Whether your workers are properly classified continues to be a major concern for the U.S. Department of Labor. Particularly, the designation of “independent contractor” is a central focus of their investigations. You should review your desiginations before the Department of Labor starts asking questions.
The Department of Labor is joining forces with states throughout the country to uncover employees misclassified as independent contractors. This is in conjunction with the efforts that the Department of Labor has already made with IRS.
It is important to determine whether your workers are employees or independent contractors. The following questions can help you sort out who really is an employee and who is truly an independent contractor.
- Does the worker have an opportunity to make a profit or suffer a loss? An employee is not usually in a position to make a profit or suffer a loss.
- Is the worker competing with others to achieve success in the independent enterprise? An employer can always call another independent contractor to complete the work.
- Is the work being performed integral to your business? If you use the same worker for repetitive work, it’s more likely an employee.
- How is the independent contractor identified by your bookkeeper? Only employees should be listed on the payroll and only employees should have deductions from their pay.
Determining whether you have employees or independent contractors can be difficult. But, it is always better to figure it out now instead of waiting for an audit from the Department of Labor.