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Be Careful With Independent Contractors

We recently faced an issue with a Client who used independent contractors for a temporary job in another state and was assessed severe per-day penalties for misclassifying workers that the state considered employees.  The issue was settled to the Client’s satisfaction.

While that state has stricter independent contractor restrictions than Georgia, many states are looking to increase fines for mischaracterizing employees to help with revenue shortfalls.   Clients with operations outside of Georgia must be very careful of how they classify workers.  Further, at least 39 states have entered into agreements with the Internal Revenue Service to share data on employee misclassification.

The main test that Georgia uses to determine whether a worker is an independent contractor instead of an employee is the control test.  The more the employer controls many details over the worker’s work, the better the chance that worker will be considered an employee under state law.  Employees will be subject to tax and worker’s compensation ramifications while the regulations on independent contractors are significantly less stringent.

There are numerous other factors Georgia courts look to in determining whether a worker is an employee or an independent contractor, including the duration of the project, whether the employer supplies the tools and location for the project, and more.

If you would like us to review your current employment situation or have any questions about employees vs. independent contractors, do not hesitate to give us a call at Hoffman & Associates.