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Virginia is now on the cutting edge of the employee versus independent contractor debate, and that could create a lot of legal problems for businesses. Virginia has enacted new laws about employees and independent contractors that go into effect on July 1, 2020. If your business engages workers as independent contractors in Virginia you should get familiar with these laws and check your compliance.
The new Virginia law presumes all workers are employees unless the business can show that the worker is an independent contractor under the IRS guidelines for determining independent contractor status. If you incorrectly classify a worker as an independent contractor, rather than an employee, the individual can sue you for wages, salary, employee benefits (including expenses that would have been covered by insurance), and other compensation he would have received as your employee. In addition, the court can make you pay the individual's legal fees and court costs. You might also be subject to civil penalties for your misclassification of an employee.
The IRS guidelines for determining independent contractor status are complicated and do not contain bright line rules. You can read more about these guidelines in this blogpost: https://www.joelankney.com/post/do-you-have-employees-or-independent-contractors.
The new Virginia law puts even greater pressure on businesses to get worker classification right by creating the employee presumption and increasing the amount of financial risks to businesses for getting worker classification wrong. If you are engaging independent contractors in Virginia, you need to be extra vigilant in establishing a basis for your classification of any worker as an independent contractor. Your efforts might even result in reclassifying certain workers as employees.
This is a big issue for businesses that use independent contractors. Look for plaintiff's lawyers to seize this opportunity to sue businesses for misclassification.
If you need help understanding the new laws, analyzing the classification of your workers, or any other legal issues surrounding independent contractors, please contact me at 757-216-4578 or joel@jalawoffice.com.
