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Wage and Hour

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Classifying Workers as Contractors vs. W-2 Employees

An employer that pays a regular employee as a contractor may be subject to employment law fines and penalties in addition to tax liability for failure to withhold. 

Whether an employer classifies a worker as a contractor or a W-2 employee raises important wage and tax withholding issues.  Nonexempt W-2 employees are entitled to overtime and both exempt and nonexempt employees are entitled to minimum wage, meal and rest periods, and reimbursement of ordinary business expenses.  Employers have to pay half of W-2 employees' social security and medicare taxes (the "payroll tax"), while contractors pay 100% of these taxes.

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