Employee vs. Independent Contractor: Understanding Worker Classification and Legal Risks – Employment Edge with Liz

 

Elizabeth Schlissel, Partner at Falcon Rappaport & Berkman, breaks down how to properly classify your workforce. Discover the real-world risks of simply labeling everyone an independent contractor to dodge payroll taxes, and why it could expose your company to tax and overtime liabilities. Have questions about classifying your workers? Contact us at frblaw.com.

Employment Edge with Liz is Falcon Rappaport & Berkman’s video web series hosted by Elizabeth Schlissel, Chair of the firm’s Labor & Employment Practice Group. Through the series, Liz provides timely, practical commentary on the labor and employment issues shaping today’s workplace, helping employers better understand legal developments and policy considerations. Episodes have covered a range of key topics, including employees leaving companies, employee classification, bonus policies, fixed leave versus unlimited PTO, and AI in the workplace.

Transcript:

**This transcript has been prepared automatically by AI and may contain inaccuracies**

Liz Schlissel:

I’m Elizabeth Schlissel, and this is the Employment Edge with Liz. 

What makes a worker an independent contractor or employee?

Companies should refrain from just hiring all workers and classifying them as an independent contractor to avoid paying payroll taxes.

Doing so can expose you to not just tax liability, but also potential misclassification and liability such as overtime that that individual may be entitled to.

If they should have been classified as an employee. When hiring workers, companies should analyze what their nature of their relationship is going to be.

How much control is the company going to have over that working relationship? Is the company going to set the hours, pay the person a salary? Are they going to provide the worker with tools such as a computer, an email address, maybe business cards? Facts like those would support employee-employee relationship.

I like to say that an independent contractor is like hiring a plumber. The plumber comes to your house, brings all their tools with them, and then fixes the pipe.

As an independent contractor relationship, you don’t tell the plumber how to fix the pipe.

You don’t provide the plumber with the tools he uses to fix the pipe. You hire the plumber, they come to your house, they fix the pipe, the relationship is that is a clear independent contractor relationship.

Now, in reality, in the workplace, there’s more nuances than that.

If you have questions regarding classifying your workforce, please contact your employment attorneys at Falcon Rappaport & Berkman.