New York uses a strict test that looks at how much control you have over the worker and whether they’re doing work that’s central to your business. If you’re telling someone when to work, where to work, and how to do the job—they’re probably an employee, not a contractor. If they’re using your equipment, working exclusively for you, and don’t have their own independent business, that points toward employee status.
The consequences of getting this wrong are serious. You could owe back taxes, unemployment insurance, workers’ compensation premiums, and penalties. The state can audit you going back several years. Nationally, misclassification costs small businesses $1.2 billion annually in fines and back taxes—and New York is particularly aggressive about enforcement.
Here’s what typically indicates someone should be classified as an employee: they work set hours you determine, they don’t have the freedom to refuse assignments, they’re not offering the same services to other businesses, and you’re providing training or equipment. If you’re deducting their expenses or providing benefits, that’s another strong indicator of employee status.
Independent contractors, on the other hand, typically have their own business entity, work for multiple clients, set their own schedules, use their own tools, and have specialized skills you’re hiring for a specific project. They should be sending you invoices, not filling out timesheets.
If you’re not sure which category your workers fall into, talk to a small business attorney in North Wantagh before the state decides for you. It’s much cheaper to reclassify workers proactively than to deal with an audit and penalties after the fact.