To further elaborate on how to properly classify employees under Idaho Law, we bring you Part 2 of this series.
An employee may report an alleged misclassification to the IRS and Idaho Department of Labor, which then investigates the claim. In determining whether the worker is an employee or an independent contractor, both the IRS and Idaho apply what Idaho refers to as “the right to control test.” In essence, this looks to: (1) whether the employer has the right to control what the worker does and how the job is performed; (2) how payments are made (e.g., regular periodic payments suggest an employer-employee relationship); (3) whether the employer furnishes the equipment used to perform the job; and (4) whether the worker has the right to terminate the relationship without liability. This test looks at the overall set of facts, but the Idaho Supreme Court has repeatedly held that where there is doubt, the resolution is to find that the worker is an employee.
Misclassifying an employee as an independent contractor can result in severe consequences from the IRS, Idaho Department of Labor and other agencies, including penalties, fines and back payments. For example, The IRS and Idaho will pursue back taxes with interest based on the employer’s failure to withhold income taxes, unemployment taxes, and FICA contributions. If the misclassified employee was denied leave under the Family and Medical Leave Act of 1993 or participation in a group benefit plan, the employer may face claims as well.
In sum, if you currently have workers classified as independent contractors, or you are thinking about classifying workers as independent contractors, you should ensure that you have carefully analyzed their status under the right to control test. If there is any doubt, or if a worker has made a misclassification claim against you, contact Roberts Law to assist you with analyzing this issue.