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NY Department of Labor Lawyer Update: Is there a risk of calling all my workers independent contractors instead of employees?

above-the-bar-logo-no12Our Award-Winning Employment Attorneys are often asked this question by owners and executives of small and large businesses, and the answer is yes – misclassifying your workforce can have severe consequences. Many laws are involved in a misclassification analysis. For example, under the recently changed New York State Commercial Goods Transportation Industry Fair Play Act, employers can face civil and criminal penalties which can quickly add up to tens of thousands of dollars. In addition, employers will most likely have to pay back taxes on Unemployment Insurance. In some cases, employers who misclassify workers can be sent to jail. Therefore, in order to protect yourself and your business against such penalties, you need to schedule an appointment with one of our Award-Winning Worker-Classification Attorneys for a privileged and confidential consultation by calling (800) 893-9645. Information about our Lead Employment Lawyer can be found here.

Why is the Misclassification of Workers Such a Big Issue?

According to a study conducted by the Cornell University School of Industrial Labor Relations, during the period between 2002 through 2005, approximately 40,000 employers misclassified 700,000 workers in New York. Certain industries, such as trucking and construction, have a high rate of misclassifying workers. When a company misclassifies a worker as an independent contractor instead of an employee, the company does not pay into the Unemployment Insurance or Workers’ Compensation Fund for that worker. As a result, New York State was losing millions of dollars in revenue due to this issue. Moreover, when an employer misclassifies an employee as an independent contractor, the worker can lose out on such benefits as healthcare insurance, minimum wage protections, as well as the right to join a union. Because the misclassification of workers can adversely affect a state’s revenues and an individual’s benefits, labor leaders and lawmakers have made this an important issue. To determine if your business is in compliance with the laws pertaining to the classification of workers, contact our office to arrange for a confidential consultation.

How Do I Determine if a Worker Should be Classified as an Employee?

While the courts have determined that there is no one single factor or group of factors that determine how a worker should be classified, making such a determination generally depends upon how much control and direct supervision you have over a worker. For instance, a worker might be considered an employee if you choose when, where and how they perform their duties and services. A worker might by an employee if you provide equipment for them to perform their job, set their hours of work, directly supervise their services or evaluate their performance. A worker also might be considered an employee if he or she is reimbursed for travel and business expenses. These are just some of the factors used to determine if a worker should be classified as an employee. However, because of the complex nature of the employment laws, you should not try to make such critical determinations on your own. Making a mistake in classifying a worker or workers can be extremely costly. Therefore, you need to consult an experienced attorney to guide you through such matters.

How Do I Determine If a Worker Should Be Classified as an Independent Contractor?

Again, while there is not one factor or group of factors that definitively determine a worker’s classification, there are several guidelines the laws use to determine if a worker is, in fact, an independent contractor. Generally speaking, an independent contractor is free from your direct supervision, directions and control over performing his or her job functions. One possible indication that a worker might be an independent contractor is if he or she owns his or her own business. The worker may advertise in print or digital media to promote his or her services. The person may have his or her own business cards, determines his or her own schedule and invests in supplies and equipment. Another indicator that a person is an independent contractor might be that he or she provides services to other companies that are your competitors. To effectively determine if your workers are independent contractors, contact an experienced employment lawyer.

Am I Legally Covered If I Make a Worker Sign a Document Stating that He or She is an Independent Contractor?

No. Even if you have the person sign an agreement stating that he or she is an independent contractor, the law ultimately determines the nature of your business relationship with a worker.

Links Used to Research This Article:
Independent Contractors – New York State Department of Labor
http://labor.ny.gov/formsdocs/factsheets/pdfs/P738-english.pdf