Employee v. Independent Contractor: Pitfalls of Misclassification (Part 1)

Hey everyone!  I hope you like this picture I took today at the "Reiterstadion" in Hannover, Germany. The yellow building (pictured) is a barn within the Hannover city limits that was built at the turn of the century for the Germany cavalry. Now it's a boarding and training stable surrounded by indoor and outdoor arenas plus a small cross-country course.

For today we have a guest post by employment law specialist Russell Cawyer, publisher of Texas Employment Law Update.  Enjoy! 

"Owning and operating a horse operation requires a lot labor. Owners use a variety of types of personal services. Improperly classifying these workers as independent contractors instead of employees can have a variety of adverse consequences. Potential liability that can result from misclassification include:

1)  Potential tax exposure from federal and state taxing authorities (i.e., unemployment tax, FICA, FUTA);

2)  Exclusion from certain insurance policies depending on the kind of coverage provided;

3)  Claims that misclassified contractors should be entitled to participate in employer benefit plans covering employees (e.g., stock option plans, health and benefit plans);

4)  Claims that misclassified contractors are entitled to overtime compensation.

Moreover, the likelihood of a misclassification mistake being discovered has increased as state workforce divisions, the U.S. Department of Labor and IRS are now coordinating their resources to catch employers that have misclassified workers. In Part 2 of this post I’ll outline the test that is used by Texas courts in determining whether a workers is an independent contractor or an employee."

Follow Russell Cawyer on Twitter @RussellCawyer

Follow Alison Rowe on Twitter @alisonmrowe