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In an effort to help employers understand the risks associated with misclassification, the U.S. Department of Labor (DOL) has created a new webpage. The page explains how deliberate misclassification of employees as independent contractors can negatively affects workers, businesses, and governments.

Employees who are misclassified as independent contractors may fail to receive appropriate wages, unemployment insurance, workers' compensation if injured, and protections from EEO laws. They also may be missing out on a number of employer-sponsored benefits.

Businesses risk liability for unpaid wages and taxes as well as fines if they are found to have misclassified employees. Governments lose tax revenue when an employer misclassifies an employee. More information is available at the DOL's website. "What is 'misclassification'?"


Independent contractors are a valuable resource to many organizations.

However, organizations must utilize independent contractors appropriately and within the guidelines of the Fair Labor Standards Act (FLSA) and the Internal Revenue Service (IRS). When employers classify a worker as an independent contractor when the worker does not meet the criteria to be considered an independent contractor, they risk wage and hour liability as well as tax liability from unpaid payroll taxes.

Employers who hire independent contractors should obtain a written agreement that details the independent nature of the relationship. The agreement alone is not enough, however. Some factors to consider include that the work of an independent contractor should not be integral to the main function of the employer. The employer must have little control over how, if, or when the contractor performs his or her job and should not be supplying resources or reimbursing the contractor for expenses.

Always have your legal counsel review a proposed relationship before you determine it is one with an independent contractor.

Not sure how your insurance policy covers or "not covers" an independent contractor? Let DDM review your program.

Posted 8:45 AM

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