Worker misclassification likely to be even costlier for employers
Q&A with Roberta Fieldspublished in The Oklahoman | September 20, 2016
For years, state and federal agencies have warned of a crackdown on employers who misclassify workers as independent contractors instead of employees. That warning hit home especially hard for Oklahoma employers last week when the U.S. Department of Labor and the Oklahoma Employment Security Commission announced its joint intention to share information as a means to combat worker misclassification. As an example, if the OESC finds an employer has misclassified workers as independent contractors to avoid state unemployment taxes, that information will be shared with the DOL, which can then investigate to determine if the employer misclassified those workers to get around federal wage and hour laws.
“With so many different agencies at play, the monetary damages can pile up quickly,” said Fields. “In many cases, they can include unpaid overtime, employer-sponsored benefits (sometimes retroactively), liability for workers’ comp claims and unemployment claims, and state and federal taxes, penalties and interest.
“Worst yet, if your company is a federal contractor, you also could face the risk of losing your government contract.”
Fields recommended employers conduct a self-audit of their independent contractors and even seek legal counsel to make sure workers are properly classified. Both the DOL and IRS have tests they use to determine whether a worker is an employee or independent contractor.
“Employers should be aware that merely issuing a 1099 instead of a W-2 doesn’t, in and of itself, rule the day when all the factors are stacked up in favor of the employee designation,” Fields said. “Neither does a written, signed contract by both parties affirming the worker is a contractor.”