There is no such thing as a “1099-Employee.” It’s a misnomer. A person who works for a company is either an employee (in which case they’re paid pursuant to an IRS Form W-2), or they’re an independent contractor (in which case they’re paid using an IRS Form 1099).
Generally speaking, EMPLOYEES are subject to the direction and control of the employer, they can be disciplined, and they have to follow company rules. They receive a paycheck on a regular basis, their wages are reported to the state and federal government, and they’re usually eligible for benefits such as paid time off, medical insurance, and workers’ compensation. Employees can be at-will or have a defined employment term, and in many states, be subject to a non-competition agreement.
INDEPENDENT CONTRACTORS tend to be freelancers, consultants, self-employed workers, or sole proprietors. They provide their own tools, can simultaneously work for multiple clients or companies, and their engagement is short-term. They are not eligible for benefits. After providing discrete services, they present an invoice for payment. They are responsible for paying their own taxes and providing their own insurance.
The federal and state departments of labor have more detailed rules about this differentiation in order to protect employees from being misclassified. For questions on how you should categorize your workers, contact an RKW employment lawyer.
