The risks of misclassifying independent contractors vary from state to state, but, in general, the consequences can include the following.
- Claims for unpaid minimum wage and overtime – If the cash payments are determined to be gratuities rather than wages, then the club could be liable for unpaid back wages for hours worked and overtime. If a class action were pursued under the Fair Labor Standards Act, successful plaintiffs could recover back wages and overtime, “liquidated damages” of that same amount, plus the plaintiffs’ attorneys’ fees.
- Tax exposure and penalties – Unpaid federal and state taxes, penalties and interest can exceed 30 percent of the workers’ income over a period generally of three years.
- Unemployment compensation – The club can be determined liable for unpaid unemployment taxes plus, in some cases, a penalty.
- Workers’ compensation – An uninsured club faces civil and criminal risks for failing to maintain workers’ compensation coverage.
- I-9 violations – A club could be exposed to fines if it did not have I-9 paperwork and otherwise satisfy employment verification requirements.
- Improper exclusion from benefit plans including 401k and retirement plans – A club’s wrongful exclusion of an individual from a benefit plan can expose certain types of plans to tax disqualification and expose the club to potential benefits liabilities.
- Failure to offer health coverage mandated by the Affordable Care Act (ACA) – If a club fails to offer ACA-mandated health coverage to individuals entitled to coverage under the ACA, the club can be exposed to penalties of more than $2,000 per individual (above a specified threshold number) not offered the ACA-mandated coverage.
- Exposure to claims brought under general employment laws such as Title VII, ADA, ADEA, FMSLA, OSHA, State and EEO laws.
- Third party liability puts the club at risk for damages caused by a caddie’s acts or omissions, possibly purported to be an agent of the club.
Mark Brenneman, PGA, is the chief business development officer for CADDIEMASTER, the premier provider of caddie management and training services with more than 50 partnerships in 22 states and four countries. He can be reached at [email protected] or 702-807-3448. For more information, visit caddiemaster.com