Onboarding new employees comes with a variety of expenses. There are recruitment and potentially relocation costs to cover. Employers pay for training and safety equipment. The company must ensure that the budget accounts for base wages and the cost of benefits.
Employers may be liable for damages in cases where workers are negligent on the job. They also incur taxes and insurance obligations, including costs related to unemployment and workers’ compensation coverage.
Hiring workers as independent contractors on a project basis instead of as employees is one way to limit staffing expenses. However, if employees later challenge their classification as independent contractors, employers can face serious consequences.
Misclassification is illegal
Both federal guidelines and New York state employment statutes clarify the difference between employees and independent contractors. Workers who are subject to company management, who rely on company equipment and who have an ongoing work relationship with the company, rather than responsibility for a single project, may be employees, regardless of what paperwork says.
If a worker denied overtime wages or deemed ineligible for workers’ compensation successfully contests their classification as an independent contractor, their employer can face numerous consequences. Businesses may be liable for injury expenses or for past-due workers’ compensation premiums. The company may need to provide back pay and could face fines for misclassifying workers.
They may have tax debts that accrued beginning on the start date of the employee’s job. The company may need to pay not just its portion of the employment taxes assessed but also interest and penalties. Misclassification claims can also damage a company’s reputation with other businesses and prospective future employees.
Ensuring that employment practices align with the intended classification of a professional can protect a company from litigation and other costly setbacks in the future. A lawyer can help employers to better ensure compliance with employment and independent contractor regulations and respond to any litigation asserting that a contract worker was actually an employee.