With a finding of worker misclassification, the workers you thought were not your employees are suddenly deemed your employees. What does that mean practically? It means that you have not been complying with all of the laws that apply to employees.
- Internal Revenue Code employment tax and withholding requirements
- State employment tax and withholding requirements
- National Labor Relations Act
- Affordable Care Act
- Fair Labor Standards Act (FLSA) (overtime/minimum wage)
- State wage and hour laws
- ERISA/employee benefits
- Participation in 401(k) & employer match
- Participation in employee stock ownership plans
- Participation in health and welfare benefit plans
- Family and Medical Leave Act (FMLA)
- Americans with Disabilities Act, Title I
- Age Discrimination in Employment Act (ADEA)
- Title VII of the Civil Rights Act of 1964
- Most states’ employment discrimination laws
- Occupational Safety and Health Act (OSHA)
- Worker Adjustment and Retraining Notification Act (WARN)
- Unemployment coverage
- Workers’ compensation coverage
- State laws covering final paychecks, unlawful deductions, wage theft prevention acts, paycheck notification requirements, meal and rest breaks, access to personnel files, etc.
But wait, there’s more. If one worker has been deemed misclassified, every other similarly situated worker is also likely misclassified. Liability may extend as far back as the statute of limitations — sometimes several years.
And it gets worse. State agencies share information. If you get tagged for failing to pay into the workers compensation system, you may be in the state’s crosshairs for failing to pay into unemployment as well.
The feds share too. The IRS and DOL have an information sharing agreement specific to worker misclassification.
The state and federal governments talk to each other as well. More than 30 states have signed Memoranda of Understanding with the DOL to share information related to findings of worker misclassification. A single finding of misclassification can quickly snowball into a world of hurt.