Pat was fearful at first. He had been working for top advertising agencies since he graduated from college, and he had visions of someday owning a portion of the agency that ultimately terminated his employment. Fortunately, a few former clients of that agency liked his work and send him some projects. He exceeded their expectations, and a new business was formed.
It grew fast, and the projects kept getting bigger. How exciting!
Pat reached out to other colleagues who had lost their jobs during the workforce reduction. He developed the artistic vision for the projects and subcontracted work to those colleagues. Everyone was happy. The clients loved the results. The colleagues were thrilled to be working again and getting paid well. Life was good–until one of his subcontractors filed for unemployment insurance (“UI”) benefits.
He notified the Department of Labor that the contractor was not an employee and was therefore not entitled to UI benefits. While that claim was pending, the New York State Workers Compensation Board sent an inquiry notice, asking for information on Pat’s workers’ compensation (“WC”) insurance policy. He knew he should respond, but he was busy the week the notice came, and he wasn’t sure he really needed WC insurance. The notice went in a pile of mail on his desk, with other topics he needed to research.
Thirty days later, he received a notice of penalties exceeding $20,000.00!
Resolve Workers Compensation, Disability, and Paid Family Leave Penalties
Pat’s story is quite common. I represent a lot of domestic employers, freelancers, small business owners, and out-of-state employers who get the independent contractor classification wrong. If you get a penalty notice, I can usually help you:
- Stay open and get in compliance
- Reduce penalties for not providing disability (“DB”), Paid Family Leave (“PFL”), UI, and (“WC”) insurance
- Build a better business
Have you been served with a penalty notice from the NYS Workers Compensation Board?
Ensure 1099-MISC Contractors Aren’t Employees
Not even the best-written contract will guarantee that your independent contractors are truly independent business owners, rather than employees. The New York State (“NYS”) Workers Compensation Board (“WCB”) and Department of Labor (“DOL”) have broad discretion to determine who is an employee and who must be provided various employee benefits. It doesn’t matter what your accountant told you or that the Internal Revenue Service (“IRS”) hasn’t penalized you. What matters is a very specific review of a 12-part test. If you misclassify your workers and fail to have WC insurance, you could be penalized $2,000.00 for every 10-day period you don’t have coverage. (That’s how Pat’s penalties got to $20,000.00 so quickly, and his was on the lower end of what I have seen.)
Gather Evidence of 1099-MISC Independence
It’s not enough to review the 12-part test and think you passed. You need evidence to support your conclusions. I created an easy-to-follow online course to help you gather it and self-audit your worker classifications. If you still have questions about your specific situation after you take the course, request a consultation. I’ll answer your questions, give you confidence, and stay just a call or email message away.
I am so, so incredibly relieved…Even if they hadn’t lifted the penalties, as I said before, it just feels better fighting for what you believe is right. Which is resonating even more at this time. ~ S.F., Business Owner, NY
We appreciate your help on this matter. No one likes these administrative hurdles in life. You helped us navigate this one with ease. It was great to meet you and thanks so much! ~ J.C., Business Owner, VA