SmartTalent - 1099 Contractor MisclassificationThe US Department of Labor reported that up to 30% of employers misclassify workers as independent contractors. Make sure that you – or your staffing partner – aren’t one of them.

Ask up-front if the workers your staffing agency sends you are being treated as W-2 employees or as 1099 independent contractors. If they are improperly classified, you can be held partially or entirely responsible.

You could be on the hook for penalties, fines and other legal or insurance liabilities including:

  • Reimbursing unpaid wages under the Fair Labor Standards Act
  • Reimbursing any unpaid overtime or holiday pay
  • Paying back taxes and penalties for federal and state income taxes
  • Paying back taxes and penalties for Social Security, Medicare and unemployment
  • Paying workers’ compensation benefits to any misclassified injured employees
  • Providing employee benefits, including health insurance, retirement, etc.

What distinguishes an employee from a contractor?

Here are a few (non-comprehensive) guidelines:

Contractor Employee
  • Sets own hours
  • Keeps business records
  • Has more than one client
  • Supplies own equipment, materials and tools
  • Provide specific services to a company according to contractual conditions
  • Performs duties dictated or controlled by others
  • Is given training for work to be done
  • Works for only one employer
  • Has specific work hours
  • Employer provides all necessary materials
  • Provide services on a regular basis in exchange for compensation and is subject to the control of the employer

If  you are managing and training workers on a daily basis, you may be found to be a joint employer with the staffing company or the sole employer of the misclassified employees. Your company can face joint liability with the staffing company or even sole liability– indemnity clauses offer little to no protection in these cases.

How can you protect yourself as an employer?

Work with a reputable agency. Find a staffing agency that can provide you with the staff you need and the assurance that they assume all employment liabilities.

Are you looking for smart talent or need to learn more about the difference between 1099 contractors and W2 employees? The staffing professionals at SmartTalent can help. Contact us and get started today.