Credit: elenabsl/Adobe Stock. Credit: elenabsl/Adobe Stock.

The decision to classify workers as independent contractors versus employees is one that many small businesses often use to save the company money. However, making this decision purely based on financial considerations can potentially lead to severe consequences and expose companies to legal liability.

ALM Small Business Adviser Logo. Courtesy photo.Recent debates have focused on large companies, but small companies also face these challenges as the “gig economy” continues to grow. In addition, the Biden administration is making a priority of identifying the misclassification of employees as independent contractors.

Given this framework, it is important to have a firm understanding of the differences between an independent contractor and an employee, the tests currently used to properly classify employees, the risks of misclassification, and best practices to consider to avoid liability.

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