“I pay him under a 1099, so he’s an independent contractor, right?” False.
“Oh, that’s because you need to pay him under a 1099 form and have an Independent Contractor Agreement too, right?” False.
TRUE: Providing an individual with a 1099 form, or even an Independent Contractor Agreement, is insufficient to create an independent contractor relationship for workers’ compensation purposes.
In an over-regulated and complicated business economy, the use of an independent contractor is especially appealing to Ohio employers – the independent contractor is responsible for their own taxes and withholdings, and the employer doesn’t have to pay workers’ compensation or unemployment compensation for the individual. But, the misclassification of an independent contractor is a potential nightmare for workers’ compensation purposes.
If an “independent contractor” gets injured on your jobsite and files a claim, you can be held liable as the employer of record, despite the 1099 form and/or the Independent Contractor Agreement indicating otherwise – and that’s just the beginning of your nightmare. Not only will you incur the workers’ compensation claims costs dollar-for-dollar associated with that, now, employee, but you will be considered “non-compliant” by the Bureau of Workers’ Compensation for as long as the claim is active.
And, your nightmare doesn’t end there. Your company is now opened up for an audit where it could be determined that more of the “independent contractors” are actually employees. The Bureau of Workers’ Compensation will now assess you for retroactive premiums on those employees, as well as fees and penalties.
So, what should you do if you are considering hiring an independent contractor?
Ohio employers need to know that the Ohio Bureau of Workers’ Compensation has its own standard that is applied to determine whether or not an employment relationship exists. The Ohio Revised Code addresses the issue of independent contractors with a list of twenty items to be considered in determining whether an individual is an independent contractor or an employee. However, unfortunately, the courts have held that these items are not directives, but merely instructive.