When you own a business, you might hire people to work on specific projects because they have special skills. For example, you could retain an attorney from a law firm specializing in employment matters to draft related contracts. Or you could hire a lawyer who reports to you and whose salary and benefits you pay.
However, it is important to understand the difference between employees and independent contractors and to classify your workers correctly. If you pay others to work with you, speak with a Georgia employee misclassification lawyer. A knowledgeable employment attorney at Sparks Law can help ensure that your hiring practices comply with Georgia and federal law.
When employers hire employees, they may offer incentives such as paid holidays and vacation, paid sick days, and health insurance. Employers must also pay minimum wage and overtime in most situations.
Although there are benefits to independent contractor status, such as greater schedule flexibility, these workers are not afforded employee incentives. For instance, independent contractors are not provided unemployment insurance, minimum wages, or overtime. Additionally, they are not covered under the Family Medical Leave Act. Because these benefits cost employers time and money, hiring freelancers can be a prudent financial move.
Georgia uses these statuses to determine workers’ compensation benefits, and the federal government uses them to determine social security withholding. Accordingly, problems arise when an employer misclassifies an employee as an independent contractor, issuing a Form 1099 instead of a W-2 for wages. For one, employers can be fined for classifying a worker incorrectly. Our employee misclassification lawyers can help Georgia employers determine the accurate status of their workers by administering a control test.
In January 2021, the federal Department of Labor (DOL) clarified the difference between employees and independent contractors under the Fair Labor Standards Act (FLSA). In its final rule, 29 CFR Parts 780, 788, and 795, the DOL reaffirms the economic reality test, also known as a control or ABC test. There are two main factors in determining whether the worker is independent or dependent on an employer
If worker designation is still unclear, the DOL identifies other critical considerations:
The new FLSA rule focuses on an employer’s control over employees. Control is based on behavior, finances, and relationship.
Employers control how employees perform their jobs, including how to do them and how long employees will work at each task. Workers who decide their own hours and how to complete a task are more likely to be independent contractors.
Employees earn a salary or are paid an hourly wage over time. They may be assigned different tasks depending on their job duties, but their pay and benefits remain the same. They perform their duties using employers’ equipment.
Independent contractors are generally paid after completing a job. At this point, their affiliation ends unless they are retained for another project.
Independent contractors are often subject to agreements whose terms specify they are not employees. They are considered owners of their business, serving a variety of clients. They incur some risk while employees generally do not.
As an employer, you must classify those who work for you as employees or independent contractors. The designation is important because it determines state workers’ compensation benefits and federal social security withholding. Government agencies know that employers can benefit financially by misclassifying workers, and they will look for mistakes in worker designations.
To avoid potential fines, consult a Georgia employee misclassification lawyer at our firm. Our attorneys are skilled at determining whether your workers are employees or freelancers, so call us today to learn how we can help.
