Placing workers in the US

Misclassification

The risk of misclassification on US placements of independent contractors is a significant concern. Misclassification occurs when workers are incorrectly classified, for instance, where a 1099 independent contractor has been working (and paid) as an independent contractor but should actually be classified as an employee (W-2 worker). This concept is similar to the issue relating to the placement of contractors working through personal service companies in the UK (“Outside IR35”), who should actually be working Inside IR35.

Misclassification can result in significant legal and financial consequences, including penalties, back taxes, and potentially even lawsuits. UK recruiters placing workers in the US must therefore navigate the complex criteria used to determine worker classification, including factors such as control over work, financial arrangements, and the nature of the working relationship to avoid the risk of misclassification.