Assessment
Being uniformed or uneducated is never a defensible position in the event of a government audit or lawsuit regarding worker classification. At the same time, the government itself will say that the determination of whether a worker should be classified as a W2 employee or an independent contractor is a complex and challenging task. They advise anyone engaging independent contractor workers to seek guidance before making determinations. As such, it is imperative that you make informed decisions.
There are many different “tests” to determine worker classification determination, all with areas that overlap as well as areas that differ in the way they assess and determine. There is the IRS, with a primary focus on control of the worker, using the Common Law Test. There is also the DOL, with primary focus on the economic dependence of the worker, using the Economic Realities Test. Then, as if that is not enough, each individual state government has the discretion to use their own individual tests, including the very strict ABC test. It can get very complicated. If the evidence for independent contractor classification fails at any level you could find yourself in a misclassification situation and subject to financial and legal risk.
IntendIC Determination Process
Through Intend's efficient independent contractor vetting process, IntendIC, we will ask pertinent questions based on the applicable federal and state tests for independent contractor status and will gather responses from both the business seeking to hire an independent contractor as well as the prospective independent contractor him/herself. Intend uses a robust and secure online tool to request all information from both the requestor of services and the prospective independent contractor. The tool also allows for upload of supporting documentation for the proposed engagement from the prospective independent contractor. Once all information is gathered the expert Intend team will analyze, discuss with all parties (as applicable), and will reach a classification determination with the specific criteria by which the determination was made. All activity and documentation will be maintained and tracked within the online tool. This will be extremely critical in the event of an audit and/or lawsuit since it will be imperative that you are quickly able to present a legal defense file clearly supporting your assessment and determination to engage an independent contractor. This documentation is "gold".
Every case is unique and the final determination of employee or independent contractor will be based on the preponderance of the evidence after looking at the totality of the prospective work/engagement as well as the particulars of the individual and his/her business situation. The evaluation will result in one of three scenarios:
- The engagement and the individual's business both clearly classify under independent contractor status provided that there is strict compliance with specific conditions, which will be carefully communicated to the Intend client by way of a formal worker classification determination through the IntendIC process.
- The engagement and/or individual's business will require some restructuring and specific actions will need to be taken in order to reach a determination of independent contractor status. In these cases, Intend will work on a consultative basis with its clients to see if such adjustments can be made to structure (or restructure) the engagement/individual's business to ensure compliance and, if so, will provide a determination approving independent contractor status.
- After careful analysis of all responses, documentation, and discussions with all parties it is determined that the prospective engagement and/or individual will not qualify for independent contractor status despite seeking restructure options. In this case, Intend will provide a determination stating that the individual must be engaged on a W2 employee basis for the proposed engagement rather than as an independent contractor, in order to avoid the risk of worker misclassification.