Do you have employees and independent contractors at your service? If you do, it is important that you label them correctly. Labeling independent contractors as employees, and vice versa, can have far-reaching implications for your business.
Whether it is intentional or by accident, the consequences of employee misclassification remain the same – reputation damage, tax and payroll fines and legal and punitive damages among other consequences. But how do you know you are misclassifying your employees?
Here are three warning signs that you could be misclassifying your workforce:
You are trying to restrict whom they can work for
An independent contractor has the freedom to work for multiple clients at any given time. An employee, on the other hand, is bound by their contract to one employer for a specified time.
If your contractor with a worker is restricting them to offer their services exclusively to your business during the course of your engagement, then chances are you are misclassifying them.
The contract is indefinite
Typically, you hire an independent contractor to perform a specified task over a specific time period. Thus, your contract with the worker ends upon the completion of the task in question. Therefore, if the contract does not specify the scope and timeframe of the engagement, then you may find that it can lead to claims of misclassification.
Independent contractors performing the same roles as employees
Again, independent contractors are hired to perform tasks that require specialized skills. Thus, if you bring in an independent contractor, who then ends up performing the same tasks as your regular employees, then you risk being accused of misclassification.
Protecting your business
Employee misclassification can be disastrous to your organization. Learning more about California labor laws can help you avoid mistakes that can lead to employee misclassification.