Virginia Independent Contractors laws & compensation compliance analysis

Virginia Independent Contractors: What you need to know

Whether a worker is an “employee” or an “independent contractor,” is critical when it comes to such important issues as pension eligibility, workers' compensation coverage, wage and hour law, and many other matters. In some situations, federal law will govern, but the question is most often resolved by looking to state law, particularly in areas such as unemployment tax liability, withholding tax, workers' compensation, and state wage and hour requirements.
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For purposes of the state unemployment compensation law, an individual who provides services for remuneration is presumed to be an employee covered by the law, unless the Commission determines that he or she is not an employee for purposes of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, based on the 20-factor test in Internal Revenue Service Revenue Ruling 87-41.
Note: Virginia courts tend to interpret this statute in favor of finding employee status.
In Virginia, classification of an individual as an employee or an independent contractor for purposes of workers' compensation is governed by court rulings (the common law) rather than by a provision of the workers' compensation statute.
An employer may elect to have an independent contractor covered by workers' compensation provided the independent contractor agrees to such inclusion and, unless the employer is self-insured, the employer's insurer agrees in writing to such inclusion. All or part of the cost of the insurance coverage of the independent contractor may be borne by the independent contractor (VA Code Sec. 65.2-101).
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