On June 2, 2009, Governor Ritter signed HB 1310 into law and if your company uses any independent contractors, this bill matters to you.
Under HB 1310, for EVERY misclassified independent contractor (i.e. an independent contractor that the state finds to be an employee), a business may be fined up to $5,000.00 for the first offense and up to $25,000.00 for subsequent offenses if the state finds the misclassification was willful. This may be in ADDITION to any withholding taxes, unemployment taxes, penalties, or interest that the state may currently apply. This means that if a business classifies five individuals as independent contractors and the state finds the five are employees, the business may own $25,000.00 in addition to everything else for the first instance of misclassification and up to $125,000.00 the second time.
For businesses trying to protect themselves, protection is properly classifying individuals as employees or independent contractors. However, as the state has determined that some individuals are employees to the dismay of attorneys, accountants, and the businesses involved, protection may also be found by a business ensuring that it had a good reason to classify the individuals as an independent contractor.
The key to protection is a good attorney. A good attorney can help a business ensure that the individual is properly classified as an employee or independent contractor. Even if the state determines that the person is an employee, if a business sought counsel from an attorney and can show that the attorney had a reasonable basis for advising the business that the person was an independent contractor. (However, if it appears that the business was *attorney shopping* this may not apply.)
To ensure that your business doesn’t face additional penalties under this new law, you should contact a business attorney to have all your independent contractors reviewed to ensure that they are truly independent contractors.
If you have any questions about the new law or the status of your independent contractors, please contact Elizabeth Lewis at 720-258-6647 or Elizabeth.Lewis@eclewis.com.