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Misclassifying employees could spell trouble for your business

On Behalf of | Jan 9, 2023 | Business Law

Classifying employees as independent contractors can save you a bit of money on taxes, payroll deductions and insurance costs. However, the risks of doing so far outweigh the benefits.

Misclassifying employees is unlawful and can result in huge monetary fines and possible criminal proceedings against an employer. Therefore, it helps to understand what the law says and ensure you do everything right.

Employees vs. independent contractors: The law in Alaska

Whether a worker is an employee or an independent contractor goes beyond what the employer wants or what the parties agree to. Alaska law has a multi-factor approach when determining the classification of a worker. It primarily depends on the working relationship and the level of control of an employer over their worker.

For instance, if a worker operates under a work schedule, is trained by the employer and is supervised or given instructions when discharging their duties, they are likely employees. Similarly, employees use their employer’s tools and equipment to work and perform services as a representative of the employer, unlike independent contractors.

Ignorance is no defense

Employee misclassification can happen unintentionally. Your HR policies could be to blame, or you may be unaware that you have mislabeled workers at your business. However, that will not spare you from the potential sanctions. You will still have to pay the price of misclassifying your workers.

It is in your best interests to avoid such an eventuality and protect your business interests as an employer. Reviewing your current practices and examining the classification of workers in your organization is an excellent place to start. 

One of the best ways of making sure you are on the right track is by reaching out for expert legal guidance instead of relying solely on your HR department to do the job. Not everyone is well versed with the law, and you cannot afford to take any chances.