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Unemployment Insurance - Worker Classification
Is a Worker an "Employee" or an "Independent Contractor"?
Wisconsin employers (referred to as “employing units” in the unemployment insurance law until unemployment insurance coverage or an employee/employer relationship is established) have an obligation under the unemployment insurance law to classify workers correctly as either "employees" or "independent contractors". Employees are covered by the unemployment insurance law; independent contractors are not covered.
If a worker is or has been "performing services for pay" for an employing unit, there is a presumption in the law that the worker is an "employee," not an independent contractor. That presumption can only be overcome by evidence under the applicable unemployment insurance law that the worker is an independent contractor.
NOTE: The department has utilized the term "employer" in this website with the recognition that not all "employing units" are covered under the unemployment insurance law or have employee/employer relationships with their workers. Nevertheless, for ease of discussion in the context of deciding whether a worker is an independent contractor or an employee, the term "employer" is frequently used, rather than "employing unit."
Compliance and Penalties
The department works to ensure that workers are properly classified as employees or independent contractors through compliance programs. If an employer is found to be improperly classifying workers as independent contractors, penalties may result.
Steps to Classify a Worker
Choose Category of Employer
The first step in the process of determining an employer's obligation under the unemployment insurance law is to determine which of the following categories describes the employer:
- General Private Employers (services performed for any other person or entity)
- State and local government employers (service performed for a unit of state or local government)
- Nonprofit employers (services performed for an organization that is described in §501(c)(3) and exempt from federal income tax under §501(a) of the Internal Revenue Code)
- Trucking employers (services performed as a truck driver for a licensed motor carrier that leases a vehicle from the contract operator)
- Logging employers (services performed as a piece cutter or skidding operator for a forest products manufacturer or logging contractor)
- Indian tribal government employers (services performed for an Indian tribe that is federally recognized under 25 USC 450B(e))
Select the appropriate employer category to continue to worker classification tests:General Private Employers State and Local Government Nonprofit Employers Trucking Employers Logging Employers Indian Tribal Government
The department works to ensure that workers are properly classified as employees or independent contractors through the field audit process and worksite compliance investigations.
Department field auditors conduct routine periodic examinations of employer records. The specific audit objectives include investigating alleged independent contractor issues, determining compliance with unemployment insurance reporting requirements, and investigating suspected unemployment insurance benefit fraud.
The department is authorized by Wis. Stat. § 103.06, to conduct compliance investigations at construction worksites as defined in Wis. Stat. § 108.18 (2)(c) to determine if workers are being properly classified as employees or independent contractors.
If an employer is found to be utilizing misclassified workers, the employer may be liable for additional tax, interest and penalties. If as a result of a worksite compliance investigation an employer is found to be utilizing misclassified workers, additional tax, interest and civil penalties, including the issuance of stop work orders, may result.
In addition, Wis. Stat. § 108.24 (2m), states that employers described in Wis. Stat. § 108.18 (2)(c), or who are engaged in the painting or drywall finishing of buildings or other structures who willfully provide false information to the department for the purpose of misclassifying or attempting to misclassify a worker as an independent contractor can be fined $25,000 for each violation. Employers described in Wis. Stat. § 108.18 (2)(c), include those engaged in the construction of roads, bridges, highways, sewers, water mains, utilities, public buildings, factories, housing, or similar construction projects.