Question

"XYZ Corporation classified large numbers of its workers as independent contractors, but in litigation brought by the IRS, the court held that they were actually employees who had been deprived of their rightful benefits. Which is likely true if XYZ's classification was erroneous but not intentional?

A) XYZ intentionally misclassified its workers.
B) XYZ will face severe punishment for the unintentional error.
C) XYZ's unintentional error will likely be excused if it had a reasonable basis.
D) The court ruling will have no impact on XYZ's classification decisions.

Answer 1

If XYZ Corporation's misclassification of workers as independent contractors instead of employees was unintentional and had a reasonable basis, it's likely that the error will be excused, though they may need to provide back benefits.

Step-by-step explanation:

If XYZ Corporation classified large numbers of its workers as independent contractors but a court determined they were actually employees deprived of their rightful benefits, and if the misclassification was erroneous but not intentional, the most likely correct answer is C) XYZ's unintentional error will likely be excused if it had a reasonable basis. In legal disputes about employment status, the intent behind the misclassification plays a significant role. An honest mistake, if coupled with a reasonable basis for the classification, might not lead to severe punishment. However, XYZ Corporation will likely need to reclassify its workers correctly and might have to pay back benefits that were wrongfully withheld.