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When Is an Independent Contractor Not an Independent Contractor?
Authored By: Joyce Marsh on 2/23/2015

Think you have a good grasp on the difference between regular employees and independent contractors? The U.S. Department of Labor (DOL) seems to be cracking down even more lately when it comes to enforcing misclassifications.


The DOL recently announced numerous instances where a number of companies failed to classify their employees correctly and now owe the agency back wages and damages ranging from $109,000 to $1.3 million. To save your company from being added to this list, here are a few vital warning signs that you may have misclassified your employees:

  • You have given your contract employee paid vacation or sick leave.
  • You pay your contract employee by the hour or on a salaried basis, versus by the project.
  • The work they perform is usually paid reported on a W-2 basis.
  • The person’s business expenses have been reimbursed.
  • You’ve had the contract employee sign a non-compete agreement.
  • They only perform work for you and do so as an individual, rather than as a company.

Don’t be mistaken, the DOL is taking this seriously. They’ve hired over 2,000 investigators since 2008. Looking for misclassifications has become a routine investigation for them now.

So, take a second look at any contract employees you may have and reclassify as needed. Just make sure you make up any back pay you may owe them to be compliant.

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