Classification of Independent Contractor in NH Is Risky Business

Independent contractors are often an essential component of a specialized, dynamic workforce and a growing business. Using an independent contractor may seem to be a perfect solution for additional employment needs — with all parties happy until the employment relationship goes wrong. It may be because the independent contractor is not getting the job done, or sometimes there simply is no more work to be done. Whatever the reason, when the relationship ends, your former “independent contractor” might be looking for unpaid wages, unemployment compensation, worker's compensation, or for money via a claim of discrimination or harassment.

Businesses beware. Classifying an individual as an independent contractor is fraught with risk because misclassification can lead to fines, worker’s compensation violations, unemployment compensation and tax fines – to name a few. New Hampshire law does not make it easy for businesses to determine whether an individual is an employee or independent contractor: three separate NH agencies (NH Department of Labor, NH Commission for Human Rights and NH Employment Security) use different tests to determine an individual’s employment status. The selection of the appropriate test depends on the purpose for the determination or in which administrative agency the matter is pending.

Both state and federal agencies have been focusing aggressively on the issue of misclassification of independent contractors. This has resulted in costly fines and back payments for businesses that have wandered into this area of the law and applied the wrong independent test. It is worth consulting a professional to conduct an independent audit of individuals currently classified as independent contractors to ensure that your business is in compliance with NH’s myriad of independent contractor tests.

For more information on NH's three tests for classification of independent contractors, please see my article: Determining Independent Contractor Status in NH on gcglaw.com, or contact me directly.