California is a great state to do business in. Unfortunately, that’s not the reality for companies that knowingly or unknowingly misclassify their employees. That’s why it’s imperative to know ways to prevent employee misclassification.
Creating thorough employment contracts
A great way to prevent misclassifying employees is with a clear and thorough employment contract. Drafting and using proper employee documentation creates more work. However, it’s a must if your business wants to lessen its risk of employee misclassifications. Proper documents detail and list the differences between independent contractors and employees, including how they receive payment, their benefits and similar matters.
Partnering with an employment service
Many companies leave hiring and classifying new employees to another business. Understandably, these companies require money to perform their services. However, these extra expenses can be worth it to avoid potential employee misclassification problems.
Updating as laws require
Over time, laws about nearly any subject change. The same is true for regulations about employee classifications. Making sure you’re up to date on law changes can save you from potential future misclassifications. It could be worthwhile to consider hiring someone capable of understanding employee classifications. Companies also conduct annual or quarterly audits concerning how they classify their workers.
Sometimes, companies have no idea they’re misclassifying employees. That’s why it’s helpful to have a dispute resolution mechanism in place. If an employee disputes their classification, and they’re correct, fixing this problem can prevent a mistake from becoming a legal matter.
Preventing employee misclassification can help your company avoid paying tax violation fees and other payment penalties. Plus, you can help ensure you avoid jail time or dealing with potentially time-consuming business-related lawsuits.