Fedex case involving misclassification of drivers as independent contractorsWhen you hire someone to do work for you, you might be employing that person as an independent contractor or an employee. If you call a plumber to fix your broken hot water heater, if that plumber has his or her own business, owns the tools, possesses special expertise, then that plumber is likely to be an independent contractor. As such, you’re not going to be responsible for the acts or omissions of that person. Nor would you have to withhold Medicare or Social Security from payments made to the plumber, or pay into the state unemployment system or cover that employee under insurance required by workers compensation laws.

However, when you employ someone to work in your business and dictate the hours of work, the manner in which the work is done, provide them with tools, that person is likely to considered an employee. However, employers are sorely tempted to classify those who work for them as independent contractors. By doing so, the employer saves the headache of tax reporting and withholding. Since employers are also responsible for direct payment of a portion of certain payments such as Medicare, and for payments to federal and state unemployment funds, and often for workers compensation insurance, classifying of workers as independent contractors can save the employer substantial amounts of money.

Misclassifying workers poses serious dangers. Upon an audit, the IRS or state agencies such as state unemployment agencies can recover back amounts due, plus interest and penalties if they find that workers have been misclassified as independent contractors. On the flipside, employees themselves may seek to recover benefits that they might have been owed under federal or state law.In the event of an injury, the state might rule that the worker was properly classified as an employee and therefore should have been covered by workers compensation insurance. Absent that insurance, an employer can be forced to pay directly for an injured employees benefits.

Even large companies with top lawyers can misstep. Recently, a major decision in California held that FedEx had misclassified thousands of its drivers.¬†Georgia employers: please call the Chapar Firm for legal advice if you are presented with this issue. The old adage about the “ounce of prevention saving the pound of cure” is a wise one.