Employee or Independent Contractor
Employers must classify those who work for them as an employee or independent contractor. If someone who does work for a business is truly an independent contractor, employers do not have to pay payroll taxes, minimum wage, or overtime; do not have to comply with certain meal or rest break requirements for employees; and do not even have to cover independent contractors under the employer’s workers’ compensation plan.
The downside is that employers are often accused of wrongfully classifying employees as independent contractors in order to avoid complying with laws covering employees. If there is litigation concerning the status of a person whom the employer classified as an independent contractor, but the court finds the person was really an employee, the employer can face stiff penalties.
Maintaining an Employee File
The law requires employers to keep a number of items in the employee’s employment file. This includes tax forms, verification of eligibility to work, benefits forms, withholding agreements, and any other agreement made between the employer and employee, like a non-compete agreement or an arbitration agreement. Any performance evaluation, whether good or bad, must also be included in the employee file.
All employers are required to carry workers’ compensation insurance even if their only employees are family members. The purpose of this insurance is that if workers are injured on the job, they can collect for their medical expenses and lost wages without having to prove that the employer was negligent. In turn, employers may not assert that the worker’s own negligence was the cause of the injury.
The penalty for not having this insurance is steep. If the Labor Board discovers an employer does not have it, it will issue a citation and shut down the business. No employees will be allowed to work until the employer proves he or she has purchased the insurance. In addition, a penalty of $1,500 is assessed for every employee that was working at the time the Labor Board issued its citation for failing to have the insurance.
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