Use of Independent Contractors Presents Significant Legal and Business Risks
The benefits to businesses of classifying workers as independent contractors (and not employees) are many: lower taxes, greater freedom from government regulation, exemption from many laws governing the workplace, and potentially lower labor costs. The border between contractors and employees is blurry, however, and businesses must be careful to avoid misclassification, as significant liabilities may arise from getting it wrong: unpaid wages, liquidated damages, back taxes, disqualification of benefit plans, overtime liability, contributions to retirement plans, social security and FICA payments, and even criminal penalties (in rare circumstances).
