On September 19, 2011, the U.S.Department of Labor (DOL) announced that it has entered into a memorandum of understanding with the IRS which permits these two agencies to share information about employers' use of independent contractors. The DOL's press release is available here.
Some individual states have entered into similar arrangements with the DOL. It is becoming very clear that the issue of whether a worker is properly classified as an independent contractor is a high regulatory priority. Employers should exercise caution when classifying its workers as independent contractors. A determination that certain workers are really employees, and not independent contractors, can have very significant financial consequences for the employer. The list of factors the IRS uses to determine whether a worker should be classified as an employee or independent contractor is available here.
Each case a business or individual may face is unique and may require legal advice. If you would like additional information regarding the content of this article, please contact the author, John Egbert, or another member of our Labor & Employment Department .