I’m on the road today. Work has kept me very busy these past months. It’s been a week of ups and downs. Cameron tried out for JV basketball for 3 days. He had good and bad days. He found out today that two of his friends made the team but he and his best friend did not. A bitter pill to swallow but hopefully just a bump in the road to future success.
Bumps in the road….something we all experience. It happens in business too. We all have to learn, many times through trial and error. Knowing what to look for always helps to avoid problems and today’s article provides criteria defining and independent contractor. Misclassification will cost you a lot in taxes, back wages and penalties.
Enjoy your weekend!
Did You Just Hire an Employee or an Independent Contractor? Be Sure You Know!
In its recent ruling in FedEx Home Delivery, the National Labor Relations Board (NLRB) added a new factor for the classification of a worker as an employee or an independent contractor. The NLRB found that a worker’s right to “entrepreneurial opportunity” was not solely sufficient to classify a worker as an independent contractor; rather, the worker must be actively exercising this right to meet the standard of independent contractor.
Based on this new factor, the NLRB found that FedEx delivery drivers in the company’s Connecticut terminal were employees and not independent contractors as the company claimed.
These are the 11 factors that the NLRB now uses to determine employment status (citing Restatement (Second) of Agency, § 2 (1958)):
1. The extent of control which, by the agreement, the employer may exercise over the details of the work;
2. Whether or not the one employed is engaged in a distinct occupation or business;
3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
4. The skill required in the particular occupation;
5. Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
6. The length of time for which the person is employed;
7. The method of payment, whether by the time or by the job;
8. Whether or not the work is part of the regular business of the employer;
9. Whether or not the parties believe they are creating the relation of employer and employee;
10. Whether the principal is or is not in the business;
11. (NEW) Whether the evidence tends to show that the individual is, in fact, rendering services as an independent business.
Employers face stiff financial penalties for misclassification of workers, including fines, interest and penalties. If the misclassification is found to be willful, the IRS can assess harsher penalties.
To learn more about good legal employment practices, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.