Overview: 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 properly classifying 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: The Internal Revenue Service, the US Department of Labor and state agencies are cooperating to enforce independent contractor misclassification.
Author: Michael Cardman, Legal Editor
Updated to reflect forthcoming final overtime rule updating and revising the Fair Labor Standards Act (FLSA) overtime exemption requirements.
Updated to reflect forthcoming amendments to the Labor Code.
Updated to include amendments to the MHRA, effective September 19, 2019.
If signed into law as expected, AB 5 would codify the California Supreme Court's 2018 "Dynamex" ruling as part of the state code and extend its application beyond the wage orders to include state labor and unemployment insurance laws.
Updated to reflect information on a decision concerning independent contractor classification under the National Labor Relations Act (NLRA).
The 9th Circuit Court of Appeals has withdrawn an opinion issued earlier this year, in which it held that the Dynamex test for independent contractor classification applies retroactively.
Updated to reflect an amendment regarding independent contractor classification, effective July 24, 2019.
Updated to reflect an amendment to the wage and hour classification criteria, effective July 1, 2019.
HR guidance on legally classifying and managing independent contractors under federal tax and employment laws.