Casual labor is where you “hire” a laborer to help you temporarily and pay him cash “off the books”, like he is your “subcontractor”.

There are many regulatory agencies (such as the ROC, Industrial Commission and IRS) that have a definition of what constitutes an “employee” VS a “subcontractor”.

The ROC requires that if the job (materials & labor) is $1000 or more, you need to use your W-2 employees OR a licensed subcontractor and if you don’t – you are aiding & abetting an unlicensed contractor. If they catch you there are penalties for both you and the person you used. It doesn’t matter that the job this person is doing in under $1000 – it is the whole job!

The Industrial Commission requires you to carry a Workers Compensation policy if you have even 1 employee. Their definition of an employee has more to do with whether you tell the person where to go, what to do and when to get there. Basically, if they do not have a work comp policy of their own and a contractor’s license – they are not your subcontractor!

The IRS definition of an “employee” is similar to the Industrial Commissions’ definition. You are only allowed to pay a person $600 per year without sending them a 1099. The 1099 is only supposed to be sent to actual “Subcontractors” and they are not subcontractors if they don’t have a license and their own insurance.

When in doubt contact us and we’ll be happy to clarify. For more tips check out our blog post on Best Practices.