It is important that employers enter into well drafted consulting/independent-contractor agreements and regularly review their contractual arrangements with independent contractors to identify potential misclassification issues. Misclassifying employees as independent contractors violates the law and could subject employers to significant liability. In recent years the U.S. Department of Labor has been aggressive in enforcing laws prohibiting misclassification of employees as independent contractors. Employers tempted to outsource work to independent contractors in order to curb payroll costs should carefully consider the legal implications before doing so. Such arrangements are likely to violate the Fair Labor Standards Act (FLSA), as well as federal tax and state laws. Employers who violate the FLSA face liability for payment of back wages and overtime due, plus an equal amount as liquidated damages and civil money penalties.
Consulting/Independent Contractor Agreements