Startup Guide To Hiring And Terminations: Worker Classification

Hiring workers is an important step for startups. Startups engage two main types of workers—employees and independent contractors. It can be difficult to determine the proper classification of a worker, especially since both federal and state law govern whether a worker is an employee or an independent contractor. Also, a worker's classification determines how they are paid and what benefits they receive. When engaging any new worker, often the most conservative approach is to classify the worker as an employee because improperly classifying a worker as an independent contractor (when they should in fact be an employee) violates tax and employment laws, resulting in legal and financial liability (including potential personal financial liability for officers and directors).