Being prepared for Worker Classification Audits: What You Need to Know
Companies relying in part or exclusively on the labor of independent contractors face tremendous risk of having the relationship they have with their contractors being called into question. There are a dozen or so ways in which a worker classification investigation can be initiated and there are multiple agencies with an interest in how companies classify workers. In the past 22 years at DDI we’ve seen it all, but the most frequent matters we see our clients face come in the form of unemployment, wage & hour, and workers’ compensation audits. The typical flow, or timeline, of an audit is as follows:
- Audit Notice is mailed certified by regulatory agency to company.
- Company has typically 15 days to provide required documents, which are typically:
- General Ledger
- List of Employees & Contractors w/personal info
- Tax Returns
- Questionnaire about Business
- Previous Regulatory Documentation
- Worker Relationship Questionnaire (WRQ)
- Virtual or In-Person Meeting (Auditors like to do this at the company’s business location).
- Follow Up Questions and/or Meetings about “Sticking Points”
DDI exists to assist workers in maintaining their self-employed status and the freedoms that come with it, as well as to help compliant organizations continue to flourish using the services (in one way or another) of contactors. We also have the experience and expertise necessary to navigate the subtly clever process that regulatory agencies have designed in such a way as to make satisfying worker classification statutes extremely difficult for companies.
Running a compliant independent contractor model is the best way to defend against the harmful impact of losing an audit. However, even the most compliant companies get audited! Knowing how to manage and deal with an audit is arguably as important as complying with regulatory rules to begin with.
With more than 100 years of combined experience in dealing with worker classification matters, the internal and external legal teams at DDI can provide you with the layer of protection your business needs.