Overview: Having independent contractors offer benefits and risks. The benefits include avoiding certain taxes, legal liabilities and administrative challenges.
However, the risks can be great. Before filling a position with an independent contractor, it is essential to carefully consider the myriad factors that go into proper employee classification a worker as an independent contractor. An independent contractor should qualify not only under the tax code, but also several other state and federal employment laws that may come into play. Inaccurately classifying someone as an independent contractor can set an employer up for costly enforcement actions.
Trends: Government enforcement of independent contractor misclassification is stricter than ever, as the Internal Revenue Service, the U.S. Department of Labor and state agencies cooperate to enforce the laws.
Author: Michael Cardman, Legal Editor
The Illinois Department of Labor will create an online employee misclassification referral system for employees who claim they were misclassified as independent contractors will be able to file a complaint to multiple agencies at once.
Effective December 31, 2017, North Carolina will create a new Employee Classification Section within the North Carolina Industrial Commission to investigate reports of employee misclassification and assist other state agencies in recovering back wages, taxes and more.
Updated to reflect information on a court ruling clarifying the coverage of limited liability companies under unemployment insurance.
Updated to reflect law regarding the status of drivers for ride-sharing companies, effective May 29, 2017.
Updated to reflect a new law providing that drivers for ride-sharing companies will be independent contractors and not employees if certain conditions are met, effective July 1, 2017.
The US Department of Labor's recent withdrawal of two administrator interpretations issued during the Obama administration may signal a more employer-friendly enforcement posture under the Trump administration.
The growth of the so-called "gig economy" has brought with it a host of misclassification claims. On this podcast, Cleveland, Ohio employment attorney Todd Lebowitz discusses those issues plus the most common mistake employers are making.
New York City freelancers may now enforce their rights under a new law, and the City as well as the Freelancers Union have engaged in a communications campaign to ensure gig workers are aware of their legal options.
Updated to reflect independent contractor requirements under the New York City Freelance Isn't Free Act, effective May 15, 2017.
HR guidance on legally classifying and managing independent contractors under federal tax and employment laws.