Understanding the Difference Between an Employee and Independent Contractor in Construction Part 3
It’s important that business owners consider whether or not they are misclassifying employees as independent contractors. When worker misclassification occurs, this results in local and federal government agencies receiving less compensation from a lack of taxation. To combat this, the Department of Labor (DOL) is investigating more construction workplaces. If the DOL determines during an investigation that a company is in willful violation of employment laws, the business will face strict penalties.
If your business has been contacted by the DOL, do not hesitate to speak with a Jacksonville construction lawyer. If your company has been issued a penalty, we are experienced in DOL appeals. To catch up on this series, please read parts one and two.
Do You Know the Law?
Millions of employees are misclassified as independent contractors annually. Although some of these misclassifications are a deliberate attempt by the employer to pay less in wages, many employers are simply unaware of the specific labor laws related to worker classification. Some companies fail to have the proper recordkeeping system in place to keep track of documents. Other companies fail to maintain this recordkeeping process long-term. Regardless, employers need to be mindful of these laws and learn how to improve their system to ensure they are compliant.
How to Prevent Misclassification Violations
Although a Jacksonville contractor lawyer can provide valuable representation during an investigation by the DOL, it’s best to avoid this process altogether. Here are a few ways that employers can ensure they are not violating these important laws:
- Understand the Law: Construction firms need to perform their due diligence and learn as much as they can about federal labor laws governed by the DOL. Consulting a construction attorney is a great place to start.
- Recordkeeping: Employers need to establish a recordkeeping system that contains the documents for every worker they hire. Further, this documentation needs to be maintained for several years to ensure the company can access these records during a DOL investigation.
- Assessing Independent Contractors: It’s critical that contractors make certain that their subcontractors are insured, licensed, and have workers’ compensation in place for their workers. An uninsured subcontractor can result in serious liability issues for a general contractor even if the contractor is completely unaware of this illegal activity.
- Payment: Contractors should never compensate independent contractors with “under the table” cash payments or through the same payroll system they use for their employees. Employers should pay independent contractors solely by accounts payable.
Although determining the classification of an employee or independent contractor needs to be performed on a case-by-case basis, when you engage specialized professionals for your projects, you need to carefully consider your options. This is why it’s always best to consult a construction attorney during every phase of a project to ensure that you have a reliable system in place that doesn’t result in costly citations down the road.
If you would like to speak with our Jacksonville construction lawyers, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.