1099 or W-2? Avoid These Mistakes When Hiring Restaurant Staff

FLSA requires that each employee receives a classification upon hiring. And while it may seem like a simple step, the classification options can be confusing.

One of the most common mistakes is classifying employees as independent contractors when they’re not.

The IRS states that if “an employer-employee relationship exists (regardless of what the relationship is called)” then the employee is not an independent contractor. Whether or not such a relationship is considered “employer-employee” depends upon the culmination of a number of factors as well as the individual circumstances of the situation.

Such factors may include:

the right to terminate the individual

the mode of payments

the supplying of tools and/or equipment

the belief of the parties as to the existence of an employer-employee relationship

the length of employment

Many restaurant owners hire independent contractors, and they shouldn’t. When this is done wrong, as I have seen time and time again, it can cause lots of financial, legal, and cultural trouble.

In this week’s show, I provide a basic understanding of how to get this right.

Please note, this is not legal advice. Reach out to your legal counsel or internal HR team for guidance before taking action.

Check out this week's 5-minute show here!