Employee or Independent Contractor?

Some employers - the Dept. of Labor estimates 30% - do not properly classify their workers. They classify their workers as independent contractors rather than employees; by doing so the employer reduces his costs: no payroll taxes, no employee benefits.

But the law says that an employee's status is determined by the degree of an employer’s control over the manner and means of work, not any written agreement. Yet, these so-called independent contractors wind up doing exactly what they were doing as employees.

Strangely, Congress is actually trying to rectify the problem via the Payroll Fraud Prevention Act of 2013. This would make employee misclassification a violation of the Fair Labor Standards Act and, thus, impose stiff penalties on offending employers.