Misclassifying workers is a common mistake made by employers of all kinds – nonprofits included. Doing so can result in serious consequences, including back wages and taxes owed, as well as violations of federal and state employment laws with associated penalties. These mistakes can also result in dissatisfied employees, risking a negative effect on the nonprofit’s mission.
In recent years the IRS has been stepping up its enforcement of employee classification, creating one more compelling reason for nonprofits to reexamine whether workers are properly classified as employees and independent contractors, and as exempt or non-exempt employees.