According to one recent 2016 study, 55 million Americans are working as freelancers (which is 35% of the US Workforce). The use of freelancers by businesses raises all sorts of legal questions, but most significantly is the issue of worker misclassification. Businesses routinely classify freelancers as independent contractors, not employees. Is this correct? It depends on a variety of factors. In general, if the freelancer is truly independent (meaning that the business does not control how the freelance does his/her work) and the freelancer operates as an independent business, then classifying the freelancer as independent contractor would most likely be correct. However, the line between who is an employee and who in an independent contractor can sometimes be difficult to determine. Unfortunately, different laws use different tests to determine if the worker is an employee or independent contractor. Most of the tests focus on (a) whether the business controls how the freelancer performs the work, (b) whether the business controls the “economic realities” of the relationship; and (3) whether the worker has an independent business. Great care must be taken to ensure workers are properly classified. A business cannot summarily decide that a particular worker is an independent contractor, rather the relationship and interaction between the business and the freelancer needs to be examined. The consequences for misclassifying a worker can be significant, as various statues requires violators to pay fines, taxes, unpaid wages, and other damages.
For more information on worker misclassification issues, please contact Scott A. Mirsky at (301) 664-7710 or firstname.lastname@example.org.