QUESTION: Our practice conducts working interviews with prospective employees who we’re considering hiring. I’ve been told that these individuals need to complete a W-4. Do I need a W-4 if we pay these people in cash? We consider them independent contractors and simply give them cash at the end of the working interview.
ANSWER: First and foremost, these individuals will not qualify as independent contractors. There are rules established by the IRS as to when workers can be classified as independent contractors. People participating in working interviews will never qualify because they are under the control of the employer at all times. Control over the work performed is the main component to the IRS criteria.
It is not legal to pay someone in cash as that is the equivalent to paying someone “under the table.” If this were to be discovered by the IRS, it could result in significant penalties and even jail time. Therefore, the people participating in the working interviews must be paid just like any other employee who you employ. This includes taxing them. The only way to know how to tax them is to obtain a W-4.
QUESTION: We ask employees who terminate from our business for any reason to sign a document that authorizes us to provide reference information to any potential employers who call about their employment with us. This document states that if they don’t sign the form allowing us to provide additional information, we will provide only dates of employment, title of their position, and a description of the job they performed with us.
The latest snag with this involves an employee who left us and is now applying for jobs elsewhere. We asked her to complete this form and she refused. She said she wants us to verify employment and “say what is legally required.” I know that I can simply fall back on what the form states and move on, but I now wonder, what is legally required?
ANSWER: In short, nothing is legally required. What an employer says about someone's previous employment is up to each individual employer. In fact, the employer can choose to say nothing. While it would be nice to have that form signed, it is not required. Since this person refused to sign it, you should provide only what you noted and move on.
In all cases, reference information needs to be truthful and factual. In addition, it is ideal if the information provided can be supported with documentation. Subjective thoughts, feelings, or conclusions should not be added at any time. For example, an employer can report that someone had poor attendance and missed 25 days during the previous calendar year (assuming that's factual). An employer cannot add something about, for example, the person being a single mother, which was why attendance was poor. That is subjective and may or may not be true.
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Human Resources Questions for Dentists is provided by Rebecca Boartfield and Tim Twigg of Bent Ericksen & Associates. Tim Twigg is president and Rebecca Boartfield is a human resources compliance consultant with Bent Ericksen & Associates. For 30 years, the company has been a leading authority in human resource and personnel issues, helping dentists deal successfully with the ever-changing and complex labor laws. To receive a complimentary copy of the company’s quarterly newsletter or to learn more about its services, call (800) 679-2760 or visit bentericksen.com.
