With workflow and needs for individual businesses changing rapidly in many industries, classifying the individuals who are providing you with services or labor correctly is crucial.  Whether someone is an employee or an independent contractor can sometimes be difficult to ascertain. Especially with the changing DOL and IRS guidelines, these identifiers can be difficult for business owners to keep up with. But it’s one of the most crucial distinctions you can make. The consequences of misidentifying an employee as an independent contractor or vice versa can be severe. 

Updates and clarifications on the federal level have further complicated the definitions of independent contractors. Because of this, many people find themselves confused when facing this aspect of their business. But amid the confusion, the repercussions for choosing the incorrect terminology to use for your employee have also grown more severe. You can’t afford to get this one wrong, even as it’s becoming more likely you will.

Federal definitions of independent contractors change depending on who’s in office. With former president Mr. Trump in office, it was a little more clear how to define and treat an independent contractor in your business. Legislation under President Biden has complicated the matter somewhat. And, with the National Labor Relations Board deciding to propose that any misclassification of an independent contractor is an “unfair labor practice”, now labor law violations will be brought into play if you do not classify your employees correctly.

None of this overcomplication means that you should simply give up on hiring people in an independent contractor capacity. Independent contractors are wildly beneficial to companies and are quickly becoming a staple position in many industries because of their flexibility and ability to be hired on a project-by-project basis. It’s very beneficial for businesses when it comes to a tax standpoint, and it can also save you money on benefits, since independent contractors are not required to receive benefits. So avoiding hiring an independent contractor all together is not necessarily the best move for you and your business, but doing it rightly is crucial to pursue a valuable business experience without breaking the law. Here are the big questions you need to answer for yourself to keep your business out of trouble when hiring independent contractors. This list is not exhaustive, but it’s highlighting the major points that people most often forget, with brief answers for each one to get you started on your way to finding what works for you and your business. Be sure that you research each of these top ten to-dos further, as they are constantly changing and will likely be updated again by the federal government within the next year. 

  1. Create independent contractor relationships while following current IRS, DOL, NLRB, and state agency guidelines and regulations.

  2. Determine employees’ statuses on a case-by-case basis with accuracy that meets court requirements.

  3. Learn the DOL’s current definition for an independent contractor.

  4. Understand all aspects of the independent contractor status and the risks that come with it.

  5. Familiarize yourself with how COVID/vaccination requirements are changing the workplace for independent contractors.

  6. Discover why federal legislation is focusing on this issue and what elements in particular they’re looking to enforce so you can protect yourself and your workers.

  7. Research what updates are likely to result from federal and state legislation this summer.

  8. Memorize the key factors used by the DOL and IRS to make classification determinations.

  9. Familiarize yourself with court cases that can help you identify contractors versus employees.

  10. Keep up with VertiSource updates to learn more.

Thank you, 

Your VertiSource HR Team

Schedule a free consultation to find out how we can improve your business!

Services Interested In?

5 + 12 =