It’s very tempting to hire people and label them as independent contractors. You’re saving money because independent contractors aren’t entitled to employee benefits, overtime and wage-and-hour protections. But this is a risky strategy because courts have been cracking down on employers who misclassify workers as independent contractors when they’re really employees.
So how do you tell whether you can safely label a worker as an independent contractor? It varies a bit from state to state, but in states like Massachusetts, California and New Jersey, courts will generally assume a worker is an employee unless he or she is free from your “direction and control;” is doing something outside your company’s usual course of business; and is engaged in an “independently established trade, occupation, profession or business” of the same nature as the service he or she is providing to you.
Other states focus on whether the services being provided are “an integral part” of the employer’s business, how permanent the relationship is, and how much control the company has over the worker. If any of those factors are significantly present, the court might deem the worker to be employee.
Misclassification cases can be costly to the employer. In addition to damages like lost wages, you might have to pay the worker’s attorney fees. So if you’re wondering whether it’s safe to try to classify some of your workforce as “independent contractors,” you should really talk to an employment lawyer first to determine if you’d be complying with the law.