When set up properly, the use of ICs is a win-win for both parties. When set up incorrectly, it creates unnecessary expenses and unanticipated fines or penalties.
the classification of an IC, your state will likely become involved in determining the outcome. Furthermore, hiring an IC who is not insured will bring added liability to your rink. Only ICs who are affiliated with a professional organization (such as ISI) and have liability insurance and at least accident medical coverage should be retained. Tey can additionally insure your rink for any claims arising out of their activity or their injuries. If you are a rink operator, there
are certain triggers that can lead to a reclassification of an IC to an employee. Tey include the following situations:
• An audit.
• An IC files an unemployment or workers’ compensation claim naming you as their employer.
• A third-party claim is filed, and the IC claims as a defense that they work for you as their employer in order to be protected by you.
• When a W-2 rink employee receives a 1099 in the same year from the same location.
DO’S AND DON’TS
• A well-written contract defines parties, responsibilities, consideration, indemnification, insurance require- ments, dispute resolution and more.
• ICs need to have multiple customers and their services should be available to the public. ICs who only have one, exclusive customer can appear as more of an employee than an IC.
• ICs must advertise their business. Tis could be on social media, internet, flyers or other means.
• ICs must supply their own tools and equipment. An employer blurs the line when they provide tools, equipment or even office space to an IC.
• ICs should have specialization, licensing or certification in their field.
• Te IC is responsible for providing a substitute or supplying additional help, not the employer.
• Te relationship between the ice rink and the IC should not be permanent. Contracts should be reviewed annually or more often to determine the need for services.
• Including ICs in rink events such as holiday parties for employees, gifts or meals can be construed as a benefit of direct employment.
• Rink operators should not track or monitor vacations or time off for ICs.
• Do not include ICs in any employee training.
• Do not reimburse ICs for business expenses. Tese are to be incorporated in the service agreement.
• Rink operators can direct the quality and result of work but not the means or method.
Violating just one of these rules may
not cause the house of cards to fall. All best practices should be adhered to as a means of differentiating a contractor from an employee. Rely on the expertise of an accountant and an attorney specializing in tax and employment law. They are your advocates to protect you from misclassification, fines and gaps in your contractual arrangements. By following these principles,
rink operators and
independent contractors can work together without allowing unnecessary risks to knock you off balance.
Dan Foster is the risk manager for Safehold Special Risk’s Sports and Entertainment Program. Safehold Special Risk
provides insurance
and rink management services for ice rinks and sports venues.
This material is provided for informational purposes only based on our understanding of applicable guidance in effect at the time of publication, and should not be construed as being legal or tax advice. Customers and other interested parties must consult and rely solely upon their own independent professional advisors regarding their particular situation and the concepts presented here. Although care has been taken in preparing and presenting this material accurately, Safehold Special Risk disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it, and any responsibility to update this material for subsequent developments. To comply with IRS regulations, we are required to notify you that any advice contained in this material that concerns federal tax issues was not intended or written to be used and cannot be used to avoid tax-related penalties under the Internal Revenue Code, or to promote, market or recommend to another party any matters addressed herein.
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ISI EDGE SPRING 2017
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