MISCLASSIFICATION OF EMPLOYEES AS INDEPENDENT CONTRACTORS

If the proposed federal law entitled the "Employee Misclassification Prevention Act" passes as anticipated, there could be severe fines and penalties for those employers who misclassify their employees as independent contractors. In addition to the fines and penalties proposed under the new law, misclassifying employees as independent contracts can lead to additional issues for employers, including, without limitation, liability for workers' compensation, tax penalties, retroactive liabilities for compensation and benefits, and benefit plan disqualification.  As the line between demarcating when to classify a worker as an employee versus an independent contractor can be blurry, it is important for businesses to review their current classifications along with their independent contractor agreements to ensure proper compliance and to avoid potential legal claims.