State of Wisconsin’s Strict Independent Contractor Classification Rules

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The nextSource blog reviews and discusses the strict classifications rules in Wisconsin.  It states:

To classify as an independent contractor in Wisconsin, that state requires an IC to:

  • Maintain a separate licensed business including a published advertisement
    • Specifically, posting of a resume or LinkedIn profile promotes the worker as looking for an employment situation (as opposed to positioning the worker as a business in a B2B relationship) and therefore specific advertising of the business in the form of webpages or marketing collateral is required.
    • More broadly, the worker has to make their services available to other organizations. A worker such as a real estate agent or insurance sales person would not qualify.
  • Obtain a federal EIN from the IRS and/or file self-employment income tax returns in the previous year;
  • Produce specific contracts outlining the work to be performed as an independent contractor;
    • Assume responsibility for operating expenses under those contracts and have it documented as such. Note the costs have to be greater than education and training;
  • Be responsible for satisfactory work performance or provide re-work at their own cost;
  • Receive payment per contract, per job or competitive bid;
  • Be subject to profit and lost in performing the work (other than not receiving payment);
  • Have reoccurring business liabilities and obligations such as rent, payroll, insurance premiums;
  • Be in a position to succeed or fail when expense exceeds income;

Similar to California, Wisconsin has imposed specific state fines to fine for willful misclassification or those who provide false information to their Department of workforce development with $25,000 fines for each occurrence. These nine factors are far more stringent and require an IC to meet a threshold much more aligned with the actual, functional requirements typically shouldered by a bona fide IC. By instituting this more thorough set of requirements, Wisconsin may be making it more difficult for workers to achieve IC status. But at the same time, this stricter regimen yields an environment far more likely to prevent IC misclassification and the severe penalties and fines that often accompany misclassification cases.For tips to avoid worker misclassification, click here.These guidelines, while law in Wisconsin, are not required in other states. However, organizations with the desire to enact and maintain stronger compliance processes may wish to adopt this nine-point standard as a way to ensure they protect themselves from costly challenges.

Read the full story at State of Wisconsin’s Strict Independent Contractor Classification Rules

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