The Conversations with a Business Attorney podcast is your legal guide to navigating the challenges and opportunities that arise throughout the life cycle of a business. Jeff Large, a start-up business owner, explores topics such as operator agreements, employee retention, and the value of protecting your company with Rhoades McKee Attorneys. Don’t get lost, listen and learn.

Mark Smith, a business and employment attorney at Rhoades McKee, demystifies employee classification.

In This Episode You’ll Learn:

  1. When it is appropriate to classify someone as a contractor versus as an employee
  2. Tips for categorizing a new position
  3. Issues that may arise when incorrectly categorizing a job

The main two factors to consider when classifying a new hire as an employee or a contractor are related to control:

[6:15] “The first two that I talked about weigh the heaviest – and that is, the nature and degree of control over the work and the ability to control whether profit or loss arises from the work.”

Mark acknowledges that the decision is often determined on a case-by-case basis, but there are guidelines to help streamline the process. For example, the more control the business has over the work, the more likely that person is an employee.

When discussing the potential consequences of misclassifying, Mark discusses why companies have abused the employee-contractor relationship. He also highlights the legal regulations that are set in place. Seeking counsel when writing the job description and before hiring is a great way to mitigate your risk of misclassification.

The relationship between the business and the potential employee is key to understanding the correct categorization. But categorizations go beyond just employee and contractor. Mark breaks down the types of employee classifications and the regulations that decide which roles are salaried exempt and which are part-time.

There are pros and cons for each categorization, and Mark’s wisdom equips business owners with proactive steps for hiring strategically and classifying roles correctly.

Click here to read the transcript of the full interview for Episode 5.


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