Independent Contractor Vs. Employee: Why the Difference Matters

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An independent contractor working from home

Independent contractors play a vital role in our economy. With the advent of the gig economy and expansion of freelance jobs, they are more important than ever. Unfortunately, the hiring of independent contractors has attracted closer and often unfair scrutiny. It’s important to know where the line is between an independent contractor and an employee. The Westchester business attorneys of Rosenbaum & Taylor can help.

An independent contractor is a person or company that provides certain goods or services pursuant to a contract. They are usually paid on a freelance basis, and are not considered regular employees of the company. The line between these two types of workers is sometimes blurry, but the distinction matters. In New York, these are the primary factors that determine whether a worker is an independent contractor or employee:

  • What is the degree of control exercised over the worker by the employer?
  • What, if anything, is the worker’s opportunity for profit or loss and their investment in the business?
  • What is the degree of skill and independent initiative required for the activity?
  • What is the extent to which the work is an integral part of the employer’s business?
  • What is the duration of the working relationship, or is it permanent?

Is the worker dependent upon the employer to render the service, or are they in business for themselves? Answering this is the ultimate goal of the above questions.

Misclassifying an employee as an independent contractor has numerous implications for a New York business. To understand them, consider the benefits to which independent contractors are not entitled:

  • Minimum wage and overtime
  • Unemployment benefits
  • Social Security and Medicare contributions
  • Tax withholding
  • Workers’ compensation
  • Health insurance

That means if a worker was actually an employee, he or she should have received these (and other) benefits. Failing to properly classify a worker could subject a business to accusations of fraud. This may further result in legal action. New York takes this issue seriously and is not hesitant to enforce labor, workers’ compensation, and other laws. If you fail to properly classify your workers, you could garner the unwanted attention of:

  • The New York Department of Labor
  • The New York Attorney General’s Office
  • The New York Department of Taxation and Finance
  • The Workers’ Compensation Board
  • The Workers’ Compensation Fraud Inspector General
  • The New York City Comptroller’s Office
  • The Internal Revenue Service
  • New York state or federal courts

If your business customarily hires independent contractors, you need to know whether you’re on the right side of the law. An experienced Westchester business attorney will review your employment operations and determine whether workers are properly classified. That includes a review of:

  • All employment contracts and agreements
  • The manner in which workers (employees and independent contractors) are paid
  • Workplace policies and how they apply to your workers
  • The degree of supervision, control, and monitoring exercised over workers
  • The hours that are worked

These and other factors help answer the above questions, and they clarify your company’s responsibilities. Where workers have been misclassified, we can help correct the problem and take necessary remedial action. In the event your company faces a lawsuit over misclassifying, we will defend you. We understand New York’s independent contractor laws, and will fight for a reasonable and fair outcome in your case.

If You Have Business Law Questions, Let Us Help

Companies benefit by hiring independent contractors, but they have to make sure they’re playing by the rules. Rosenbaum & Taylor knows there’s a lot on the line with your business. And we want to help make it a success. We are experienced in all aspects of New York business law. If you have questions about independent contractors, you can turn to us. Give us a call today to schedule your consultation.

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