There is a nationwide employment law trend pushing for employers to classify workers as employees and not independent contractors. Misclassification of workers as independent contractors when they really should be employees comes with stiff penalties, such as monetary fines, lawsuits, and legal fees.
Virginia enacted multiple recent employment laws targeting employers that misclassify their workers as independent contractors. These recent laws establish: (1) a rebuttable presumption that workers are employees; and (2) civil penalties on employers for worker misclassification.
Virginia Code § 40.1-28.7:7, effective July 1, 2020, creates a presumption that workers are appropriately characterized as employees unless an employer can show otherwise. This means that Virginia law presumes workers should be classified as employees, and if you are classifying a worker as an independent contractor, you need to have a legal justification for it.
Effective January 1, 2021, another new Virginia law imposes civil penalties on employers that misclassify employees as independent contractors, including fines that increase based on the number of violations. Together, these laws increase Virginia employers’ potential liability and exposure to financial risk when they misclassify workers.
Whether you can properly classify a worker as an independent contractor depends on your industry, the workers’ duties, your relationship with the worker, and how much control you exert over the worker, among other factors.
The Virginia Employment Commission (VEC) has a guide outlining how it analyzes the different between a W2 employee and a 1099 independent contractor, and the Internal Revenue Service (IRS) also provides 20 factors that employers should consider in the classification analysis.
If you have any questions about how to classify your workers appropriately, and which labor and wage laws apply to your company, contact The Lipp Law Firm today.
Katie dedicates her practice to employment separation guidance.
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