Employee Misclassification – Save Your Business from Legal Nightmares

Businesses large and small are being caught up in government investigations and civil lawsuits for misclassifying their employees as “independent contractors.”  With the threat of severe fines and penalties in the event one or more workers are misclassified, understanding the difference between employees and contractors is crucial.

As most business owners know, independent contractors are not entitled to minimum wage, overtime pay, vacation pay, or other benefits that are promised to employees.  Therefore, it may be tempting to simply hire independent contractors to get the job done, resulting in lower overhead expense and less tax paperwork.  But treating an independent contractor like an employee carries enormous risk.  If your business misclassifies a worker, you could be liable for all unpaid wages including unpaid overtime, liquidated damages up to double the amount of unpaid wages, and reimbursement of attorney fees and costs for the attorney that filed suit against your business.

To make sure you’re not misclassifying workers, you should apply the test North Carolina courts often use.  Courts weigh several factors, all of which surround the level of control your business exerts on workers.  These factors include the following questions:  (1) do you control how, when, and where your workers perform their work? (2) do you control your workers’ hours, or can they work irregular hours? (3) are your workers paid on set dates in regular amounts, or on a project-by-project basis? (4) do you give your workers extensive training and supervision? (5) do your workers own their own “tools of the trade,” or do you give these to them?

When applying these factors to determine whether a worker is an employee or independent contractor, no single factor is determinative.  However, if you have independent contractors working for your business and your answers to the above questions show that your business exerts a large amount of control over these contractors, there’s a strong chance that you have misclassified these individuals.

In NC, misclassification often occurs with construction workers, franchise workers, interns, student workers, and work-from-home arrangements.  However, employee versus independent contractor issues crop up in almost every industry.

Qualified employment attorneys can perform an “employment audit” of your company to make sure you are not running afoul of the law.  Contact the experienced attorneys at Weaver, Bennett & Bland, P.A. to discuss your business.

Matthew Villmer is a civil litigation and business law attorney who also practices employment law at Weaver, Bennett & Bland, P.A. Contact Matthew at Weaver, Bennett & Bland, P.A. at (704) 844-1400.  The information contained in this article is general in nature and not to be taken as legal advice nor to establish an attorney-client relationship between the reader and Matthew Villmer or the law firm of Weaver, Bennett & Bland, P.A.

Weaver, Bennett & Bland, P.A. serves clients in North Carolina and South Carolina. Located in the town of Matthews between Mecklenburg and Union Counties in North Carolina since 1982, we proudly provide legal services throughout Charlotte, Matthews, Mint Hill, Stallings, Indian Trail, Monroe, Marvin, Wesley Chapel, Weddington, Waxhaw, the Ballantyne area, and other surrounding communities in the Greater Charlotte area. Our clients range from national corporations and major banking institutions to individuals and local companies.