When you misclassify an employee as an independent contractor, you may open up your business to certain legal penalties. It is a position many business owners knowingly or unknowingly find themselves in, and the outcome can be costly.
Ignorance is no defense in such cases. You may be unaware that some of your employees have been misclassified, but you will still have to pay the price. Here are the potential penalties for employee misclassification in New York.
What are the ramifications to your business?
Your business is likely to suffer financially for misclassifying workers as independent contractors. You may have to pay back any wages or benefits missed by the affected workers. Depending on their number, it can amount to a considerable sum of money.
You may also have to pay some regulatory fines or other forms of financial penalties for violating the law. The IRS may impose various fines for failure to withhold and pay income tax. In some cases, misclassifying employees borders on fraud, and you may bear the burden of a conviction. Jail time is a real possibility if you are found guilty.
It can also tarnish the reputation of your business. Failed audits for employee misclassification can paint your company in a bad light, and you may miss out on prospective business opportunities. No one wants to be associated with a business that disregards the law and its workers’ rights.
Do not take chances
Some cases of employee misclassification can slip through the crack unnoticed, only to come up when it’s too late to do anything about it. Therefore it is crucial to have solid workplace policies and procedures that work to prevent such instances. It could save you and your business a lot of trouble.