Do you assume that you’re financially insulated from the missteps of the independent subcontractors you hire? You may find that your subcontractors aren’t as independent as you think. In the eyes of the courts, they could, in fact, be employees.
A company classifying workers as subcontractors must answer the following questions:
A “yes” to either of those questions means the worker is likely an employee in the eyes of the IRS. There are 20 factors the IRS takes into consideration to determine the worker’s classification.
If the IRS classifies a subcontractor as an employee, you could be required to pay for their Worker’s Compensation benefits. A work-related accident could result in large medical and legal expenses, such as lawyer fees, settlements and judgments. The injured party’s lawyer will surely search for deep pockets. This is important to understand so you can take the proper risk management steps to protect your business.
To better determine if your subcontractors could be classified as an employee, I recommend that you read Cary Christian’s article “Employee vs. Subcontractor Issues.”
Under most state laws, the order of responsibility to pay when there is liability for a work-related auto accident is as follows:
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