Worker Classification: 1099 vs. W-2 workers

Worker Classification Do’s and Don’ts

The age old dilemma of classifying workers as either W-2 Employees or Independent Contractors is as relevant today as its ever been.

The rules can be complex, especially for startups unsure whether they are hiring workers or independent contractors. New laws from the IRS, Massachusetts, the Dept. of Labor and OSHA all make it increasingly difficult to classify workers as independent contractors. The primary rule which threads through the Federal and State Laws is about control. If you control how and when someone is doing a project for you, that person is likely an employee.

As we like to say here in Massachusetts, which has arguably the most employee friendly laws for classification:

If it looks and smells like an employee, it probably is!

The fines for not properly classifying are severe.  Before calling your workers Independent Contractors, you should take a hard look at the following best practices and feel free give me a call to discuss, along with your attorney and your accountant.

Independent Contractor Best Practices

Steer clear of doing any of these:


  • Treating the workers as employees (for instance providing business cards or employee perks/benefits).
  • Setting hours (it’s recommended to set start and completion dates for the project).
  • Providing office space, computers, and tools (you could charge for them).
  • Assigning fill in work.

Do these items:


  • Prepare a written agreement for independent contractors addressing most of the important criteria.
  • Stipulate that the worker is free to work for others—if you can, find out if he does.
  • Compensate for the work performed, not the time required to do the job.
  • Use agencies whenever feasible.
  • Have workers remain responsible for their own insurance and training.
  • Make it clear that additional workers needed will be provided by the contractor.
  • Build travel and other costs into the contract.

For more timely, in-depth advice on how payroll can help with Choice of Entity, ACA reporting, Paid-Time-Off/Sick Leave Rules, connect with us!
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