--- title: The Easy Way to Comply with Independent Contractor Laws description: Innovative Employee Solutions, a top employer of record, provides easy ways for your business to comply with independent contractor laws. --- [Skip to content](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/employer-of-record/easy-way-comply-independent-contractor-laws#main-content) [![IES Logo_Full-ColorNavy](https://blog.innovativeemployeesolutions.com/hs-fs/hubfs/IES%20Logo_Full-ColorNavy.png?width=300&height=140&name=IES%20Logo_Full-ColorNavy.png)](https://www.innovativeemployeesolutions.com/) - [Innovative Employee Solutions Blog](https://blog.innovativeemployeesolutions.com) - [Innovative Employee Solutions Blog](https://blog.innovativeemployeesolutions.com) [mailto:?subject=Check%20out%20https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/employer-of-record/easy-way-comply-independent-contractor-laws](mailto:?subject=Check%20out%20https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/employer-of-record/easy-way-comply-independent-contractor-laws) August 26, 2016 # The Easy Way to Comply with Independent Contractor Laws Written by: [Innovative Employee Solutions](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/author/innovativeemployeesolutions) As a small-business owner, whether you properly classify workers as employees or independent contractors (ICs) saves you time and money in the long run. Learn the risks involved with misclassifying workers and how partnering with Innovative Employee Solutions can help mitigate those risks. - ## Typical Reasons for Misclassification Because employees are subject to more federal, state, and local employment and labor laws, including payroll tax withholdings, worker’s compensation, unemployment insurance, health care insurance, and other benefits, employers may classify workers as ICs to avoid taking on many of these responsibilities. However, the U.S. Department of Labor's Wage and Hour Division (WHD) is concerned about the lower tax revenues for the government that result from classifying employees as ICs. In 2012, the WHD began hiring hundreds more investigators to determine whether workers were being properly classified. Over $7 billion in revenue is expected to be collected by 2022 due to properly classifying workers as employees rather than ICs. - ## Penalties for Misclassification The consequences of misclassifying workers may include hefty fines, taxes, and lawsuits. For example, in April 2016, Uber settled a class action lawsuit that was filed by drivers in California and Massachusetts for $100 million. In May 2013, the Department of Labor (DOL) recovered more than $1 million in retroactive overtime pay and benefits for 196 employees of a Kentucky-based cable installation company. In 2012 and 2013, the DOL collected over $18.2 million in back wages for 19,000 employees misclassified as ICs. You definitely don’t want to be facing similar lawsuits with your small business. - ## Properly Classifying Workers In July 2015, the WHD published guidelines for properly classifying workers under the Fair Labor Standards Act (FSLA), which rules how minimum wage and overtime are paid for non-exempt employees. The main determinant as to whether a worker is an employee or an IC is whether the worker is financially dependent on the employer or is in business for themselves. For example, if the tasks performed by the worker are required for the business to operate, the worker is to be classified as an employee. Also, the worker’s opportunity for making or losing money for the company, such as hiring others or purchasing materials, classifies them as an employee. In contrast, if a worker typically makes investments in their company that don’t pertain to one particular job and help their business grow, the worker is to be classified as an IC. Also, when a worker sets their own hours and typically works independently, they are to be classified as an IC. - ## Partner with IES to Avoid Misclassification Partner with IES as your employer of record to take advantage of our IC compliance services. Our comprehensive screening process examines the worker, job description, and nature of employment to verify whether a worker is an IC. We continue the process on a regular basis to ensure ongoing compliance. Save yourself the time and cost involved with evaluating a worker’s proper classification. [Reach out to the trained staff](https://www.innovativeemployeesolutions.com/cloud-payrolling-companies/) at Innovative Employee Solutions today! Tag(s): [Comply with Independent Contractor Laws](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/tag/comply-with-independent-contractor-laws) , [Innovative Employee Solutions](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/tag/innovative-employee-solutions) , [Employer of Record](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/tag/employer-of-record) , [Independent Contractors](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/tag/independent-contractors) , [The Easy Way to Comply with Independent Contractor](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/tag/the-easy-way-to-comply-with-independent-contractor) , [Employer of Record Services](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/tag/employer-of-record-services) ## [Innovative Employee Solutions](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/author/innovativeemployeesolutions) ## Other posts you might be interested in View All Posts ## [Which Employee is Right for You? 2 min read | April 15, 2016 3 Ways to Know if You Need a Contractor or a Full-Time Employee Read More](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/business/3-ways-know-need-contractor-full-time-employee) ## [Employer Best Practice 2 min read | April 8, 2016 Learn How to Handle Co-employment Issues Related to Contingent Workforce Read More](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/employer-best-practice/learn-handle-co-employment-issues-related-contingent-workforce) ## [Business 2 min read | May 30, 2016 Why You Should Consider Hiring Contract Employees Read More](https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/business/consider-hiring-contract-employees) ## Subscribe to email updates Additional content around the benefits of subscribing to this blog feed. - [Innovative Employee Solutions Blog](https://blog.innovativeemployeesolutions.com) © 2014-2026 Innovative Employee Solutions. All rights reserved. [CSR policy](https://www.innovativeemployeesolutions.com/corporate-social-responsibility-policy/) [Diversity & Inclusion](https://www.innovativeemployeesolutions.com/ies-diversity-inclusion-policy/) [Privacy policies](https://www.innovativeemployeesolutions.com/privacy-policies/) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Innovative Employee Solutions", "url" : "https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/author/innovativeemployeesolutions" }, "dateModified" : "2024-04-24T18:56:15.342Z", "datePublished" : "2016-08-26T17:57:35.000Z", "headline" : "The Easy Way to Comply with Independent Contractor Laws", "mainEntityOfPage" : { "@id" : "https://blog.innovativeemployeesolutions.com/ies-blog-nb-24/blog/employer-of-record/easy-way-comply-independent-contractor-laws", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.innovativeemployeesolutions.com/hubfs/Signature-TaglineKarla.png" }, "name" : "Innovative Employee Solutions" } } ```