Could this be you? The NOT so independent contractor
I pay him under a 1099, so he’s automatically an independent contractor, right?” False.
“Oh, that’s because you need to pay him under a 1099 form and have an Independent Contractor Agreement too, right?” False.
TRUE: Providing an individual with a 1099 form, or even an Independent Contractor Agreement, is insufficient to create an independent contractor relationship for workers’ compensation purposes.
In an over-regulated and complicated business economy, the use of an independent contractor is especially appealing to Ohio employers – the independent contractor is responsible for their own taxes and withholdings, and the employer doesn’t have to pay workers’ compensation or unemployment compensation for the individual. But, the misclassification of an independent contractor is a potential nightmare for workers’ compensation purposes.
If an “independent contractor” gets injured on your jobsite and files a claim, and the individual is really an employee, you can be held liable as the employer of record, despite the 1099 form and/or the Independent Contractor Agreement indicating otherwise – and that’s just the beginning of your nightmare. Not only will you incur the workers’ compensation claims costs dollar-for-dollar associated with the employee, but you will be considered “non-compliant” by the Bureau of Workers’ Compensation for as long as the claim is active.
And, your nightmare doesn’t end there. Your company could now be opened up for an audit where it could be determined that more of your so-called “independent contractors” are actually employees. In that event, the Bureau of Workers’ Compensation will now assess you for retroactive premiums on those employees, as well as fees and penalties.
So, what should you do if you are considering hiring an independent contractor?
Ohio employers need to know that while the Ohio Revised Code provides a list of twenty factors to be considered when determining whether an individual is an Independent Contractor or an employee, these factors are merely instructive. The Ohio Bureau of Workers’ Compensation makes each determination on a case-by-case basis. Given the harsh consequences of misclassifying an employee as an “independent contractor” in the workers’ compensation arena, we encourage you to give careful thought to the factors that go into the analysis, so that you can rest a little easier with your classification decisions
If you have hired, or are thinking of hiring, an independent contractor contact Sue Wetzel (firstname.lastname@example.org or 614.227.7744), or any member of the Employment & Labor practice group to discuss the relationship status and avoid the potential risks outlined above.
This is for informational purposes only. It is not intended to be legal advice and does not create or imply an attorney-client relationship.Download PDF