR managers and emp...
Glide Outplacement and Career Coaching
 
HRM Dessler CH# 17
HRM Dessler CH# 17HRM Dessler CH# 17
HRM Dessler CH# 17
Usman Rashid
 

What's hot (15)

Employing Contractors and Contracting Employees
Employing Contractors and Contracting EmployeesEmploying Contractors and Contracting Employees
Employing Contractors and Contracting Employees
 
What You Need to Know: State Law Update 2012
What You Need to Know: State Law Update 2012What You Need to Know: State Law Update 2012
What You Need to Know: State Law Update 2012
 
A Practical Guide to Workers Comp Insurance
A Practical Guide to Workers Comp InsuranceA Practical Guide to Workers Comp Insurance
A Practical Guide to Workers Comp Insurance
 
Kdragonfly's Compliant Gig Toolkit
Kdragonfly's Compliant Gig ToolkitKdragonfly's Compliant Gig Toolkit
Kdragonfly's Compliant Gig Toolkit
 
What Employers Can Do To Take Control
What Employers Can Do To Take ControlWhat Employers Can Do To Take Control
What Employers Can Do To Take Control
 
Virginia Unemployment Compensation Claimants Willful Misconduct
Virginia Unemployment Compensation Claimants Willful MisconductVirginia Unemployment Compensation Claimants Willful Misconduct
Virginia Unemployment Compensation Claimants Willful Misconduct
 
The 5 Hidden Causes of Employee Absenteeism – and What You Can Do About Them
The 5 Hidden Causes of Employee Absenteeism – and What You Can Do About ThemThe 5 Hidden Causes of Employee Absenteeism – and What You Can Do About Them
The 5 Hidden Causes of Employee Absenteeism – and What You Can Do About Them
 
Sample Learning Programs
Sample Learning Programs Sample Learning Programs
Sample Learning Programs
 
Michigan Alsp 2009(3)
Michigan Alsp 2009(3)Michigan Alsp 2009(3)
Michigan Alsp 2009(3)
 
Linda Webb aka The Fraud Dog, presents - Swarm interaction with Premium Audit
Linda Webb aka The Fraud Dog, presents - Swarm interaction with Premium AuditLinda Webb aka The Fraud Dog, presents - Swarm interaction with Premium Audit
Linda Webb aka The Fraud Dog, presents - Swarm interaction with Premium Audit
 
Chief legal officer survey 2013
Chief legal officer survey 2013Chief legal officer survey 2013
Chief legal officer survey 2013
 
FLSA Lawsuits
FLSA LawsuitsFLSA Lawsuits
FLSA Lawsuits
 
Avoid Termination Blunders: How to Fire an Employee Legally & Fairly
Avoid Termination Blunders: How to Fire an Employee Legally & FairlyAvoid Termination Blunders: How to Fire an Employee Legally & Fairly
Avoid Termination Blunders: How to Fire an Employee Legally & Fairly
 
The Australian redundancy process - a strategic guide for HR managers and emp...
The Australian redundancy process - a strategic guide for HR managers and emp...The Australian redundancy process - a strategic guide for HR managers and emp...
The Australian redundancy process - a strategic guide for HR managers and emp...
 
HRM Dessler CH# 17
HRM Dessler CH# 17HRM Dessler CH# 17
HRM Dessler CH# 17
 

Similar to Independent Contractor or Employee? Understanding the Risk of Misclassification and How to Avoid It

Working with Independent Contractors: Smart Strategies for Effective (and Leg...
Working with Independent Contractors: Smart Strategies for Effective (and Leg...Working with Independent Contractors: Smart Strategies for Effective (and Leg...
Working with Independent Contractors: Smart Strategies for Effective (and Leg...
ComplyRight, Inc.
 
