Do your contractors have UBI/Department of Revenue registration numbers for the business they conduct? While answering this question in the affirmative is no guarantee that your business is in full compliance with state independent contractor tests, you can be assured that your business would fail state tests if you answered “No.”
A key consideration in any independent contractor analysis — federal or state — is whether the contractor is engaged in an independently established business, and follows formalities of operating an independent business. The IRS’s independent contractor test factors this into its analysis, and L&I and ESD’s independent contractor tests codify the UBI requirement as an absolute requirement for establishing independent contractor status. So critical is this requirement that auditors conducting worker classification audits will summarily determine that any contractor who lacks a UBI number should be reclassified as an employee/covered worker.
Given the importance of UBIs, businesses that hire independent contractors should request UBI registration numbers at the time of hire (in addition to other IC compliance due diligence), and refuse to do business with contractors who cannot produce one. It is bad/risky business to do otherwise.
For more on independent contractor law compliance, check out Mercer Law PLLC’s 1099 Review™, Washington State’s first online independent contractor risk assessment tool and resource center.
