Seasonal / Temporary Employees Can’t Be Paid as 1099 Independent Contractors in Business and at Work

Another key consideration for employers managing their seasonal workers hired for the summer—aside from utilizing the New York State PFL waiver for seasonal employees—is the non-negotiable requirement to pay seasonal workers (such as camp counselors and outdoor staff, who are almost always classified as hourly, non-exempt employees eligible for overtime) as W-2 employees, not as 1099 independent contractors.

It’s a common misbelief, especially for organizations with no existing or historic internal human resources function, and I’ve periodically given clients guidance on the correct classification requirements. Nevertheless, many employers who add seasonal workers continue to be under the mistaken impression that it’s an acceptable shortcut to pay them as independent contractors (1099). The IRS, and especially NYS, have numerous requirements that clearly define independent contractors—who essentially must be business owners with multiple clients (for example, my business meets almost all of the NYS and IRS requirements for a 1099 independent contractor), among other very specific and lengthy criteria.

In reality, IRS and NYS regulators do not take kindly to employers who choose to pay seasonal workers as 1099 contractors, because to do so is to avoid paying both state and federal payroll taxes, as well as not paying overtime, workers’ compensation and unemployment insurance.

The cost of getting it wrong is painful especially to a smaller employer’s bottom line. For just one worker misclassified as an independent contractor over a three-year period (assuming an annual payment of $60,000), an employer can easily face an estimated $50,000 to over $100,000 in combined NYS and federal back wages, payroll taxes, unpaid overtime wages, liquidated damages, unpaid insurance premiums, interest, and statutory fines.

Are you paying your seasonal workers as W-2 employees (not as 1099 independent contractors) in business and at work?