Does Your Environmental Staffing Agency Provide 1099 or W2 Employees? Why It Matters.

When evaluating prospective abatement staffing agencies, don’t overlook this important question: does your prospective staffing agency source 1099 workers or W2 employees? The answer matters as it can affect your business substantially.

What’s the Difference between 1099 and W2 Employees?

Asbestos abatement and environmental contractors who are supplied by staffing agencies are classified either as 1099 or W2 workers. A W2 employee works for the staffing company (like CRM Workforce Solutions). A 1099 employee is an independent contractor. Those designations matter quite a bit–because they matter to the IRS and every state’s unemployment division.

Many contractors are actually misclassified and, whether accidentally or on purpose, that misclassification can lead to legal trouble for your company, not to mention steep fines and penalties levied by the IRS. Some environmental staffing companies prefer to provide asbestos workers and other crew members who are classified as 1099 contractors so they can offer cheaper staffing rates, but this could land your company in hot water.

Consider some of the differences between the two classifications:

• 1099 workers complete projects independently; W2 employees have more direct oversight by the staffing agency
• 1099 workers employ their own methods for performing work; W2 employees are trained to perform work according to the construction company’s preferred methods per industry standards and required codes
• 1099 workers adhere to their own schedules; W2 employees work assigned hours or a set schedule
• 1099 workers submit invoices and are generally paid per project; W2 workers receive an hourly wage or salary
• A 1099 worker might be working on several projects for several clients simultaneously; a W2 employee is generally assigned by the staffing agency to one client at a time

What Are the Risks Associated with Misclassifying 1099 Workers?

If you hire temporary environmental or asbestos workers that are independent contractors, you could be putting your business at risk. If your company is not careful to avoid misclassifying 1099 workers it could result in significant taxes, fines, and penalties imposed by the IRS and state unemployment offices that threaten your livelihood–and that could even put your company out of business!

Since abatement and demolition companies are the ones who are directing work performed at a jobsite, companies using 1099 workers are assuming significant financial risks. Employment taxes are paid by W2 employers and when paying workers as 1099 workers, the workers are responsible for paying those employment taxes. However, many workers do not follow through with this which then often results in the IRS or state unemployment departments reaching out to the abatement company for payment.

In a discussion recently with an IRS auditor, the auditor said, “If 1099 workers don’t pay their taxes, and we feel they should have been designated as W-2 employees, we may go after both the staffing firm and the construction client to collect the employment taxes that should have been paid.” If you are a construction or demolition contractor using staffing firms that treat workers as 1099 contractors, this is a serious risk to consider.

When partnering with an environmental and asbestos staffing agency, take care to choose one that features W2 workers rather than 1099 workers so you can spare yourself the associated risks. Misclassification of independent contractors is a serious problem that’s increasingly on the IRS’ radar as the ‘gig economy’ continues to grow.

Learn More

Contact CRM with your questions on this issue. CRM will ensure that you’re IRS-compliant (tax compliant), while providing efficient, accurate certified payroll reporting, turning reports around in a few days, so you can get paid fast for your work. And we’ll also fulfill all of your environmental and asbestos abatement staffing needs, with highly qualified workers.