January 2011 - Business Law & Order - Mark Heusel
January 2011 - Business Law & Order -  Mark HeuselJanuary 2011 - Business Law & Order -  Mark Heusel
January 2011 - Business Law & Order - Mark Heusel
AnnArborSPARK
 
Employee or Independent Contractor?
Employee or Independent Contractor?Employee or Independent Contractor?
Employee or Independent Contractor?
Infinisource
 
Independent contractor or common law employee 2013
Independent contractor or common law employee   2013Independent contractor or common law employee   2013
Independent contractor or common law employee 2013
lukem
 
Hiring Workers as Employees vs Independent Contractors.pptx
Hiring Workers as Employees vs Independent Contractors.pptxHiring Workers as Employees vs Independent Contractors.pptx
Hiring Workers as Employees vs Independent Contractors.pptx
HEB Chamber of Commerce
 
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...
ComplyRight, Inc.
 
Employee vs Contractor
Employee vs Contractor Employee vs Contractor
Employee vs Contractor
Kristina Caltagirone
 
20 Factor Test Employee Or Sub Contractor
20 Factor Test Employee Or Sub Contractor20 Factor Test Employee Or Sub Contractor
20 Factor Test Employee Or Sub Contractor
dmaaskant
 
Hiring Hazards: How to Avoid the 7 Most Common Legal Landmines
Hiring Hazards: How to Avoid the 7 Most Common Legal LandminesHiring Hazards: How to Avoid the 7 Most Common Legal Landmines
Hiring Hazards: How to Avoid the 7 Most Common Legal Landmines
ComplyRight, Inc.
 
Contingent Workers
Contingent Workers Contingent Workers
Contingent Workers
lnarvid
 
White Paper: Complying With Regulations Regarding Temporary Workers
White Paper: Complying With Regulations Regarding Temporary WorkersWhite Paper: Complying With Regulations Regarding Temporary Workers
White Paper: Complying With Regulations Regarding Temporary Workers
ss
 
Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...
Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...
Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...
Badmus & Associates
 
Independent contractor vs employee for ashrm
Independent contractor vs employee for ashrmIndependent contractor vs employee for ashrm
Independent contractor vs employee for ashrm
SherryLDarden
 
Tx nonprofit hr update august 2011
Tx nonprofit hr update august 2011Tx nonprofit hr update august 2011
Tx nonprofit hr update august 2011
annmstarr
 
HR Update with Cyndi Mergele
HR Update with Cyndi MergeleHR Update with Cyndi Mergele
HR Update with Cyndi Mergele
Greenlights
 
HR Webinar: 2020 Compliance Kick-Off
HR Webinar: 2020 Compliance Kick-OffHR Webinar: 2020 Compliance Kick-Off
HR Webinar: 2020 Compliance Kick-Off
Ascentis
 
No HR Staff? 7 Crucial Moves to Master Everyday Employee Management
No HR Staff? 7 Crucial Moves to Master Everyday Employee ManagementNo HR Staff? 7 Crucial Moves to Master Everyday Employee Management
No HR Staff? 7 Crucial Moves to Master Everyday Employee Management
ComplyRight, Inc.
 
Webinar Unintended Employees
Webinar   Unintended EmployeesWebinar   Unintended Employees
Webinar Unintended Employees
danielschwartz
 
Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up
Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up
Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up
UNHInnovation
 
Employee Rights
Employee RightsEmployee Rights
Employee Rights
sh_neha252
 

Similar to Independent Contractor or Employee? Understanding the Risk of Misclassification and How to Avoid It (20)

Working with Independent Contractors: Smart Strategies for Effective (and Leg...
Working with Independent Contractors: Smart Strategies for Effective (and Leg...Working with Independent Contractors: Smart Strategies for Effective (and Leg...
Working with Independent Contractors: Smart Strategies for Effective (and Leg...
 
January 2011 - Business Law & Order - Mark Heusel
January 2011 - Business Law & Order -  Mark HeuselJanuary 2011 - Business Law & Order -  Mark Heusel
January 2011 - Business Law & Order - Mark Heusel
 
Employee or Independent Contractor?
Employee or Independent Contractor?Employee or Independent Contractor?
Employee or Independent Contractor?
 
