The BIG risk of misclassifying employees as independent contractors

A national auto parts distributor has reached a settlement with the Department of Labor to pay a total of $5.6 million in back pay and liquidated damages (plus interest) to 1,398 drivers misclassified as independent contractors. The payments to the individual drivers are as low as $40 and as high as more than $120,000.

Can you afford to make a substantial payment of unpaid overtime to a group of misclassified employees (not to mention other potential liability for benefits not provided and payroll taxes not withheld)? If not — and most businesses cannot — follow my mantra: unless it's abundantly clear that your worker is an independent contractor, the safest course of action is to classify them as an employee. The risks of misclassification are just too great to mess around.