Small businesses often prefer to treat workers as independent contractors for a number of reasons: to avoid the hassle of calculating and paying employee withholdings; escape employer-required expenses for unemployment insurance, workers’ compensation, and other costs; and, freedom from overtime and other wage and hour regulations. In short, treating employees as “independent contractors” can be a strong attraction to a small business.
Like many other strong temptations, treating an employee like an independent contractor can also lead straight to hell if the employee isn’t. The litany of hellish consequences, both for an employer and for its responsible officers and shareholders, is sobering.
In the first place, there are unpaid withholdings for which not only the employer but also his managers and directors may have joint and several personal liability. Officers, directors, members, managers, partners, and limited liability partners are also personally, jointly and severally liable with their business entity and each other for all claim costs, civil penalties, and attorneys’ fees if they are found to be the “independent contractor” was really an “employee” when they were injured on the job. ORS 656.735.
When a misclassified employee is injured on the job, not only is he free to bring a personal injury action against his employer, but the employer loses the benefit of any defense based on the employee’s own contributory negligence. ORS 656.020.
In addition, individuals responsible for an employer’s unemployment insurance compliance may be personally, severally liable with each other and their employer for the unemployment benefits and claim costs of an employee misclassified as an independent contractor. ORS 657.516.
Consequently, treating a person who provides services to a business as an independent contractor is a decision that must be taken with caution. One mistake could not only hurt your business, but also strain your personal finances.
© 12/12/2013 Lawrence B. Hunt of Hunt & Associates, PC All rights reserved.