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Jeffrey S. Klein, left, and Nicholas J. Pappas, right, of Weil, Gotshal & Manges. Jeffrey S. Klein, left, and Nicholas J. Pappas, right, of Weil, Gotshal & Manges.

In recent years, employers have faced increased scrutiny regarding their classification of workers as independent contractors rather than as employees. The U.S. Department of Labor estimates that in 2017 employers classified nearly 15.5 million workers, representing 10.1% of the workforce, as independent contractors across a variety of sectors in the economy. Various federal and state laws and regulations apply only to workers classified as employees, and businesses bear the responsibility of making payroll tax withholdings and reporting those withholdings to governmental tax authorities, but not if the workers are classified as independent contractors. In response to the uptick in cases alleging misclassification of workers, courts and administrative agencies have developed or revised a series of tests to determine whether an employer has properly classified a worker as an independent contractor.

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