Misclassification of workers as independent contractors, when
they really should be classified as employees, can lead to
significant liability. The United States Department of Labor (DOL)
continues to push this misclassification issue on the federal
level.
Compliance is important because the DOL will seek to ensure that
workers are receiving minimum wage for all hours worked, plus
overtime. Despite the fact that on a federal level the law has
remained relatively unchanged for many years, employers continue to
believe that classifying a worker as a 1099 contractor is
the only determinative factor. Obviously, a worker who is an
independent contractor is also generally not entitled to benefits,
including FMLA, medical insurance, etc. Employers therefore have
financial incentive to consider workers contractors. Further, many
workers prefer the classification, as it enables them to earn a
higher wage and can provide tax benefits.
