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How to Deal with and Avoid an Employee Misclassification Audit

   |   Aaron Matthews   |   August 11, 2015

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Are You at Risk for a Misclassification Audit?

Independent contractor misclassification may seem like a far-off idea—something that only happens to very large companies, like FedEx or Citigroup. After all, does the government really care about the details of how a small business engages freelance writers for website copy? The truth is, because audits are private, you only hear about high profile cases that become class action lawsuits. Businesses of all sizes receive the dreaded audit notice. As the independent workforce continues to grow, the issue of worker classification has been thrust into the spotlight and audit occurrences have become more frequent. 

4 Common Audit Triggers

In order to prepare your company for a possible audit, it is key to undertand the potential triggers.  These include:

  1. a contractor filing a compensation or disability claim
  2. a contractor filing for unemployment compensation
  3. a whistleblower reporting misclassification, and
  4. dual classification

What To Do if You Are Audited

Our guide outlines the steps to take if you are audited.  These include:

  • What is in the Audit Letter, including which records will be requested
  • How to Prepare for the audit, including steps for you and your legal counsel will need to take
  • How the Audit is Conducted, including visits that might be scheduled and how to submit information

15 Best Practices to Implement to Avoid an Audit

Our guide offers detailed information on the 15 best practices to implement in order to avoid a misclassification audit.  These include:

  • Developing guidelines for hiring and managing indepependent contractors
  • Writing policy changes to ensure compliance
  • Updating hiring and contractor engagement procedures
  • Documenting descriptions of services performed by contractors
  • Qualifying your contractors as independent

To learn additional steps you can take to minimize your audit risk while continuing to leverage independent talent, download our guide.

Aaron Matthews