Governor Cracks Down on Employee Misclassification
Earlier this month Governor Evers issued Executive Order 20 (EO), which will ultimately lead to a crackdown on misclassification of employees as independent contractors. The EO calls for creation of a joint task force of leaders from the state Department of Workforce Development, Attorney General’s office, Workers’ Compensation and Unemployment Insurance Divisions, and several other state agencies.
The task force has been given numerous objectives, some of which are fairly administrative, but it’s clear that its primary focus is enforcement and a push for increased reporting of misclassification. The Governor cited the impact on vulnerable populations that are misclassified (and therefore don’t get employment benefits), the loss of income to the state when workers are misclassified, and the unfair advantage obtained by organizations that misclassify workers over those that are law-abiding.
To be considered an independent contractor and not an employee in the state of Wisconsin, an individual must meet and maintain all nine of the following conditions:
- Maintain a separate business
- Obtain a Federal Employer Identification number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on the work or service in the previous year.
- Operate under specific contracts.
- Be responsible for operating expenses under the contracts.
- Be responsible for satisfactory performance of the work under the contracts.
- Be paid per contract, per job, by commission or by competitive bid.
- Be subject to profit or loss in performing the work under the contracts.
- Have recurring business liabilities and obligations.
- Be in a position to succeed or fail if business expense exceeds income.
The law has not changed, but the issuing of the EO makes it more important than ever that employers are confident in their classifications. If you currently have workers classified as independent contractors, consider doing an audit of those classifications to ensure that they comply with state law.
Content provided by TPC HR Support Center.