Independent contractor or common law employee 2013
Independent contractor or common law employee   2013Independent contractor or common law employee   2013
Independent contractor or common law employee 2013
 
Hiring Workers as Employees vs Independent Contractors.pptx
Hiring Workers as Employees vs Independent Contractors.pptxHiring Workers as Employees vs Independent Contractors.pptx
Hiring Workers as Employees vs Independent Contractors.pptx
 
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...
Contractor or Employee? Exempt or Non-Exempt? Understanding the Distinctions ...
 
Employee vs Contractor
Employee vs Contractor Employee vs Contractor
Employee vs Contractor
 
20 Factor Test Employee Or Sub Contractor
20 Factor Test Employee Or Sub Contractor20 Factor Test Employee Or Sub Contractor
20 Factor Test Employee Or Sub Contractor
 
Hiring Hazards: How to Avoid the 7 Most Common Legal Landmines
Hiring Hazards: How to Avoid the 7 Most Common Legal LandminesHiring Hazards: How to Avoid the 7 Most Common Legal Landmines
Hiring Hazards: How to Avoid the 7 Most Common Legal Landmines
 
Contingent Workers
Contingent Workers Contingent Workers
Contingent Workers
 
White Paper: Complying With Regulations Regarding Temporary Workers
White Paper: Complying With Regulations Regarding Temporary WorkersWhite Paper: Complying With Regulations Regarding Temporary Workers
White Paper: Complying With Regulations Regarding Temporary Workers
 
Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...
Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...
Avoiding Workplace Pitfalls - Domestic and Foreign Employee Compliance - Best...
 
Independent contractor vs employee for ashrm
Independent contractor vs employee for ashrmIndependent contractor vs employee for ashrm
Independent contractor vs employee for ashrm
 
Tx nonprofit hr update august 2011
Tx nonprofit hr update august 2011Tx nonprofit hr update august 2011
Tx nonprofit hr update august 2011
 
HR Update with Cyndi Mergele
HR Update with Cyndi MergeleHR Update with Cyndi Mergele
HR Update with Cyndi Mergele
 
HR Webinar: 2020 Compliance Kick-Off
HR Webinar: 2020 Compliance Kick-OffHR Webinar: 2020 Compliance Kick-Off
HR Webinar: 2020 Compliance Kick-Off
 
No HR Staff? 7 Crucial Moves to Master Everyday Employee Management
No HR Staff? 7 Crucial Moves to Master Everyday Employee ManagementNo HR Staff? 7 Crucial Moves to Master Everyday Employee Management
No HR Staff? 7 Crucial Moves to Master Everyday Employee Management
 
Webinar Unintended Employees
Webinar   Unintended EmployeesWebinar   Unintended Employees
Webinar Unintended Employees
 
Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up
Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up
Lean Start-up Business Tactics Seminar - HR Issues and Your Start-up
 
Employee Rights
Employee RightsEmployee Rights
Employee Rights
 

More from ComplyRight, Inc.

Poster Compliance Audit: Are You Up to Date with the Latest Requirements?
Poster Compliance Audit: Are You Up to Date with the Latest Requirements?Poster Compliance Audit: Are You Up to Date with the Latest Requirements?
Poster Compliance Audit: Are You Up to Date with the Latest Requirements?
ComplyRight, Inc.
 
Returning to Work after COVID-19: Legal Considerations and Best Practices for...
Returning to Work after COVID-19: Legal Considerations and Best Practices for...Returning to Work after COVID-19: Legal Considerations and Best Practices for...
Returning to Work after COVID-19: Legal Considerations and Best Practices for...
ComplyRight, Inc.
 
How to Avoid Accidental Discrimination When Hiring
How to Avoid Accidental Discrimination When HiringHow to Avoid Accidental Discrimination When Hiring
How to Avoid Accidental Discrimination When Hiring
ComplyRight, Inc.
 
Get Your HR in Shape for 2020: Healthy HR Habits to Implement Right Now
Get Your HR in Shape for 2020: Healthy HR Habits to Implement Right NowGet Your HR in Shape for 2020: Healthy HR Habits to Implement Right Now
Get Your HR in Shape for 2020: Healthy HR Habits to Implement Right Now
ComplyRight, Inc.
 
A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020
A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020
A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020
ComplyRight, Inc.
 
