September 29, 2016
Over the past few years, there has been a concerted effort on the part of the US Department of Labor, as well as various state attorneys general, to target businesses that misclassify workers as independent contractors when those workers should be treated as employees.
As previously discussed on this site, there can be certain advantages to retaining the services of independent contractors rather than employees. Utilizing such workers can, under some circumstances, help to reduce payroll expenditures and limit potential employment-related lawsuits and liability. However, given the attractiveness of independent contractor classification, courts, regulatory agencies and state and federal tax authorities alike have increasingly ruled against attempts by businesses to label workers independent contractors when, in all material respects, those workers instead fit the definition of employees.
In light of ever-increasing regulatory scrutiny, businesses should seek knowledgeable counsel when deciding whether to designate workers as 1099-eligible independent contractors or W-2 employees.
When Should a Worker Be Classified as an Independent Contractor?