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ARTICLE · 22 FEBRUARY 2016

Just Because You Say It, Doesn't Make It So

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This option may be very attractive to a start-up who may be short on cash to pay salaries and fringe benefits.

United StatesEmployment and HR
Mark Neuberger
Mark Neuberger
Larry Perlman
Larry Perlman
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Many companies in the technology industry pay workers as "independent contractors" or "1099 workers." In theory, classifying individuals as independent contractors rather than employees can bestow significant economic benefits on a company. This option may be very attractive to a start-up who may be short on cash to pay salaries and fringe benefits.

When independent contractors do the work, your company is not responsible for tax withholdings, is not responsible for workers' compensation or unemployment insurance, and does not need to pay minimum wage or overtime. That's the good news. However, when not done correctly, independent contractor classification is fraught with risk and lots of potential legal liability.

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