Business Owners Beware!
A Federal Court of Appeals recently ruled that thousands of former temporary workers from Microsoft Corporation were, in reality, employees that should have been allowed to participate in the company’s pension program.
For most businesses the issue is much broader than participation in company pension plans. If people working for you as independent contractors are found to be employees under the law, you may be held liable for Federal and State withholding taxes, state disability payments, pension plan contributions and, under certain circumstances, the worker’s income taxes as well. Interest and penalties may also be assessed.
Among the factors considered by the courts in determining whether a particular individual is an employee or an independent contractor are the right to control the manner and means by which production is accomplished, skill required, source of tools, location of the work, documentation of the relationship between the parties, method of payment, hiring the paying assistants and whether the worker is part of the regular business of the hiring party.
Microsoft has learned that misclassifying workers can be a costly mistake. If you have any concerns about how your workers should be classified, you should obtain proper legal advice — before it’s too late.