With the busy holiday season approaching, many floral shops, design studios, and wholesale suppliers bring on extra help to deal with the delivery rush. But as Hortica Retail Sales Specialist Maria Shepherd shares, how you classify that help could impact your workers’ compensation coverage.
Author Shawn McBurney took a look at the issue in the article “Potential Pitfalls in Independent Contractor Classification,” published in the July 13 E-brief from the Society of American Florists. It discussed how many businesses classify some workers on their payrolls as independent contractors, instead of traditional employees.
Here’s why you need to know the difference. The classifications hold advantages and disadvantages for both employers and employees. They’re also regulated under federal law.
If you classify a worker as an employee, you must comply with the Fair Labor Standards Act (FLSA). That includes:
- Keeping records
- Paying minimum wage and overtime
- Withholding taxes—including payroll taxes for Social Security/Medicare
- Providing unemployment compensation and workers’ compensation
Some of the other things you may have to consider as an employer is offering worker group health insurance plans, ERISA-covered retirement plans, Family and Medical Leave Act (FMLA) leave, along with other benefits. These are things that aren’t traditionally offered to independent contractors.
When determining whether a worker is an independent contractor under the FLSA, judges historically look at a six-factor economic realities test, which includes:
- Determining whether the work performed is an integral part of the business
- Judging if there’s an opportunity for profit or loss for the worker
- Considering the nature and extent of the worker’s investment in the business
- Ruling whether the work requires special skills and initiative
- Examining the permanency of the relationship
- Deciding the degree of control exercised or retained by the employer
Courts would typically place primary emphasis on that last point. But in 2015, the Obama administration changed the rules so that no one rule was given extra weight.
Then, in June 2017, the Trump Department of Labor rescinded the Obama policy, and the determination of whether a worker is an employee or an independent contractor returned to the original system.
Now, new tax reform rules include provisions that may lead more workers to request being classified as an independent contractor, rather than an employee. That means as an employer, you’ll need to be careful how you use the independent contractor classification. Doing it incorrectly can mean severe penalties.
So, whether you’re using a delivery service or a temporary driver, you’ll need to take a closer look at your business insurance. Talk with your Hortica representative to make sure you’re correctly classifying your holiday help and are including or excluding their payroll in your workers’ compensation calculations. They’ll be happy to sit down with you and make sure you have the protection you need.
Learn more about protecting your business by checking out the Hortica Resources section.
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