Worker classification

Federal and state departments of labor and other taxing authorities are cracking down on the misclassification of workers. Workers in your business can be classified as either independent contractors or employees. Properly classifying workers is important because misclassifying a worker as an independent contractor can open you up to back payroll taxes, penalties, and interest; whereas misclassifying a worker as an employee can cost you in payroll taxes and benefits. Determining whether a worker is an employee or a contractor is a facts and circumstances test, meaning there is not a hard line definition. Instead, the authorities look at a number of factors to try to understand the big picture. There are three general categories of factors: behavioral control, financial contraol, and relationship control. They will be looking at things like who sets the schedule, whether the worker performs the same type of work for other businesses or the public, and who buys supplies and equipment, among other things. The more control the business has over the work, the more likely the person will be classified as an employee. The state department of labor and employment puts particular weight on whether the worker publicly markets their services to other businesses.