1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...
1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...
1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...
ComplyRight, Inc.
 
Mandatory Employee Leave: An In-Depth Analysis of State and Local Laws
Mandatory Employee Leave: An In-Depth Analysis of State and Local LawsMandatory Employee Leave: An In-Depth Analysis of State and Local Laws
Mandatory Employee Leave: An In-Depth Analysis of State and Local Laws
ComplyRight, Inc.
 
Set For Success: Get Maximum Results from Performance Reviews
Set For Success: Get Maximum Results from Performance ReviewsSet For Success: Get Maximum Results from Performance Reviews
Set For Success: Get Maximum Results from Performance Reviews
ComplyRight, Inc.
 
Labor Law Postings: 10 Common Myths That Put Businesses at Risk
Labor Law Postings: 10 Common Myths That Put Businesses at RiskLabor Law Postings: 10 Common Myths That Put Businesses at Risk
Labor Law Postings: 10 Common Myths That Put Businesses at Risk
ComplyRight, Inc.
 
From #MeToo to #NotHere: Essential Strategies to Prevent Workplace Harassment
From #MeToo to #NotHere: Essential Strategies to Prevent Workplace HarassmentFrom #MeToo to #NotHere: Essential Strategies to Prevent Workplace Harassment
From #MeToo to #NotHere: Essential Strategies to Prevent Workplace Harassment
ComplyRight, Inc.
 
The State of Employment Law: How to Comply with Trending Hiring Laws
The State of Employment Law: How to Comply with Trending Hiring LawsThe State of Employment Law: How to Comply with Trending Hiring Laws
The State of Employment Law: How to Comply with Trending Hiring Laws
ComplyRight, Inc.
 
The State of Employment Law: Top Compliance Issues Facing Small Businesses
The State of Employment Law: Top Compliance Issues Facing Small BusinessesThe State of Employment Law: Top Compliance Issues Facing Small Businesses
The State of Employment Law: Top Compliance Issues Facing Small Businesses
ComplyRight, Inc.
 
A Look Ahead: 5 Employment Law Trends to Watch in 2019
A Look Ahead: 5 Employment Law Trends to Watch in 2019A Look Ahead: 5 Employment Law Trends to Watch in 2019
A Look Ahead: 5 Employment Law Trends to Watch in 2019
ComplyRight, Inc.
 
2018 Labor Law Posting Change Trends
2018 Labor Law Posting Change Trends2018 Labor Law Posting Change Trends
2018 Labor Law Posting Change Trends
ComplyRight, Inc.
 
Midterm Election Alert: How to Deal with Political Discussions in the Workplace
Midterm Election Alert: How to Deal with Political Discussions in the WorkplaceMidterm Election Alert: How to Deal with Political Discussions in the Workplace
Midterm Election Alert: How to Deal with Political Discussions in the Workplace
ComplyRight, Inc.
 
From Documentation to Discipline: Control Unscheduled Absences with Proper At...
From Documentation to Discipline: Control Unscheduled Absences with Proper At...From Documentation to Discipline: Control Unscheduled Absences with Proper At...
From Documentation to Discipline: Control Unscheduled Absences with Proper At...
ComplyRight, Inc.
 
Poster Compliance Audit: Is Your Business at Risk?
Poster Compliance Audit: Is Your Business at Risk?Poster Compliance Audit: Is Your Business at Risk?
Poster Compliance Audit: Is Your Business at Risk?
ComplyRight, Inc.
 
2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...
2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...
2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...
ComplyRight, Inc.
 
How to Manage Employee Leave Requests and Control Absence Abuse
How to Manage Employee Leave Requests and Control Absence AbuseHow to Manage Employee Leave Requests and Control Absence Abuse
How to Manage Employee Leave Requests and Control Absence Abuse
ComplyRight, Inc.
 
5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...
5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...
5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...
ComplyRight, Inc.
 

More from ComplyRight, Inc. (20)

Poster Compliance Audit: Are You Up to Date with the Latest Requirements?
Poster Compliance Audit: Are You Up to Date with the Latest Requirements?Poster Compliance Audit: Are You Up to Date with the Latest Requirements?
Poster Compliance Audit: Are You Up to Date with the Latest Requirements?
 
