Wednesday, December 10, 2008

Misclassified 1099 Employee?

Are you a recently laid off 1099 employee?

Chances are, you are not included in the Bureau of Labor unemployment statistics and you are not eligible for unemployment benefits.

Employers who may have accidentally misclassified employees as 1099 employees are receiving considerable attention from states who are investigating if employers are using 1099 status to avoid payroll and social security taxes for W-2 employees.

Those who legitimately receive 1099 income come from diverse backgrounds. Actors, artists, novelists, freelance writers and similar creative artists are generally compensated on a "per job" basis, and are not treated as W-2 employees by employers or the IRS.

More and more businesses are bringing in independent contractors to work on a similar "per job" basis, as this helps keep the employer costs down since the employer does not have to pay for such things as health and life insurance, as well as make contributions to retirement plans. After the job is completed, the employer can cut the cord and simply issue the independent contractor a 1099 Form. (wisegeek)

But, if you are not a "per job" worker, in other words, if you provide the same service over and over again under the supervision of an employer, you may be misclassified as a 1099 employee and entitled to unemployment and other employment benefits.

This rule could apply to millions of current and former construction, finance industry and IT employees whose work was supervised by a broker, company owner or manager. It applies even if you have already paid social security and other state and federal taxes on your own.

Here's some background information for your review:

Construction Workers:

Finance Industry (loan officers) :

Where to find more information of file a complaint: WA State Department of Labor and Industries:

Spotting the red flags (Courtesy of WA State Department of Labor)

Below are a few of the behaviors that might indicate that an employer is not paying industrial insurance/workers' compensation for their employees.

Is operating a business without the proper license or registration and has workers.
Pays workers in cash and doesn't give them any kind of payroll stub.
Gives workers a 1099 form instead of the standard W-2.
Submits bids on jobs well below the industry standard.
Pays workers other than in cash or check, by such things as free rent, reimbursement of expenses, barter, etc.
Has a large number of corporate officers listed for the firm, and all work at the firm.
Does not maintain or report complete and accurate employee payroll information.
Pays workers on a piece work basis and does not record hours.
Requires employees to work long hours but turns in fewer hours than they actually worked.
Has a worker who gets injured on the job, and the employer promises to pay the doctor and medical bills rather than report the accident to L&I.
Reports hours on injured worker's accident report that do not match the hours the employer reported to L&I.
Has workers who find they do not qualify for unemployment insurance because the employer under-reported their hours.
Hires their own kids to work for the firm (other than on a family farm).
Has several "corporate officers" who do not exercise control of the business operations.

If you feel that you were misclassified as a 1099 employee, please contact Fraud Investigations staff at 1-888-811-5974 or

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