Does your company classify workers as independent contractors? In 2017, companies need to realize that such classifications are becoming fraught with financial peril. Given stricter IRS enforcement of independent contractor standards in regards to employment taxes combined with the ongoing requirements of the Affordable Care Act, misclassification has become hazardous to your company’s bottom line. As a professional employer organization, Total HR Management has a proven track record of making sure our client companies avoid the financial and regulatory hazards of worker misclassification.
Do You Classify Workers as Independent Contractors?
Beyond IRS enforcement and Affordable Care Act requirements, there are many other reasons not to classify workers as independent contractors. For example, avoiding potential problems with the Department of Homeland Security is a major motivating factor. The Department of Homeland Security has become much more vigilant when it comes to the completion of I-9 Employment Eligibility Verification forms. Every employer is required to complete and retain a Form I-9 for every employee hired for employment in the United States.
The only major exception for Form I-9 verification is for individuals hired on or before November 6, 1986. Employees hired on or before November 6, 1986 are exempt if they have been in continuous employment with an employer. Given the huge time gap, the certified Professionals in Human Resources (PHRs) at Total HR Management would imagine that few, if any, of your employees qualify for such an exception. More importantly, this exception would never apply when making the decision to classify workers as independent contractors. In other words, there are no loopholes.
Increased Workplace Rights for Independent Contractors
Do you know about additional federal provisions that call for increased workplace rights for employees who once were classified as independent contractors? Such provisions are coming at employers from all directions. These added requirements will have a lasting impact both on employers and employees moving forward. If you sign up for an HR audit with Total HR, we can examine your employment and staffing strategies, figuring out how these provisions affect your company.
For example, expanded requirements for employers to pay unemployment compensation insurance and workers’ compensation insurance now covers many workers once classified as independent contractors. In addition, the Family and Medical Leave Act now covers many of these workers once classified as independent contractors. The Department of Labor is focused on remedying independent contractors’ ineligibility to take time off under the Family and Medical Leave Act. They consider this an unfair loophole that needs to be closed.
Beyond Federal Problems, Beware the States
Although this article focuses on the federal hazards of deciding to classify workers as independent contractors, the state hazards are increasing as well. In a future article, we will detail the dangers of independent contractor misclassification in California and other states. For now, your company needs to realize that the threat is real. In the past, it wasn’t a big deal to classify a potential employee as an independent contractor. Today and beyond, the decision to classify workers as independent contractors has become a much riskier decision for your company
Overall, the benefits of deciding to classify workers as independent contractors have been greatly reduced in the past couple of years. Instead of being positive for your company, the decision to classify workers as independent contractors has become a real liability. Misclassification is a literal minefield of financial dangers for your company. However, the HR managers at Total HR Management can help minimize this danger for your company, allowing you to hurdle the federal regulatory and bureaucratic minefields. Our goal is to help you focus on the business of your business.
Total HR Management Can Help
To learn more about how we can help your company avoid the dangers of worker misclassification, contact Total HR Management today. Please call (800) 975-5128 today to speak with an HR professional and access the help your small to mid-sized company needs.
No Legal Advice Intended: This blog includes information about legal issues and legal questions. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.