We just got news that a Michigan-based construction company paid $594,000 in back wages and penalties after being found guilty of misclassifying 63 workers as independent contractors. The firm, Teracom, headquartered in Saline, Michigan installs underground fiber optics for telephone and internet providers and apparently has had a practice of classifying some of its workers as independent contractors rather than as employees for some time. They had previously been subject to civil penalties for similar violations in 2018.
“Employers who misclassify workers as independent contractors deny them their rights as employees to important overtime, benefits and protections” ….and the neither the IRS or state agencies think too kindly to that.
One of the solutions PACE provides to our customers who don’t want to go thru the process of hiring people who are working on short term or interim assignments in or out of state, is our Employer of Record service. Not only do we act as the pay agent for these workers, but we hire them directly giving our clients immunity for unexpected IRS audits and giving the workers all the protections of a full benefit eligible W2 employee. If you’re worried that your 1099 workers won’t pass the IRS sniff test, give us a call at 425-637-3312 and we’ll walk you thru the process. These are very low cost services designed for employers who don’t want the hassle or liabilities of being the employer.
Takeaway for Employers: Misclassifying workers as independent contractors can lead to significant financial penalties and legal challenges. Keeping the IRS in the wings by not inviting their scrutiny on your use of independent contractors is a staffing strategy that you can implement quickly and can be hands free for you. Ask about our Employer of Record service model which offers a simple, cost-effective way for us to become both pay agent and the employer of record for any short-term or interim workers that you think might get a second look by the IRS. Making them our W2 employee, assigned back to you to do the work under your control, also gives them access to all the securities and benefits of W2 employment.
