April 25, 2007

Employee or Independent Contractor

What’s the Difference and Why Does It Matter?

Misclassifying employees as “independent contractors” can get a nonprofit financial hot water with the U.S. Department of Labor, the applicable state DOL or both. If federal or state regulators determine the nonprofit has mistakenly misclassified employees as contractors, enforcement personnel may hold the nonprofit responsible for applicable back overtime, plus tax withholdings, employer contributions and potential penalties.

The IRS has developed and uses a 20 Factor Test to investigate contractor status. Different states may weigh some of the factors differently, but the 20 Factor Test is a good starting point. For example, the Web site for the New York Department of Labor indicates, “You are an employer if you control what will be done and how it will be done, i.e, the manner, means and results.” See: www.labor.state.ny.us/ui/dande/ic.shtm.

An easy-to-understand chart of the 20 factors and additional guidance on this topic are available in Taking the High Road, A Guide to Effective and Legal Employment Practices for Nonprofits, 2nd Edition. Click here to read the Table of Contents and the Introduction to the book. Buyers of the book enjoy complimentary access to an online edition containing hundreds of active hyperlinks.

Remember: It’s not what you call workers that matters; it’s what the workers do and how they serve your organization that counts in making the proper classification.

Additional advice can be gleaned from attending one of the Center’s Regional Conferences. Each conference features the following content-packed workshop:

Effective and Legal Employment Practices
The session will explore employment topics on the radar screen for 2007. What risks lurk in your current employment practices? What changes in law and regulation are most likely to result in errors on the part of even a dedicated nonprofit leader? Learn what your organization can and must do to “take the high road” with its employees while remaining safely within the lanes of legal conduct.

May Calendar

May 10, 2007

Risk Management Essentials for Leaders of the Nonprofit Sector of Texas

Norris Conference Center, Austin, TX
8:00 am-5:00 pm