Independent Contractor or Employees?
Independent Contractors or Employees: Which is right for your business?
The decision between hiring an independent contractor or subcontractor versus an employee can be a tricky one for Ohio employers. But it's an important distinction. If a company mistakenly gets it wrong, and it is discovered during an audit, that employer would face hefty fines that would have to be paid in a short period of time.
According to the Ohio Bureau of Workers' Compensation, “if an employer controls the working hours, selection of materials, traveling routes and quality of performance of a worker, an employer-employee relationship exists and the employer is required to provide workers' compensation coverage for that employee.”
Compensation Solutions, Inc. Vice President Tony Canovi says, “Many employers want to 1099 and use subcontractors to save costs, because of workers' comp, unemployment, taxes they have to pay.
However, in many cases, they are not truly 1099. It's something that we will advise you on, and give you our best recommendation. We will help make sure you are compliant and doing the right thing.”
Questions about independent contractors come up a lot in the construction industry. Compensation Solutions, Inc. helps take out the guesswork. Canovi explains, “What we do is give them the tools and the resources to understand what the bureau looks for. In many cases, employers don't realize that it's a question of “Care, Custody, and Control.” If you are supervising that employee, they are using your tools, and you are providing them company transportation, even though they are 1099, those are still your employees.”
Criteria to help determine Independent Contractor or Employee
Ohio BWC Employee Questionnaire: Independent Contractor-Employee Questionnaire
If ten or more items apply, then the worker is considered an employee and not an independent contractor.
If the answer to eleven or more of these questions is “no,” then that worker is probably an independent contractor.
If I make a mistake and classify someone as an Independent Contractor who should have been an employee, what will happen?
Canovi has seen this happen many times. “Employers get pulled for an audit, and officials find some 1099 subcontractor labor that was not done properly and picks them up as employees, and in turn, the company is hit with thousands, in one case hundreds of thousands of dollars in fines that needed to be paid in 45 days. In certain cases we can help work that out. We can't guarantee all cases, but we can definitely be there as a resource before that happens.”
Can I appeal the fines?
Canovi says, “Everything in the state of Ohio process or system is appealable. So we have that ability to appeal an audit finding or appeal the balance based on extenuating circumstances and the law. We'll look into that with our attorney partners.”
An employer can appeal the fine themselves, but it's easier if you have someone like Compensation Solutions, Inc. helping to resolve the situation. Canovi says, “It's just a matter of employers understanding or knowing the right way to do it. What's the process? How long does the process take? Who do I contact? Is there a special form? In many cases, there are special forms that need to be completed and the Bureau will help you out with that, but it's kind of our forte to make sure it gets directed to the right person.”
Contact CSI with questions
Are you considering hiring independent contractors for your business? Talk to Compensation Solutions, Inc. to make sure you are compliant with Ohio BWC Workers' Compensation rules.
Tony Canovi - firstname.lastname@example.org