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Classifying an employee as an independent contractor is a mistake far too many business owners and managers make. If you make this mistake, intentionally or not, penalties can be steep.

Just because an employer wants to hire someone as an independent contractor (a.k.a. a 1099 employee), it doesn’t mean they can. There are federal and state rules and requirements that employers must follow in order to be compliant.

To help better understand the difference between an employee and independent contractor, and to protect yourself and your business, review the graphic below and/or be sure to familiarize yourself with the U.S. Department of Labor’s State Rules.