Independent Contractor or Employee?

Why the distinction is important:

Misclassifying a worker as an independent contractor instead of as an employee will result in the underwithholding of taxes, underpayment of taxes, and improper reporting of tax payments. Baylor as an employer is responsible for withholding federal income taxes, paying and withholding social security and Medicare taxes and reporting of taxes for its employees. Failure to adhere to these tax obligations due to worker misclassification will result Baylor owing these taxes plus the payment of penalties and interest.

Additionally, Baylor has state and federal wage payment and reporting requirements (e.g., minimum wage payments, overtime pay, hourly reporting, etc.) for its employees. Failure to properly categorize a worker can result in the underpayment of wages leading to additional compensation owed and further penalties and interest.

Other areas of exposure that exist for misclassification are workers’ compensation, health care and retirement obligations.

Thus, it is critical that Baylor properly determine whether a worker providing services to the University is an employee or an independent contractor. For more information on the evaluation to determine whether an individual is an employee or an independent contractor, please visit the Baylor Tax & Compliance website.

For assistance with drafting agreements and clarifying the relationship between Baylor and an independent contractor, please contact the Director of Contract Administration.