Business owners and household employers of nannys and home health aides regularly seek counsel from our Award Winning New York Employment Law Attorneys about how to properly classify their workers. Many companies mistakenly believe that they can simply call all of their workers independent contractors and issue 1099 tax forms. However, while that may be easy, that is the always prudent. Many laws are implicated in a misclassification analysis. For example, under the New York State Commercial Goods Transportation Industry Fair Play Act, employers can face civil and criminal penalties which can add up to tens of thousands of dollars. Factors under the New York Labor Law must also be considered and, if an improper employment practice is deemed to exist, employers could have to have back taxes on Unemployment Insurance and other payroll taxes. Therefore, in order to protect yourself and your business against such penalties, you should schedule an appointment with one of our Award-Winning Worker Classification Lawyers for a privileged and confidential consultation by calling (800) 893-9645. It always a best practice to ensure you are in compliance before you receive a Notice of Audit from New York State Department of Labor regarding your workforce.
Misclassification of Workers is a Significant Legal Problem
The School of Industrial Labor Relations at Cornell University conducted a study covering a three year period and found that approximately 700,000 workers were misclassified by 40,000 employers in New York. It was found that the trucking and construction industry had a higher rate of misclassifying workers but it was a problem in every industry. When a company misclassifies a worker as an independent contractor instead treating him or her as an employee, the company does not contribute to the Unemployment Insurance or Workers’ Compensation Fund for that worker. As a result, New York State loses millions of dollars in revenue. In addition, when an employer misclassifies an employee as an independent contractor, the worker loses 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.
Factors to Determine an Independent Contractor or Employee
While the courts and administrative bodies 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 a company exerts over a worker. For instance, a worker might be considered an employee if a company chooses when, where and how the employee performs his or her duties and services. A worker might be an employee if a company provides equipment for the worker to perform the job, set hours of work, directly supervises the services or evaluate the 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.
Is it true that an Independent Contractor Agreement Will Protect Me Against All Claims?
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. The agreement itself is not controlling.