Independent Contractor OR Reclassify as EE for Workers Compensation

FMason SPHR

Here is my situation: We have "hired" drivers to operate company shuttles in the past. Paid them through A/P with a 1099. Had a situation earlier this year where one of the IC drivers was involved in an unfortunate accident with one of our reg employees. We are now thinking that we may want to "compel" the IC to be an employee. This would move the remedies available to WC instead of general liability. I have conducted an initial analysis using the IRS 20 item test and the results point heavily towards classification as EE vs IC. Besides wage and hour exposure, can you think of some other risks? Can this backfire on us?

Hunter1

Probably many ways it can backfire, for instance, wage claims (ever work any OT?), the Microsoft (I think it was) case where ICs should have been classified as employees and should have been eligible for benefits which had to be granted retroactively, etc, BUT, by making them employees if they should be, you begin to limit your exposure to those possible claims, otherwise, they just keep on mounting up.

Cotterwood

I agree with Hunter1.

You're much better off classifying this individual as an employee. You've reviewed the IRS rules - and said they point to employee. I would think so since he is a driver for your company.

Don D

The downside (liabilities?) include unemployment taxes, payroll taxes, company benefits, overtime and comp rate affect. But, those don't outweigh the liability for NOT doing it correctly and making them employees. The risks inherent in not making them employees are greater.