At TASB HR Services, we’re always looking to provide timely guidance on trending HR topics.
One of the subjects we’ve been fielding a lot of questions on recently is independent contractors and when districts can issue 1099s and W-2s.
Unfortunately, the answer can be complicated. The Department of Labor (DOL) and Internal Revenue Service (IRS) both have responsibilities for investigating and enforcing laws related to independent contractors and employees. The DOL wants to ensure, among other things, that nonexempt employees are paid appropriately for time worked (e.g., overtime, minimum wage compliance), and the IRS wants to ensure the district and employee are paying taxes appropriately (e.g., income tax, Medicare).
To determine whether someone is an employee or independent contractor, the IRS will (and you should) review the relationship of the worker and the district, including the degree of control and degree of independence present in the work relationship. If the answer to some or all of the following questions is “yes,” chances are the worker should be an employee and not an independent contractor:
- Behavioral: Does the district control when and where the work is done? Does the district provide instructions on work sequence and tools and equipment usage?
- Relationship: Was the worker hired with an expectation that the relationship will continue indefinitely? Are the worker’s services key to the success of the district’s business? Is the worker’s work presented as the district’s work?
On the flip side, if the worker stands to make a profit or suffer a loss as a result of the work relationship, chances are he or she is an independent contractor.
Some real-life school district examples of workers potentially misclassified as independent contractors include:
- Game workers, such as ticket takers, concession stand workers, and parking lot attendants, even if the workers don’t have a regular job with the district
- Band clinicians (unless the clinician is paid directly by students for private lessons)
- Community education instructors teaching afterschool courses where the district controls class registration, scheduling, and the tools and resources used by the instructors
Many districts assume that it’s OK to consider someone in these positions an independent contractor if they’re not otherwise employed by the district. Unfortunately, this isn’t the case.
While it’s not something to panic about, it’s definitely important for districts to proactively correct misclassification issues. More details about independent contractors are available in the HR Library, and members are always welcome to call us at 800.580.7782.
Amy Campbell is the director of TASB HR Services. She can be reached at email@example.com.