Misclassification

Misclassification is treating a worker as an independent contractor when the law says they are an employee. It often happens when a business pays people on a 1099 to skip payroll taxes, workers' comp and overtime, but still controls when, where and how they work. The IRS, the U.S. Department of Labor and state labor, tax and unemployment agencies each review it under their own tests, and a worker can file a claim. The consequences generally include back payroll taxes, back wages and overtime, penalties and interest. Hiring through a W-2 staffing agency puts that employer responsibility on the agency instead.