It is fraudulent for an employer to purposefully misclassify a worker as an independent contractor in order to avoid complying with regulations on Unemployment Insurance, Workers’ Compensation, Social Security, tax withholding, minimum wage, and more.
When determining a worker’s status as an employee or independent contractor, the relationship between the business and the individual must be considered.
Examples of an employer-employee relationship include, but are not limited to, when an employer:
- Tells the employee when, where, and how to do the job and directly supervises the job;
- Sets the work hours and rate of pay;
- Requires prior permission for absences;
- Provides facilities, equipment, tools, or supplies; and
- Provides compensation in the form of a salary or hourly pay rate.
Independent contractors, on the other hand, are in business for themselves and make their services available to the public. They perform services free from supervision, direction, and control.
Independent Contractors Fact Sheet (IA 318.14)
Suspected Employer Fraud Including Misclassification Tip Sheet (IA 318.26)