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Independent Contractor or Employee?

Nitin Sud, Board Certified Labor and Employment Attorney

Nitin Sud, Board Certified Labor and Employment Attorney

Small businesses frequently choose to classify some or all of their workers as independent contractors, thinking it’s an easy way to avoid taxes, and their workers get more money in their pocket in the short-term because there are no immediate deductions. So everybody is happy, right? No. At least not the government. As most companies know, the IRS has a general checklist to determine whether it is appropriate to classify a worker as an independent contractor, yet they’re often still willing to take the risk.

However, in addition to potential federal tax-related consequences, misclassifying an employee as an independent contractor could lead to a plethora of other problems. Examples of potential violations are as follows:

• Violating the Fair Labor Standards Act for not paying overtime
• Violating the Employee Retirement Income Security Act of 1974 (ERISA) for not providing certain benefits to these workers that are provided to employees
• Violating Title VII of the Civil Rights Act, the Americans with Disabilities Act, and other anti-discrimination laws
• Violating the Family Medical Leave Act by not providing protected leave
• Violating the Texas Payday Law
• Failing to pay state unemployment taxes
• I-9 violations
• Violation of the Worker Adjustment and Retraining Notification Act in the event of mass layoffs or plant closings

Although risking the misclassification may at first glance seem to be a risk worth taking, that is an incorrect assumption. The potential violations could be staggering, and all businesses should make sure they are properly classifying their workers.

This article is for general information purposes and is not to be construed as specific legal advice.


Board Certified Labor and Employment Attorney Nitin Sud represents employees, executives, and small businesses in a variety of labor and employment matters, including litigation in state and federal courts.

For more information, visit www.sudemploymentlaw.com

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