Ignorance May Not Be Bliss

Another update from the Jungle…
image012Bill runs a small tech company with a group of bright, energetic young web designers. (His techies shouldn’t be confused with Trekkies, although many of them are Star Trek and Star Wars fans.) Bill’s techies provide their own laptops, iPads and cell phones. Some of the techies have other clients but most of them work exclusively for Bill.

Bill rents space in a renovated factory where he can meet with clients and with his techies to discuss projects. His clients think the location is cool because it’s a center for several IT startups.  His techies like it because next door is a coffee shop with plenty of dark roast coffee, a necessary ingredient in the creative process of the techies.

Bill insists that his techies work at his office location at least once a week so that he can monitor progress on specific client projects. Bill has always treated his techies as independent contractors rather than W-2 employees. The techies prefer to be paid as 1099’s because it gives them a sense of freedom as they work on their own schedule.

Recently, one of the techies told Bill that the U.S. Department of Labor (DOL) has redefined who is an independent contractor.  Based on this new definition all the techies should probably be reclassified as employees rather than independent contractors. But this techie is a bit of a weirdo who shows up occasionally dressed like Spock and tells clients to “live long and prosper” so Bill’s not sure he believes him.

What are Bill’s options?

  1. He can continue his existing practice of classifying the techies as independent contractors since this classification has not been challenged in the past.
  2. He can take a quick look at the DOL website to see if he can find information about a new definition of “independent contractor”.
  3. He can ask for professional help in figuring out whether his techies are truly independent contractors or are actually employees.

A few years ago, a client faced this issue and chose to continue classifying its web designers as independent contractors. The client also declined to hire an attorney to obtain a legal opinion on the matter. Ignorance may not bliss. It generally costs less to hire an employment law attorney to provide a legal opinion on the issue than wing it and end up paying penalties if the IRS or DOL decides workers were misclassified.

If your company is struggling with HR issues, Corporate Compliance Risk Advisor can help you create HR policies that are appropriate for your company’s size and then serve as a resource to your staff as the policies are implemented.

If your company is struggling with HR issues, Corporate Compliance Risk Advisor can help you create HR policies that are appropriate for your company’s size and then serve as a resource to your staff as the policies are implemented.

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