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Independent Contractors Vs. Employees: The Wage And Hour Implications

Business owners in New York must understand the differences between employees and independent contractors, particularly when considering wage and hour laws and compliance. Many businesses employ a variety of people to fulfill their vision as a business, and these employees may be part-time, full-time, salaried, contractors, or other types of workers. In fact, it is common for businesses to hire both employees and contractors as both offer unique benefits to the company. However, these different classifications of workers require different levels of oversight and legal responsibility.

Wage and hour laws have stipulations for how employees should be paid for their labor, breaks and rest periods that must be provided, and how these workers should be paid for overtime and other factors. However, independent contractors are not strictly considered employees. As such, the regulations for contractors are different from those of employees. Understanding how to navigate these differences and provide a good employee experience to both types can help improve morale and boost the performance of the business, while also keeping employers out of legal trouble.

Speak with a skilled New York employment lawyer from Schwab & Gasparini today by calling the office at (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, (914) 304-4353 in White Plains, or (914) 304-4353 in Hudson Valley to schedule a consultation.

Understanding Employee Classification

Employee classification is a very important facet of running a business. Many companies find great benefit in large numbers of contractors, particularly in the marketing and construction spaces, while other business models benefit from the stability and dependability of employees. What distinguishes employees from contractors is their legal relationship with their employer and the control the employer has over their actions. Understanding the dynamic interactions of these two positions can help clarify how to avoid wage and hour violations in the future. 

Employees

Many people understand employees as workers who are subordinate to an employer and are registered for tax withholdings with a W-2 form. However, this is not the exact legal definition of an employee. According to the Internal Revenue Service, an employee is any worker whom the employer can contractually dictate what they will do and how they will do it. The level of control that an employer has over the employee is what defines this relationship, such as financial control or behavioral control. If an employer can dictate how a job is done by their workers, then these workers are considered employees and should be treated as such with wage and hour privileges. 

Independent Contractors

Independent contractors, on the other hand, are contractually obliged to provide a service to their employers. How this service is carried out is not for the employer to dictate, so long as the quality and timeliness of the service are as specified in the agreed-upon contract. Employees are hired to be a part of the business entity, receiving certain benefits and legal protections, whereas an independent contractor provides a specified service in a distinct business agreement. For example, a contracted plumber working for a construction company may be expected to have working plumbing on a building project by a specified date, but the employer cannot control how the contractor decides to install the plumbing. 

For more details on wage and hour concerns for employees and independent contractors, speak with an experienced employment law attorney from Schwab & Gasparini. 

Wage and Hour Considerations for Employee Classifications

In addition to many other differences, employees and independent contractors are legally entitled to different considerations under New York wage and hour laws. All workers in a company are entitled to some degree of protection and legal rights under their contracts, but the degree of this protection may vary between classifications. Employers should understand how these factors may influence running their business, as violation of these wage and hour standards could lead to legal action and other negative consequences. Additionally, businesses must be careful to avoid misclassifying employees and contractors. Misclassifying an employee could lead to wage and hour law violations that could be harmful for a business. 

Protections for Employees

Employees are generally a part of the larger company as per their contracts, which often entitle them to things like insurance benefits, tax withholdings, and other legal protections like workers’ compensation. However, wage and hour laws in particular are incredibly important to comply with. In New York, employees are entitled to a minimum wage depending on their sector of work, which may be higher in metropolitan areas as opposed to elsewhere in the state. Employees are also entitled to overtime pay, spread pay, and potentially holiday pay. These workers may also require regular rest and meal breaks for a certain number of hours worked. 

Protections for Independent Contractors

Independent contractors are generally not considered a part of the company's legal entity, and as such are often entitled to fewer protections and benefits. The actual details of what rights a contractor is entitled to are often detailed in the worker’s contract. For example, while a standard employee is entitled to overtime pay if they work more than forty hours in a workweek, a contractor is not unless their contract specifies this. While the contractor may be entitled to some minimal benefits, such as minimum wage requirements and other FLSA benefits and protections, these are often not nearly as extensive as those provided to employees. 

Dangers of Misclassifying Employees

The New York Department of Labor says that it is fraudulent for an employer to misclassify their employees as contractors to avoid providing the specified benefits. While some unscrupulous employers may misclassify their employees intentionally with misleading tax documents and contracts, some may accidentally misclassify their employees without realizing it. This is because employees are not classified by their tax documents, but by the control that an employer has over their work. If an employer is exercising behavioral and directional control over the work the individual is doing, that worker may be considered an employee and have a right to benefits. 

Contact a New York Employment Lawyer Today

New York wage and hour laws can be difficult to understand, particularly for growing businesses with many employees and independent contractors. However, the consequences for violating these statutes can be severe, leading to loss of reputation and financial damages for the company. This is why effectively classifying and providing benefits to workers is so important for employers to understand. Fortunately, a seasoned New York employment law attorney from Schwab & Gasparini can help business owners comply with wage and hour laws. Schedule a consultation by calling the Syracuse Office at (315) 422-1333, the Albany Office at (518) 591-4664, the White Plains Office at (914) 304-4353, or the Hudson Valley Office at (914) 304-4353.

Mon Nov 17 2025, 12:00am