(HR) Misclassification Is ‘Hot’—And Many (Maybe Most) Organizations Are in Violation

Misclassification is “very hot,” says Attorney Dinita James, and the DOL is doing “directed” investigations, that is, visiting places where there hasn’t been a complaint.

The agency is also singling out certain industries in its search for companies violating rules governing misclassification of independent contractors. For example, says James, they are looking at electrical contractors. In investigations of contractors in construction, most companies were found to be in violation, she says.

The Department of Labor (DOL) is checking such statistics as the ratio of W-2s to 1099s. When the 1099 form is issued to an individual social security number instead of an entity, there will be intense scrutiny.

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Factor	Indicates Employee Status	Indicates Independent Contractor Status
Instructions	Worker is subject to control of and must comply with company’s significant instructions.	Worker determines when, where, and how the work is performed.
Training	Worker is required to undergo on-the-job training.	Worker is already highly skilled and receives no training from company.
Integration	Worker’s services are an integral part of the overall business; worker’s services parallel work done by regular full-time employees.	Worker’s services are not integral to the success or continuation of the business; worker performs services separate and distinct from work done by regular full-time employees.
Services Rendered	Worker must render the services personally.	Worker need not render services personally and has helpers.
Hiring/Super-vision	Company hires, supervises, and pays workers.	Worker hires, supervises, and pays helpers under a contract requiring him or her to provide materials and labor.
Employment Relationship	Continuing relationship between worker and company	Relationship exists only until specific project is completed.
Work Hours	Company sets work hours.	Worker sets his own work hours.
Full-time Effort	Worker must devote full-time effort to company.	Worker determines when and for whom he or she chooses to work.
Location	Work is performed on company premises.	Work is performed elsewhere.
Order/ Sequence	Company sets order or sequence of work performed.	Worker follows his own pattern or schedule of work.
Reports	Worker must submit regular oral or written reports.	Regular reports are not required.
Payment Method	Worker is paid hourly, weekly, or monthly.	Worker is paid by the job or by straight commission.
Expense Reimbursement	Company reimburses worker for business or traveling expenses.	Worker pays his or her own expenses.
Tools and Materials	Company provides worker’s tools and materials.	Worker furnishes his or her own tools and materials.
Significant Investment	Worker does not invest in facilities and/or equipment used to provide services.	Worker makes significant investment in facilities and/or equipment he or she uses in performing services.
Profit or Loss	Worker cannot make a profit or loss.	Worker can realize a profit or loss under the contract.
Employed by More than One Firm	Worker provides services to one company.	Worker provides services to multiple, unrelated companies at the same time.
Service Availability	Worker does not regularly make services available to the general public.	Worker regularly makes services available to the general public.
Firing	The right to discharge is an indicator of an employer-employee relationship.	Worker may not be fired if work is produced according to contract specifications.
Quitting	Each party has the right to terminate the relationship without incurring liability.	Worker may terminate the relationship only upon completion of contract or breach of contract by other party.

Source: HR Daily Adviser