Misclassification and the Affordable Healthcare Act

Before ObamaCare, employers could loosely characterize an individual’s relationship with the company as either an employee (W-2) or an independent contractor (1099).  After the enactment of the Affordable Healthcare Act, all employers must be extremely careful about how they classify their employees.  Employers can no longer use the protections of “independent contractor status” to shield themselves from the expense of providing healthcare and other benefits for individuals who should rightfully be classified as W-2 employees. An individual will be considered a W-2 employee if: -the employer controls the means and process of their work; -the employer controls the hours and location of the work; -the employer supervises the quality of their work and needs manager’s approval for certain decisions; -Receives benefits like group life insurance and health insurance. An individual will be considered to be a 1099 independent contractor if: -If they are in an independent trade, business or profession; -offer services to the general public and are not limited to just one employer; -the payer controls only the result of the work; -contractor controls the scope and method of work; -contractor controls the details of how the services are performed. The IRS clearly indicates that professionals such as doctors, lawyers, dentists, veterinarians, accountants, contractors, subcontractors, public stenographers or auctioneers are to be considered independent contractors.  But the IRS also includes the proviso that each such instance will be evaluated on a case-by-case basis and that the individual must meet with tests set forth above. Take the time to re-evaluate your employee classification now to avoid the headache, cost and penalties associated with misclassification.