The distinction between an "employee" and an "independent contractor" can have critical implications.
An important issue all contractors face is whether a subcontractor (or the employee of a subcontractor) is considered your "employee" under the law. While most of us use the word in everyday conversation without thought, the distinction between an "employee" and an "independent contractor" can have critical implications.
This designation is important for several reasons. An obvious advantage to labeling workers as "independent contractors" is the savings on payroll, withholding taxes and related benefit expenses. However, just calling someone an "independent contractor" is not conclusive to the Internal Revenue Service, the National Labor Relations Board or the Occupational Safety and Health Administration. Second, if a worker is deemed an "employee," any on-the-job injuries to the worker, as well as worker's compensation claims arising from those injuries, will be the responsibility of the employer. Third, if a worker is an "employee," any personal or property damage arising out of that employee's actions will likely be the responsibility of the employer.