3 Steps to Avoid Fines for Misclassifying Independent Contractors

By Jamie Moore Marcario, Esq.

The new millennium has seen the meteoric rise of the  “gig economy,” in which businesses engage independent contractors (“IC”) to do the lion’s share of the work instead of  W-2 employees. While ICs may seem like the way to go, the equally meteoric rise in the number of IC   misclassification cases filed against businesses suggests that businesses relying on ICs should think again.

When a company misclassifies its independent contractors, the error is typically an honest mistake rather than an intentional end-run around the federal requirements. Accordingly, until the last 10 years, most regulatory agencies made little to no effort to enforce employee-independent contractor classification laws and regulations, leaving business owners to believe there was little risk if they chose not to strictly comply with the laws. But those days are gone. Today, both federal and state regulatory agencies apply heightened scrutiny when analyzing classification questions at all levels, leading to a new spike in classification lawsuits.

The penalties for misclassification are no laughing matter. If you misclassify an IC, your business may very well owe back taxes on behalf of team members you’ve mischaracterized, and you and your business may even be subject to criminal charges for misclassification. That said, with proper legal guidance from a business law firm like Thrive Law,  it’s actually relatively easy to stay safe and compliant with respect to employee and IC classification issues. We make it simple by walking you through the following three steps ensure your IC classifications pass regulatory muster. Read more