State and federal laws regulate whether an employer should classify a worker as an “employee” or “independent contractor.” Classifying workers as independent contractors can seem like an attractive option, but the cost of misclassifying a person can mean significant liability.

Recent class action lawsuits indicate that employers may start to face more claims from workers who argue that, although they were classified as independent contractors, they were owed the benefits, like insurance, typically received by employees. To avoid such claims, consider the following questions before classifying a worker as an independent contractor:

  1. Does the contract person have another source of income?
  2. Does the contractor advertise his or her services to others?
  3. Whose business card does the person carry?
  4. How much control does the “employer” have over the means and methods of performing work?
  5. Does the contractor furnish his or her own tools, computer, or supplies?

Every situation is different, but these questions can help avoid making the wrong decision. The more the company controls when, where, and how a person performs the work, the more likely that worker will be classified as an employee. Finally, consider whether a regular employee would normally do this work. If so, it might be more difficult to argue that the worker was truly an independent contractor.