Classifying Workers as Non-Employees – Intern, Volunteer or Contractor – Is Risky

By Mary E. Drobka
10.21.09

We are often asked, “Is it OK not to pay ourselves until we obtain funding?” or “I don’t have to pay someone who wants to volunteer for my company just for the experience, right?” We’ve also been told, “I don’t have to worry about overtime, payroll taxes or benefits because I only use contractors!” Each assumption is risky.

Considering the advantages, disadvantages and consequences of how you classify workers is critical for emerging companies striving to hold down start-up costs. But any company hoping to manage compensation outlays must also be aware of the risks involved when classifying someone other than as an employee. The money you think you may be saving can all be lost, and additional costs and penalties incurred, if you don’t classify workers correctly from the start.

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About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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