Returning to Work after COVID-19: Legal Considerations and Best Practices for...
Returning to Work after COVID-19: Legal Considerations and Best Practices for...Returning to Work after COVID-19: Legal Considerations and Best Practices for...
Returning to Work after COVID-19: Legal Considerations and Best Practices for...
 
How to Avoid Accidental Discrimination When Hiring
How to Avoid Accidental Discrimination When HiringHow to Avoid Accidental Discrimination When Hiring
How to Avoid Accidental Discrimination When Hiring
 
Get Your HR in Shape for 2020: Healthy HR Habits to Implement Right Now
Get Your HR in Shape for 2020: Healthy HR Habits to Implement Right NowGet Your HR in Shape for 2020: Healthy HR Habits to Implement Right Now
Get Your HR in Shape for 2020: Healthy HR Habits to Implement Right Now
 
A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020
A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020
A Look Ahead: Labor Law Issues Likely to Affect Your Business in 2020
 
1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...
1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...
1099s, W-2s and ACA Forms: New Tax Season, New Priorities for Fast, Fully Com...
 
Mandatory Employee Leave: An In-Depth Analysis of State and Local Laws
Mandatory Employee Leave: An In-Depth Analysis of State and Local LawsMandatory Employee Leave: An In-Depth Analysis of State and Local Laws
Mandatory Employee Leave: An In-Depth Analysis of State and Local Laws
 
Set For Success: Get Maximum Results from Performance Reviews
Set For Success: Get Maximum Results from Performance ReviewsSet For Success: Get Maximum Results from Performance Reviews
Set For Success: Get Maximum Results from Performance Reviews
 
Labor Law Postings: 10 Common Myths That Put Businesses at Risk
Labor Law Postings: 10 Common Myths That Put Businesses at RiskLabor Law Postings: 10 Common Myths That Put Businesses at Risk
Labor Law Postings: 10 Common Myths That Put Businesses at Risk
 
From #MeToo to #NotHere: Essential Strategies to Prevent Workplace Harassment
From #MeToo to #NotHere: Essential Strategies to Prevent Workplace HarassmentFrom #MeToo to #NotHere: Essential Strategies to Prevent Workplace Harassment
From #MeToo to #NotHere: Essential Strategies to Prevent Workplace Harassment
 
The State of Employment Law: How to Comply with Trending Hiring Laws
The State of Employment Law: How to Comply with Trending Hiring LawsThe State of Employment Law: How to Comply with Trending Hiring Laws
The State of Employment Law: How to Comply with Trending Hiring Laws
 
The State of Employment Law: Top Compliance Issues Facing Small Businesses
The State of Employment Law: Top Compliance Issues Facing Small BusinessesThe State of Employment Law: Top Compliance Issues Facing Small Businesses
The State of Employment Law: Top Compliance Issues Facing Small Businesses
 
A Look Ahead: 5 Employment Law Trends to Watch in 2019
A Look Ahead: 5 Employment Law Trends to Watch in 2019A Look Ahead: 5 Employment Law Trends to Watch in 2019
A Look Ahead: 5 Employment Law Trends to Watch in 2019
 
2018 Labor Law Posting Change Trends
2018 Labor Law Posting Change Trends2018 Labor Law Posting Change Trends
2018 Labor Law Posting Change Trends
 
Midterm Election Alert: How to Deal with Political Discussions in the Workplace
Midterm Election Alert: How to Deal with Political Discussions in the WorkplaceMidterm Election Alert: How to Deal with Political Discussions in the Workplace
Midterm Election Alert: How to Deal with Political Discussions in the Workplace
 
From Documentation to Discipline: Control Unscheduled Absences with Proper At...
From Documentation to Discipline: Control Unscheduled Absences with Proper At...From Documentation to Discipline: Control Unscheduled Absences with Proper At...
From Documentation to Discipline: Control Unscheduled Absences with Proper At...
 
