What is Your Potential Liability for Misclassifying an Independent Contractor?
From a strictly legal perspective, the safest course if you are in doubt about whether someone should be a contractor or an employee is to pay them as a W2 employee. After all, there are no legal consequences to treating someone as an employee who could be an independent contractor, but there are potential legal claims in the opposite scenario.
There are, however, costs associated with moving a contractor to employee status, so it is important for you to have clarity about the potential damages so you can make an informed risk-benefit decision.
An employee who proves they were misclassified can recover basically for anything they missed by not being an employee- the 7.5% of pay that would have otherwise been the employer contribution to social security, and any holiday or vacation time or benefits that others who were employees received. Whatever this number is in your business, remember that it will be tripled under the Wage Act, and if liable you will have to pay the employee's legal fees as well as your own.
Learn more here about damages under the Massachusetts Independent Contractor Law.
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