In the United States, according to the Internal Revenue Service (IRS), “Anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is true even when you grant the employee freedom of action. The crucial factor is that you possess the authority to oversee the details of how the services are carried out.”

Nonetheless, regulations differ from state to state, and they are continually evolving.

Despite the variation in rules, several indicators can be utilized to assess the risk of independent contractor misclassification. Understanding these indicators and staying up-to-date with the latest changes in employment laws across different jurisdictions can help businesses maintain compliance and reduce the risk of misclassification. By closely examining the degree of control, autonomy, and the nature of the working relationship, companies can better distinguish between employees and independent contractors, thereby avoiding potential penalties and legal issues related to misclassification.

  • How is the worker paid?
  • How important is the work?
  • What’s the length of the relationship?

  • Does the contractor manage or direct other workers?

Use our free Misclassification Risk Calculator to determine how exposed your company may be to potential fines and penalties.