Poster Compliance Audit: Is Your Business at Risk?
Poster Compliance Audit: Is Your Business at Risk?Poster Compliance Audit: Is Your Business at Risk?
Poster Compliance Audit: Is Your Business at Risk?
 
2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...
2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...
2018 National Compliance Pulse Survey: Small Businesses Weigh In on Top Emplo...
 
How to Manage Employee Leave Requests and Control Absence Abuse
How to Manage Employee Leave Requests and Control Absence AbuseHow to Manage Employee Leave Requests and Control Absence Abuse
How to Manage Employee Leave Requests and Control Absence Abuse
 
5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...
5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...
5 Performance Management Scenarios: Navigating Everyday Encounters for Greate...
 

Recently uploaded

Easy Approval Same Day Emergency Cash Loans for Urgent Situations
Easy Approval Same Day Emergency Cash Loans for Urgent SituationsEasy Approval Same Day Emergency Cash Loans for Urgent Situations
Easy Approval Same Day Emergency Cash Loans for Urgent Situations
EiLoan
 
foodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docxfoodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docx
PraghyaBhandari
 
Cheslyn Jacobs- TymeBank: Building Consumer Trust in Digital Banking
Cheslyn Jacobs- TymeBank: Building Consumer Trust in Digital  BankingCheslyn Jacobs- TymeBank: Building Consumer Trust in Digital  Banking
Cheslyn Jacobs- TymeBank: Building Consumer Trust in Digital Banking
itnewsafrica
 
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصريشركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
إبراهيم العرجاني
 
Pricing sophistication - auto insurance telematics
Pricing sophistication - auto insurance telematicsPricing sophistication - auto insurance telematics
Pricing sophistication - auto insurance telematics
Matteo Carbone
 
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAAPETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
lawrenceads01
 
1234567891011121314151617181920212223242
12345678910111213141516171819202122232421234567891011121314151617181920212223242
1234567891011121314151617181920212223242
fauzanal343
 
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Aggregage
 
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance UpdatesFamily/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
AishwaryaDoiphode3
 
Top Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdfTop Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdf
Top IT Marketing
 
Case study on Indian Ecommerce logistics
Case study on Indian Ecommerce logisticsCase study on Indian Ecommerce logistics
Case study on Indian Ecommerce logistics
UnheardShayari
 
Zodiac Signs and Fashion: Dressing to Suit Your Astrological Style
Zodiac Signs and Fashion: Dressing to Suit Your Astrological StyleZodiac Signs and Fashion: Dressing to Suit Your Astrological Style
Zodiac Signs and Fashion: Dressing to Suit Your Astrological Style
my Pandit
 
High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...
High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...
High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...
dimplekumaridk322
 
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
Growth Buyouts - The  Dawn of the GBO (Slow Ventures)Growth Buyouts - The  Dawn of the GBO (Slow Ventures)
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
Razin Mustafiz
 
Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...
Brian Frerichs
 
Millionaire track government application
Millionaire track government applicationMillionaire track government application
Millionaire track government application
pragyasharma659549
 
Green Minimalist Aesthetic Project Proposal Presentation.pdf
Green Minimalist Aesthetic Project Proposal Presentation.pdfGreen Minimalist Aesthetic Project Proposal Presentation.pdf
Green Minimalist Aesthetic Project Proposal Presentation.pdf
shivamkush646
 
Connected Small Boat Protection Solution | July 2024
Connected Small Boat Protection Solution | July  2024Connected Small Boat Protection Solution | July  2024
Connected Small Boat Protection Solution | July 2024
Hector Del Castillo, CPM, CPMM
 
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Philip M Caputo
 
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family FoundationPatrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch
 

Recently uploaded (20)

Easy Approval Same Day Emergency Cash Loans for Urgent Situations
Easy Approval Same Day Emergency Cash Loans for Urgent SituationsEasy Approval Same Day Emergency Cash Loans for Urgent Situations
Easy Approval Same Day Emergency Cash Loans for Urgent Situations
 
foodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docxfoodgasm restaurant and Bar pune road.docx
foodgasm restaurant and Bar pune road.docx
 
