THE EMPLOYMENT status of consultants, temporary and contingent workers who provide business services (Providers) may be classified as independent contractors or employees. They are retained under varied conditions that determine their classification. The classification, in turn, has major implications for business costs and operations. A review of the criteria provided by statute[1]� and interpreted by the courts[2]� will assist businesses in assessing the true cost of the service provided. The exposure for a bad call can be enormous.[3]�
In many situations, businesses blithely classify Providers as independent contractors. However, if a court determines that the Providers are employees, the employer may be liable for the payment of overtime wages, vacation pay, social security contributions, Medicaid taxes, unemployment and workers’ compensation benefits, disability benefits and penalties for failing to insure the employee under those plans,[4]� contributions to pension, 401(k), stock option, health and other plans. And under some statutes, punitive damages are available for a willful violation, and under the most egregious situation, criminal penalties may be imposed.[5]�
