From Tire Review, Deanna Arnold discusses mistakes that small businesses make that may be violations of the Fair Labor Standards Act (FLSA). She warns that these violations can be costly for small businesses and may even force them to close. She identifies the misclassification of workers as independent contractors instead of employees as the first risk. She writes:
“To mitigate the risk of a costly wage and hour claim, avoid these five common mistakes that small businesses make:
- Classifying employees as independent contractors – Keep in mind that there is no such thing as a 1099 employee, someone is either an independent contractor or they are an employee. As a rule of thumb, if the company has financial control over the person and controls the work that the person does and how they do it, they will be considered to be an employee and not an independent contractor. It is all too common that small businesses bring people on as independent contractors to not have to pay taxes, workers compensation, etc., but the penalties associated with this practice are far beyond what needs to be paid for being in compliance from the beginning. Check the IRS website for the independent contractor test to determine if a worker is an independent contractor or an employee….”
Read the full story at Don’t Make These 5 Wage & Hour Mistakes.