Cheslyn Jacobs- TymeBank: Building Consumer Trust in Digital Banking
Cheslyn Jacobs- TymeBank: Building Consumer Trust in Digital  BankingCheslyn Jacobs- TymeBank: Building Consumer Trust in Digital  Banking
Cheslyn Jacobs- TymeBank: Building Consumer Trust in Digital Banking
 
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصريشركات إبراهيم العرجاني: لدعم الاقتصاد المصري
شركات إبراهيم العرجاني: لدعم الاقتصاد المصري
 
Pricing sophistication - auto insurance telematics
Pricing sophistication - auto insurance telematicsPricing sophistication - auto insurance telematics
Pricing sophistication - auto insurance telematics
 
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAAPETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
PETAVIT MICHAEL TAY.pdfAAAAAAAAAAAAAAAAAAAA
 
1234567891011121314151617181920212223242
12345678910111213141516171819202122232421234567891011121314151617181920212223242
1234567891011121314151617181920212223242
 
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
Don’t Get Left Behind: Leveraging Modern Product Management Across the Organi...
 
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance UpdatesFamily/Indoor Entertainment Centers Market: Regulation and Compliance Updates
Family/Indoor Entertainment Centers Market: Regulation and Compliance Updates
 
Top Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdfTop Digital Marketing Strategy in 2024.pdf
Top Digital Marketing Strategy in 2024.pdf
 
Case study on Indian Ecommerce logistics
Case study on Indian Ecommerce logisticsCase study on Indian Ecommerce logistics
Case study on Indian Ecommerce logistics
 
Zodiac Signs and Fashion: Dressing to Suit Your Astrological Style
Zodiac Signs and Fashion: Dressing to Suit Your Astrological StyleZodiac Signs and Fashion: Dressing to Suit Your Astrological Style
Zodiac Signs and Fashion: Dressing to Suit Your Astrological Style
 
High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...
High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...
High Profile Girls Call Bhubaneswar 🎈🔥000XX00000 🔥💋🎈 Provide Best And Top Gir...
 
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
Growth Buyouts - The  Dawn of the GBO (Slow Ventures)Growth Buyouts - The  Dawn of the GBO (Slow Ventures)
Growth Buyouts - The Dawn of the GBO (Slow Ventures)
 
Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...Navigating Change Strategies for Effective Transition and Operational Plannin...
Navigating Change Strategies for Effective Transition and Operational Plannin...
 
Millionaire track government application
Millionaire track government applicationMillionaire track government application
Millionaire track government application
 
Green Minimalist Aesthetic Project Proposal Presentation.pdf
Green Minimalist Aesthetic Project Proposal Presentation.pdfGreen Minimalist Aesthetic Project Proposal Presentation.pdf
Green Minimalist Aesthetic Project Proposal Presentation.pdf
 
Connected Small Boat Protection Solution | July 2024
Connected Small Boat Protection Solution | July  2024Connected Small Boat Protection Solution | July  2024
Connected Small Boat Protection Solution | July 2024
 
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
Innovation Hub_ Spotlight on Toms River's Role as a Beacon for Entrepreneuria...
 
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family FoundationPatrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
Patrick Dwyer Merrill Lynch - Founder of the Dwyer Family Foundation
 

Independent Contractor or Employee? Understanding the Risk of Misclassification and How to Avoid It

