15 Best Practices for Classifying Workers and Avoiding an Audit

By MBO Partners | August 3, 2021

consultants working in office

Misclassifying employees as independent contractors may often seem like a far-off concept—something that only happens to very large companies that you read about in the news. 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 can be audited. 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. Here are four common audit triggers to be aware of.

Four Worker Misclassification Audit Triggers

In order to prepare your company for a possible audit, it is important to understand potential triggers. These include:

  1. An independent contractor filing a compensation or disability claim
  2. An independent contractor filing for unemployment compensation
  3. A whistleblower reporting worker misclassification
  4. Dual classification

What Do You Do if Your Company Is Audited?

Our guide below outlines the steps to take if your company is audited. In the guide you will learn important parts of the process including:

  • What is in an audit letter, including which records will likely be requested
  • How to prepare for the audit, including steps 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

Best Practices to Avoid a Misclassification 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 independent 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 the additional steps you can take to minimize your audit risk while continuing to leverage independent talent, download our guide today.


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