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What is the difference between an Independent Contractor and an Employee?

Thumbnail image for Thumbnail image for Female.Freelancer.Employee.Checkbox.DPC.2.28.16.jpgThe US Department of Labor has stated that the misclassification of employees as independent contractors is a primary enforcement initiative. In fact, the Secretary of the Labor Department, Thomas Perez, has referred to misclassification of workers as a “workplace fraud” and a practice that cheats the state out of revenue and deprives workers of basic rights including protection under employment discrimination statutes. As evidence of the government’s interest in stopping this practice, the federal agency’s budget in investigating misclassification cases is for FY 2016 is $14 million dollars and it has been working with many states as part of a joint task force. New York is part of the joint task force. The federal agency has recovered over 200 million dollars in 2014.

Employers and businesses in New York State should carefully evaluated their workforces to determine if they have properly classified their workers properly before an audit, investigation or lawsuit is commenced. Our NY Independent Contractor Misclassification Lawyer can assist you in your evaluation.

We have discussed the topic of misclassification before and some basic information can be found here in prior posts. This post is designed to discuss some general points to consider if you are using independent contractors (please note that these are general tips and are not designed for everyone – you should consult with legal counsel about your specific situation).

Point No. 1: One of the biggest factors in the misclassification analysis is the amount of control that the business exerts over the worker and amount of responsibility the worker bears. The more control the business has over the worker (e.g., how frequent the schedule is, manner in which he or she performs the duties and how he or she is assigned the duties, the method payment was negotiated – was it agreed upon mutually based on a negotiation or set solely by the company, etc.) This is not the only factor but it is very important. In general a contractor should create his or her own schedule, use his or her own tools and equipment and get paid pursuant to an agreement (ideally not on an hourly basis like some employees).

Point No. 2: Just because you have a written independent contractor agreement does not mean you are protected and safe from any exposure. While an agreement can be helpful, the Department of Labor will focus on the actual nature of the parties’ working relationship. As a result, if the parties’ working history is contradicted by the agreement’s terms, the DOL may not give it all the weight the business was hoping it would be afforded.

Point No. 3: In general, do not provide an independent contractor with a uniform, training or direction. If a uniform or other equipment showing that the contractor is part of the Company is provided, this can project the appearance that the worker is an employee. The DOL will consider these to be evidence of an employer-employee relationship.

Point No. 4: Pay the Contractor Pursuant to an Invoice: Contractors in general provide invoices on their letterhead while employees typically are paid on a weekly or bi-weekly basis. A contractor should provide a detailed invoice for a specific job based upon a price that was agreed upon mutually between the worker and business. Contractors typically have their own tax identification numbers and are issued 1099 tax forms.

Thumbnail image for Employee.Freelancer.DOL.Misclassification.Lawyer.Notepad.DPC.3.10.16.jpgThere are many other factors to consider and they can vary by industry. Workers in the entertainment industry and healthcare industry have special considerations. Contact our Award Winning New York Employment Law Attorney to learn more about your specific situation and if we can help you protect your business and develop best practices.


Disclaimer: Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced attorney in your state or jurisdiction. From time to time, a blog post may discuss a legal case – please note that the post may not contain the most to update information on the case as developments may have occurred after it was created.

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