Small businesses often prefer to treat workers as independent contractors for a number of reasons: to avoid the hassle of calculating and paying employee withholding; 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 have a strong pull on 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 are the 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 partners are also personally liable, jointly and severally, with their business entity and with each other for all costs of claims, civil penalties, and attorneys’ fees if it is found that 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 file a personal injury lawsuit against his employer, but the employer loses the benefit of any defense based on the employee’s own contributory negligence. ORS 656.020.
Also, persons responsible for enforcing an employer’s unemployment insurance may be personally liable, jointly and severally with each other and with their employer, for the unemployment benefits and claim costs of an employee misclassified as an independent contractor. ORS 657,516.
Accordingly, treating a person who provides services to a business as an independent contractor is a decision that should be made with caution. One mistake could not only hurt your business, but also drain your personal finances.
© 12/12/2013 Lawrence B. Hunt of Hunt & Associates, PC All rights reserved.