Glossary
What is worker misclassification?
Also known as: Employee misclassification, Contractor misclassification.
Worker misclassification is engaging someone as an independent contractor when the working relationship actually meets the legal test for employment, which can leave the company liable for back taxes, unpaid benefits, penalties and reclassification.
The label on a contract does not settle the question. Authorities look at the substance of the relationship, control, dependence, how integral the person is to the business, and can rule that a contractor is in truth an employee, with the duties that follow.
The tests and the consequences differ by country, so classification is a decision to make deliberately rather than by default. Capstan keeps employees and contractors in one record but draws the distinction clearly; where the line sits is a legal judgement, not a setting.
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