If you engage a contingent workforce and would rather not be haunted by fines, jail time, and damage to your reputation, this post is for you. When the Biden Administration rolled out a proposal that would make it harder for companies to classify workers as independent contractors, he solidified his commitment to making accurate worker classification a top priority. Take a cue and make worker classification a top focus. Violators can expect to be subject to strict penalties, fines, and negative press.
A Haunted Future For Worker Classification Violators
Big companies make headlines for their classification missteps. Smaller companies should see those big fines as a warning to take a look at their own practices. It can be a costly mistake to think you’re exempt from the consequences. The Biden administration has made worker classification a priority and made it easier for workers to argue for minimum wage and overtime protections/compensation. In addition to having to pay back 100% of the matching FICA taxes they would have paid had they classified the worker correctly up front, employers can end up subject to additional penalties for each W-2 form they fail to file, a percentage of the employee’s wages, and penalties between $5,000 and $25,000 for each worker classification violation.
In addition, class-action lawsuits, failed audits, and negative headlines can damage a company’s reputation to the point where both workers and consumers are hesitant to engage with the company. It’s just not worth it! Perhaps scarier than the possibility of monetary damages, misclassification has landed some business leaders under house arrest. Let’s get to the punch line: misclassifying workers is not good business in the long run.
The Bottom Line
Whatever the structure, every business needs to protect itself by making compliance a major priority. This reduces the risk for fines and unpleasant attention from the IRS. Any company without the capacity to accomplish this in-house should consider working with a partner. In our world, accurate worker classification and top-notch risk management are always top priority. We are the first to be aware when change is in the air. We track rules in every state as well as on a federal level and offer services to help clients stay compliant. Contact us if you have any questions about your own status.