  • 1. Independent Contractor or Employee? November 2018 Jaime Lizotte HR Solutions Manager ComplyRight, Inc. Shanna Wall, Esq. Compliance Attorney ComplyRight, Inc. Understanding the Risk of Misclassification and How to Avoid It
  • 2. What You’ll Learn…  Practical benefits of using independent contractors  Legal tests government agencies use to determine worker status  Penalties for classifying workers incorrectly  The types of events that can trigger an investigation  How to manage contractors so you don’t cross the line
  • 3. Employee vs. Contractor It really comes down to control.  Independent contractors are responsible for delivering a certain result  Contractors decide what to do and how to do it to achieve that result  Employees do what you tell them, when you tell them and how you tell them to do it
  • 4. Why Use Contractors Using independent contractors is a practical and common tactic for U.S. businesses.  Offers flexibility  Limits legal obligations and liability  Reduces administrative burdens  Can save time and money
  • 5. Why Use Contractors Cont’d  Using independent contractors is not a legitimate way to avoid complying with labor and tax laws  You can’t treat everyone as an independent contractor  You must follow the rules for classifying workers
  • 6. Why Classification Matters Many federal and state agencies watch for misclassification.
  • 7. Consequences can be steep if you get it wrong.  Back taxes (e.g., Social Security, Medicare, unemployment) plus penalties  Back wages, including overtime pay, for up to three years (sometimes doubled) plus penalties  Back premiums for workers’ comp insurance  Possible employee lawsuits Why Classification Matters Cont’d
  • 8. What Triggers an Investigation?  IRS conducts an audit  DOL or state agency conducts a random investigation  Worker gets hurt on the job  Worker files for unemployment  Worker requests IRS review (Form SS-8)  Disgruntled worker files lawsuit
  • 9. Consider This …  A national study found that 30 percent of businesses got it wrong  In most cases, misclassification wasn’t intentional  Independent contractor use continues to rise  Agencies are cracking down and sharing info
  • 10. What Are the Rules? Independent contractor status is determined by certain tests.  Federal and state agencies – and courts – use different tests  Rules overlap but there are meaningful distinctions  In all cases, the totality of the circumstances is what matters
  • 11. Right to Control Test The “Right to Control” test (also known as the “Common Law” test) looks at the degree of control exerted over the worker. It considers 3 categories of control: 1. Behavioral Control 2. Financial Control 3. Relationship of the Parties
  • 12. Behavioral Control In the Behavior category of the Right to Control test, the main question is whether you are acting like the worker’s boss.  Do you instruct the worker on how, when and where to do the work?  Do you provide training to do the work in a particular way?  Is performance closely monitored or documented?
  • 13. Financial Control In the Financial category of the Right to Control test, these are the questions to ask:  Are business expenses paid by the worker?  Does the worker own his or her own equipment?  Does the worker have other customers?  Does the worker have potential for profit or loss?  Is the worker paid by the project?
  • 14. Relationship Category In the Relationship category of the Right to Control test, these are the questions to ask:  Is there a written contract specifying an independent contractor relationship?  Is the relationship temporary or permanent?  Does the worker provide core business services?  Is the worker eligible for benefits?
  • 15. Economic Reality Test The second test is the “Economic Reality Test.”  Preferred by the Department of Labor and OSHA  Focuses on the economic relationship with the worker  Comprised of six factors
  • 16. Six Factors of the ERT 1. Right to control: Does the worker control how the work is performed? 2. Investment: Who pays for equipment, materials and helpers? 3. Length of relationship: Is the relationship permanent or temporary?
  • 17. Six Factors of the ERT Cont’d 4. Skill: Does the work require special skills? 5. Level of risk: Does the worker’s ability to make money depend on his or her managerial skills? 6. Level of integration: To what extent are the worker’s services an integral part of the employer’s business?
  • 18. Contractor Don’ts When it comes to working with a contractor make sure to NOT do the following:  Let the worker decide if he or she is a contractor  Set or track work hours  Give company business cards or an email address  Provide PTO or other benefits  Assign helpers or support workers
  • 19. Contractor Don’ts Cont’d When it comes to working with a contractor make sure to NOT do the following:  Provide a dedicated office or phone line  Pay hourly or salary  Withhold taxes  Issue a W-2  Use full-time for an extended amount of time
  • 20. Contractor Do’s When it comes to working with a contractor make sure to DO the following:  Choose contractors with skills and expertise to work independently  Work with contractors who don’t require training or supervision  Pay by the project  Treat as a vendor under accounts payable
  • 21. ComplyRight Solutions Easily File and Deliver 1099 and W-2 Forms Online For more info visit
  • 22. Watch the recording of this webinar here. Interested in more FREE webinars? Check out our webinar topics here. Connect With Us @ComplyRight @ComplyRight ComplyRight,Inc. Wait… there’s more!