Worker misclassification is an easy mistake to make if you are running a small and close-knit business. Even if you do not intend to take advantage of your team members, you may be overlooking some of their rights.
Worker misclassification is when an employer classifies his or her employees as self-employed individuals or independent contractors. As a result, people may miss out on benefits that are rightfully theirs. Misclassifying your employees could not only get you in legal trouble, but it could damage company morale and your reputation over time.
What is an employee?
Different laws define “employee” in different ways. A general rule of thumb is that if someone works for you and you determine what the person does and how the person does it, he or she is likely your employee. Having the person fill out a 1099 form or keeping the person off of your payroll does not change this classification. Even a signed agreement does not make a difference if the person depends on your business economically.
What are an employee’s rights?
It is important to know what rights are unique to employees. Everyone you employ must get overtime pay, worker’s compensation and the minimum wage. It is also important that you always keep safety standards and discrimination laws in mind. On top of this, you should make sure that your employees pay no more than their share of withholding taxes.
Classifications may seem unimportant at times, especially when friends and family members are working together in a business. However, classifications ensure that everyone gets what they deserve. You can foster a healthier work culture by understanding each person’s role and being fair.