This question becomes more important, as New York and the federal Government are increasing their enforcement actions to root out employers who misclassify their workers as independent contractors. Don’t wait with an answer until the Task Force on Employee Misclassification comes knocking at your door.
Sure, it’s nice to just 1099 everybody and save on unemployment insurance, workers’ compensation, social security and don’t have to deal with tax withholding and minimum wage and overtime laws that protect workers. But before you do so, be reasonably certain that you are allowed to do so. I say “reasonably”, because unfortunately it’s kind of a murky area.
See here for IRS guidance on the subject, a guide by the New York Department of Labor and a recent article by Matthew B. Hayes (Mislabeling of Employees As Independent Contractors Becomes A Focal Point For Employer Liability.
Is Your Business Safe?).