Washington’s Employment Security Department (ESD) has received a grant of over $400,000 from the U.S. Department of Labor to audit businesses for misclassification of employees as independent contractors.
As we have discussed in an earlier article The Difference Between Independent Contractors & Employees, some attractive benefits of hiring an independent contractor are that:
- It reduces overhead, as they can be utilized on an “as needed” basis
- Since they are in business for themselves, they do not have to be provided with benefits, and
- Often work from their own offices, eliminating the need for adding workspace and equipment
However, businesses that misclassify employees as independent contractors have a bull’s-eye on their backs!
You will give up some control over their performance, and may not have the loyalty that you would have with a dedicated employee.
Furthermore, Washington’s ESD estimates that they will find 430 misclassified employees with about $7 million in unreported wages. Employee misclassification results in workers not being eligible for workers compensation or unemployment benefits, and the resulting loss of tax funds for the state.
You do not want the Employment Security Department auditing your company and levying penalties and fines against you! Make sure your business is on the right side of the law.