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Many startups decide to hire an “independent contractor” to test their abilities prior to hiring them as an employee. The mischaracterization – whether intentional or unintentional – often results in some expensive consequences including back wages and the application of payroll taxes with interest and penalties. Criminal sanctions are also a possibility.

Distinguishing between an independent contractor and an employee can be dicey even for the most well-intended employer. The following list represents just a few guidelines issued by the U.S. Supreme Court that are considered to be only some of the more weighty factors in determining employee status:

  • The degree of control an employer has over the work – the more control an employer has over how a worker performs work will favor an “employee” designation
  • The extent to which the worker can or does provide similar services to other businesses – working exclusively for one employer will lean in favor of “employee” status
  • The permanence of the relationship – established relationships will suggest an “employee” designation
  • Investment – the more tools (e.g., phones, computers, software) an employer provides to a worker will tilt in favor of “employee” status

Navigating through the murky waters of accurate employee classification can result in a shipwreck. Startups are, therefore, cautioned to work closely with an attorney to ensure proper classification of a worker as either an independent contractor or an employee. You can speak with a skilled employment attorney at LawTrades. Our legal marketplace makes it painless for businesses to seek and acquire the legal advice they need.