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Critical elements in employee classification

In many businesses, employees are the backbone of the businesses that employ them. Whether those employees are traditional or contractors, it is in the best interest of the employer to make sure employees are happy and all practices keep the business in good legal standing

Proper employee classification is a key element in determining those best practices. There are a few key elements to keep in mind about the classification of employees.

Determining factors

Improperly classifying employees can have serious ramifications for the company. When determining the proper classification of a worker, the courts examine a few different factors, including:

  • The employer's level of control in the relationship
  • Personal profit or loss in accordance with the employee's skills
  • Necessary skills for the position
  • Investment of employer vs. employee or contractor

By utilizing these factors to classify employees and contractors, business owners can avoid possible issues moving forward. Should a worker's duties change in the course of their employment, it may be beneficial to review their classification again to make sure that it is still legally compliant.

Reviewing applicable laws and regulations

Along with understanding the different classification criteria, business owners should be familiar with state and federal labor laws, especially new regulations that the government puts into place regarding wage increases, longevity in a position, remote work and duration of temporary work. Keeping abreast of current laws could mean avoiding classification issues like those currently facing "gig economy" companies like Uber, GrubHub and others. It may be beneficial to consult an attorney on a regular basis to ensure that the company is in compliance with all applicable employment laws and any other business regulations.

This is a brief overview of the key aspects surrounding employee classifications. Take time to review the law or consult with an attorney to determine what additional steps may be necessary for your business.

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