Whether an individual working for you qualifies as an employee or an independent contractor is a question with no clear answer. Often the employer’s decision on whether to classify an employee as exempt or non-exempt is based on a written job description. The classification decision is made by human resource personnel or even legal counsel under the assumption that the job description accurately describes the duties performed by the employee. Problems arise when job descriptions are either not accurate or become out-dated as the duties of the job change over time
When weighing the benefits of an independent contractor vs. employee advantages, the former is sometimes favorable – particularly in the current business climate. However, the potential liability associated with misclassifying these workers can lead to financial ruin. The growing use and simultaneous need for 1099s forces the question: How do employers keep the specialized talent they need and stay compliant with state and federal regulations?
There are several strategies to help alleviate this potential problem for employers. The goal of any strategy is to have an accurate and up-to-date job description. One option is to have employees either draft or review their job description annually, or when any significant change in employment occurs. Employers can have the employees sign an acknowledgment that the description accurately reflects the actual job duties.
For protection, you need to document the facts before the first day of work and continue as the project progresses. It’s too difficult to reconstruct facts several years later, after memories have faded, key people are not available, and the consultant may be on the other side of the challenge. It’s also important to document the facts surrounding “off boarding” the consultant when the project is completed. Many legal issues arise when the consultant leaves. It’s not uncommon for former independent contractors to feel they received a raw deal and hire an attorney to make it right.
For more information and tips to avoid misclassifications read about 1099 compliance