CONCEALING EMPLOYMENT RELATIONSHIPS
When an employment relationship is concealed, it can pose a legal risk to a business. Even when the intentions of both parties may be innocent, the consequences for deliberately not disclosing an employment relationship can be serious and far-reaching.
At the heart of this issue is the idea of control. Depending on the circumstances, an employer may control an employees working hours, job duties, pay, or access to company assets. For example, an individual providing services to a company may be classified as an independent contractor if the company does not have the right to control how the individual provides those services.
The legal framework for employment relationships may vary between jurisdictions, but there is one universal concept: employment relationships are symmetrical. Both parties have an obligation to disclose the true nature of the relationship, and to capture that disclosure accurately in writing.
Employers often attempt to disguise an employment relationship by either intentionally misclassifying the individual providing the services, or by attempting to structure the relationship in such a way as to avoid the appearance of an employment relationship.
For example, employers may attempt to disguise an employment relationship by allowing the worker to set their own working hours and be paid on an hourly or piece-rate basis, without any taxes being withheld. This technique may also be used when an employer is attempting to hire a large number of employees but wants to avoid the expense of providing benefits, or when the employer wants to avoid the record-keeping and financial costs that are associated with formal employment relationships.
Employers should be aware that the courts have often ruled against those who attempt to conceal an employment relationship. In some jurisdictions, employers who are found to have intentionally misclassified employees as independent contractors may be subject to criminal prosecution.
In addition, both employers and employees may be subject to civil penalties for failing to accurately disclose the true nature of their employment relationship. The legal ramifications for such a failure can range from fines to imprisonment, depending on the jurisdiction.
Employers should ensure that they accurately disclose the true nature of their employment relationship and accurately record it in writing. Both employers and individuals should be aware of their rights and responsibilities in an employment relationship, and consult a legal professional if they are unsure of their obligations.
By taking these steps, businesses can protect themselves from any legal risks associated with concealing a formal employment relationship. Although the legal landscape can vary across jurisdictions, the importance of accurately disclosing the true nature of the relationship remains a universally accepted principle of employment.
