Classifying a worker as an “independent contractor” rather than an employee is attractive to employers for several reasons. Whereas employees have taxes withheld from their paychecks and have legal protections such as the minimum wage law, unemployment benefits, and workers’ compensation insurance, independent contractors are considered to be self-employed. As such, independent contractors are responsible for paying their own taxes and benefits such as health insurance expenses and for setting their own work schedules. The availability of workers compensation benefits and unemployment insurance is also limited when a worker is classified as an independent contractor. Virginia lawmakers have passed legislation in an attempt to stop employer misclassification of employees as independent contractors.
The Virginia House and Senate have agreed on the language of House Bill 1407 which establishes monetary penalties and debarment from public contracts for worker misclassification. The legislation also permits the Tax Commissioner to work with and share information with several agencies such as the Department of Labor, the Virginia Employment Commission and the Workers’ Compensation Commission to address worker misclassification. This bill has a delayed effective date of January 1, 2021. Employers should take care to avoid misclassifying employees as independent contractors so you aren’t penalized by this new legislation.
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