As companies increasingly rely on supplemental labor and contract workers, it is essential that they understand the potential compliance risks associated with worker classification. Misclassification of workers can result in hefty fines, penalties, and legal action. In this article we will discuss why businesses can’t assume that a staffing agency is legally compliant in how they classify workers, and we’ll share how businesses can protect against the risks associated with worker misclassification.
Worker Misclassification and the Potential Risks of a Staffing Agency
When hiring supplemental labor, it is important to understand the potential risks of misclassification. Generally, workers will be classified as either employees or independent contractors based largely on the degree of control exercised by the company that hires them. A staffing agency that fails to classify workers correctly can result in serious legal and financial repercussions, up to and including hefty fines.
Who do you think is responsible for these repercussions when a staffing agency fails to classify workers correctly? JD Supra writes, “Employers utilizing staffing agencies should be on high alert given the Department of Labor’s (“DOL”) recent investigations targeting these arrangements. Specifically, the DOL has been actively investigating businesses that contract with certain types of staffing agencies that rely on placing 1099 independent contractors for labor… The DOL is attempting to hold the staffed businesses accountable for the staffing agency’s alleged misclassification.”
How to Take Extra Precautions When Selecting a Staffing Agency for Supplemental Labor
In order to avoid misclassification and potential legal issues, employers should take extra precautions when selecting a staffing agency. Here’s the thing: staffing agencies aren’t necessarily experts on classification. Although many staffing agencies offer multiple services, this does not necessarily mean that they are compliance experts.
Therefore, employers should carefully vet any staffing agency the are considering or currently utilizing. It’s important to do your due diligence and make sure that the staffing agency is correctly classifying workers. Employers should also confirm specific details about the agreement, like whether or not they assume liabilities. While there’s no one-size-fits-all approach, you can check out these articles to help you figure out what to look for in your situation:
- Proper Worker Classification Around the World
- What Are the Key Differences Between Employees vs Contractors
- When Should You Hire a Contractor vs Employee
How the Future of Work is Navigating Compliance to Avoid Worker Misclassification
If you’re feeling overwhelmed, schedule some time to speak with us and we will gladly help illuminate your path. At GreenLight.ai, we specialize in providing employer compliance solutions to ensure that workers are correctly classified every time; that’s why we’ve had zero cases of misclassification. We are compliance experts devoted to making it easy for you to pay and manage your extended workforce with ease.