By Bernadette Starzee
By using independent contractors instead of hiring employees, employers cut various expenses, from health insurance to payroll taxes. However, workers are sometimes misclassified as independent contractors when they are really employees, which could be a costly mistake for their employers.
Often, misclassification shows up in the salesperson category. As salespeople have various arrangements with regard to where they work and how they are compensated, even well-meaning employers often get the classification wrong.
Employers might also think that because their salespeople are paid on a commission basis rather than a salary that they do not have to classify them as employees.
“When the salesperson is in business for himself, and he’s out selling door to door, and he doesn’t have to be anywhere at any time, and he’s not told who to reach out to, who to sell to – that’s a classic example of a salesperson who is truly an independent contractor,” said Arthur Yermash, a senior associate at Campolo, Middleton & McCormick in Ronkonkoma.
Misclassification may be discovered when an independent contractor gets terminated and files for unemployment insurance or gets injured and files for worker’s compensation. Or it could be found on a Department of Labor audit.
Over the past few years, the Department of Labor has been focused on going after employers for misclassification, Yermash said, noting, “It’s one of the easier ways for employers to avoid some of the legal requirements regarding workers.”
Companies who have independent contractors on their roster should perform a self-audit to make sure they are classified properly.
“They should reevaluate every year or every couple of years, depending on the size of the company and how many independent contractors they have,” Yermash said. “They will be putting themselves in the best possible position to work through any audit that may come.”
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