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10 Compliance Issues that Increase Employee Misclassification Risk

   |   MBO Partners   |   September 9, 2014

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Employee Misclassification Risk is Increasing

Worker misclassification and independent contractor (IC) compliance have long been high stakes issues for businesses, but new legislation, recent high-profile cases, pressure from organized labor, and heightened scrutiny from government agencies have increased the risks of misclassifying workers as independent contractors.

Misclassification, intentional or unintentional, can lead to fines and penalties, litigation expenses, and worker settlements, while other costs, such as increased insurance premiums, also hang in the balance.

There is No One Definition of an Independent Contractor

Further complicating the issue is that there is no single national definition of “independent contractor.”  Workers are often simultaneously “employees” for the purposes of one law, and independent contractors or 1099s for other purposes.  A categorization technique may be appropriate in one context, but inappropriate in a different jurisdiction or under a different legal provision.

Independent contractor status can be beneficial for both workers and employers, but these arrangements present complex compliance questions and sometimes difficult choices.  Employers can reduce the risk of misclassification through careful staffing methods, and early recognition of potential problems remains a key component of “best practice.”

How to Reduce Your Risk of Misclassification

In our guide we show you how you can be better prepared to recognize and address compliance issues by watching for ten signs of a possible storm on the horizon.

Sections in this guide include:

  • Policies Are In Place But Not Followed
  • Disgruntled and Dissatisfied
  • Application Filed For Unemployment Benefits
  • Tax Evading Independent Contractors
  • W2 and 1099 in the Same Tax Year
  • Industry Dominated by Unions
  • Lucrative Benefits
  • Your Contractor’s Hiring Policies
  • Insurance Carrier Audit
  • You and Your Competitors Classify Similarly Situated Workers Differently
  • Avoiding Risk

Download our guide to learn how to reduce your risk of employee misclassification.

MBO Partners