Employers need to be cautious when classifying individuals as independent contractors. Misclassifying an employee as an independent contractor can have serious financial and legal consequences.

The New York Times reports the IRS is emphasizing the distinction between employees and self-employed independent contractors this year. With increased financial stakes due to ACA, determination of employer size and classification of full time employee status is contingent on the definition of “employee”. Employers seeking to classify employees as contractors have not only IRS regulation to consider, but also state-level regulation that can vary from federal law.

As a general rule, the more an employer controls the work of an individual, the more likely that individual is the employer’s employee. For this reason, it is generally accepted that employers can control or direct the result of the work done by independent contractors, but not the means and methods by which contractors choose to accomplish each assignment.

For questions regarding the definition of employee with regard to ACA, contact your NEEBCo representative.