As an employer, you have an obligation to provide certain forms of support and protection for your workers. Their employment status determines which obligations your company has. Workers’ compensation coverage helps ensure that your employees won’t lose their home or be unable to support their families just because they get hurt on the job.
However, not every person who does work for your company will qualify for workers’ compensation benefits. Independent contractors who are self-employed won’t necessarily qualify for benefits. Workers who can’t get benefits may try to fight for them by claiming you misclassified them and that they are actually employees. What are the risks if a worker makes such a claim?
You may pay penalty costs and taxes
A dispute about a worker’s eligibility for workers’ compensation coverage could end up in court. If the ruling is in favor of the worker, the company may have penalties to pay, in addition to arranging to cover the costs that the worker has had.
Beyond that, a ruling that a company misclassified a worker could have many other financial consequences. The employer may face allegations of failing to make income tax contributions. The company could need to pay not only a tax bill but also penalties and interest from the IRS related to unpaid employment taxes.
Businesses facing claims by an injured independent contractor that they were an employee may need to fight back to protect the company’s reputation and profit margin. Understanding the possible consequences of a workers’ compensation conflict with an independent contractor can help your company take the right steps to resolve the situation.