Misclassification of workers: a costly issue

Misclassification of workers as independent contractors remains a top employment law problem area, frequently resulting in fines, orders for back wage payments, penalties and an array of headaches for unsuspecting employers. Proper classification of workers can be difficult for several reasons:

 

  • There is no singular definition of employee or independent contractor under federal or state law.
  • An agreement between an employer and a worker that the worker is an independent contractor may have little, and in some instances, no legal significance. Independent contractor is a legal status determined by factors that go beyond the employer’s and employee’s desire to contract for work on a certain basis. Written agreements can be quite helpful, but are not dispositive.
  • Both federal and state policy has been trending towards classifying workers as employees due to perceived governmental and individual worker benefits from employee payroll withholding, workers’ compensation and unemployment insurance.
  • The relationship between employer and worker frequently evolves over time, and even a well-intentioned employer can find that a worker once properly classified as an independent contractor has now become misclassified.

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