Our Maryland Employment Law Firm Helps Businesses Avoid Misclassification Errors and Penalties
A recurring problem for many Maryland employers is the issue of misclassification of employees as independent contractors. If you misclassify an employee as an independent contractor or fail to classify your independent contractors properly, you could face thousands of dollars in penalties and fines. If you have both employees and independent contractors working for you, an experienced Maryland employment attorney can make sure they are classified correctly.
What is the Issue with Misclassification?
The misclassification issue arises because employers can save a significant amount of money by hiring independent contractors rather than employees. For example:
- Employers can avoid payroll taxes on independent contractors
- Employers do not have to provide workers’ compensation coverage for independent contractors
- Employers do not have to pay unemployment insurance for independent contractors
As you can see, there is a significant financial incentive for unscrupulous employers to classify employees as independent contractors incorrectly. Unfortunately, honest mistakes can also lead to a citation. If you have received a misclassification citation, a Maryland employment lawyer can help you resolve the issue.
How Does Maryland Distinguish Between Employees and Independent Contractors?
Distinguishing between an employee and an independent contractor isn’t always easy. As a result, Maryland employment authorities will use a multi-factor test to determine whether a worker is an employee or independent contractor:
- Is the worker free from control or direction regarding the performance of their work?
- Is the worker providing a service that is outside of their employer’s ordinary course of business?
- Is the worker performing a service that would be typically considered an independent occupation?
For example, you might hire an accountant to provide some guidance concerning your financial operations for your plumbing business. You do not control how or when they work so long as they provide the services you have hired them for. Also, the advice they provide is obviously outside the normal course of your plumbing business. Lastly, accountants are traditionally considered independent from their employers.
In short, the analysis will focus on the relationship between you and the worker. If the relationship appears to be close to an employer-employee relationship, Maryland may consider it such even if you have classified the employee as an independent contractor. A Maryland employment lawyer can help you make sure your workers are correctly classified.
Potential Penalties for Maryland Employers Who Misclassify Employees
If you are cited with misclassifying an independent contractor, you could face the following consequences:
- Civil penalties, including $5,000 per employee for intentional misclassifications and $10,000 for subsequent misclassifications
- Assessment of any unpaid unemployment contributions, with interest at 2% per month if not paid within 45 days
The amount of these penalties could be staggering depending on the number of employees that Maryland believes you have misclassified.
Speak with a Maryland Employment Attorney Today to Protect Your Business
You don’t have to wait to receive a citation to get the help you need. At the Law Firm of J.W. Stafford, we work with employers large and small to help them make sure their workers are appropriately classified by reviewing contracts and providing guidance concerning their day-to-day business operations. Contact us today at 410-514-6099 to schedule a consultation and discuss how we can help.