Independent Contractor or Employee?
Advantages and disadvantages of using independent contractors
Businesses that opt to treat workers as independent contractors rather than employees enjoy significant benefits. Most importantly, there is a significant financial motivation for using independent contractors in place of employees. Even if companies end up paying independent contractors more per hour than they pay employees, they can save untold dollars in payroll taxes, workers’ compensation premiums and employee benefit programs. Second, businesses can limit their exposure to lawsuits and resulting liability under state and federal employment laws because such laws are interpreted, in most cases, to apply only to employees. Examples of potential claims that could be avoided by treating workers as independent contractors include:
• claims brought for overtime compensation under the Fair Labor Standards Act and comparable state wage and hours law; • claims for discrimination, harassment and retaliation under Title VII, the Age Discrimination in Employment Act, the Americans With Disabilities Act and others;...