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3 ways to avoid misclassification errors

On Behalf of | Jul 21, 2022 | Business Litigation

In Oregon, the misclassification of workers comes with steep consequences. Employers, individuals and state agencies all benefit from the proper classification of workers, and while some misclassifications occur on account of error, some businesses purposely attempt to manipulate the system.

The financial and legal consequences of employee misclassification are steep. You can avoid fines, increased taxes and potential jail time by following these preventative measures.

1. Make a procedure for classifying individuals

Small business owners need to have a process in place to correctly classify those who come into the business. Use a formal process to help prevent errors and ensure follow-up is in place in the event that roles change during the time of employment. Having a paperwork process in place also provides evidentiary support in the event of a misclassification lawsuit.

2. Know the classification differences

Misclassifying employees are independent contractors brings serious legal trouble. Consider the following factors to distinguish between the two.

  • Importance of the work to the company
  • Ownership of the equipment and tools
  • Profit or loss opportunity for the worker
  • Skills or qualifications of the workers
  • Length of employment engagement

3. Develop different management processes

The law requires different treatment for contracted individuals and employees. To avoid confusion regarding their status, create different management processes between these two categories. These individuals should not handle the same work, receive a job description or earn the same incentives and perks. Contingent workers typically do not receive benefits or health coverage, nor should you provide them with tools or training.

These tips can help avoid misclassification errors. Just one mistake could lead to costly legal battles and government discipline.