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There are significant differences in classifying a 1099 or a W2 worker to the IRS. Per the IRS, there are 3 factors that come into play when considering which category the worker falls: 

1.)   Behavioral, Financial and the Type of Relationship.  The key is to look at the entire relationship, consider the extent of direction and control of the work being performed and to document each of the factors used in coming up with the classification.  

2.)  Be sure your workers meet the criteria you classify them in and you have a reasonable basis for doing so or you may be held liable for employment taxes for that worker.  

3.)  The Treasury Department states that employers nationwide misclassify millions of workers as independent contractors instead of employees, thus avoiding having to pay employment taxes.  

4.)  Please do not forget the misclassified worker has options to remedy the situation, including reparations for back pay and additional fines and penalties that can be imposed.

As required by the Fair Labor Standards Act (FLSA) specific criteria qualifies an employee for each status:  

1.)  Non-exempt employees must be paid 1.5 times their hourly wage for all work performed over 40 hours per week.

2.)  Exempt employees must meet established criteria of earning at least $455 per week and perform executive, administrative or professional duties. 

3.)  Always remember that it is the tasks performed at the job, not the job title that determines exempt vs non-exempt status.

4.)  Misclassifying an employee can result in reparations of back pay for the employee and fines and penalties for the employer if not done properly.  

The Federal Department of Labor does not require your organization to have a handbook, but they do require you to inform employees of their rights. Having an employee handbook or policy and procedure manual is good business practice because even one employee can cause you problems. All employees want to know rules of the organization, and in my experience most new hires read the handbook on their first day of employment.  The handbooks consistent messaging informs its employees about acceptable and unacceptable behaviors and the course of action that will be taken employees stray from the guidelines  and can help reduce the threat of lawsuits if the handbook procedures are followed.  

This is especially true in today chaotic business environment where over-communicating with your employees is becoming the new normal due to the current COVID 19 pandemic.  In today’s uncertain times having your company mission, vision, values, expectations and policies and procedures in writing can clarify assumptions that previously existed and shore up new policies such as working from home and leave.  Believe it or not, your employees will thank you for it.

Per Wikipedia:  At-will employment is a term used in US labor law for contractual relationships in which an employee can be dismissed by an employer for any reason without having to establish “just cause” for termination and without warning as long as the reason is not illegal such as terminating for race, sex, religion, etc.

However, that does not mean your State Department of Labor, the EEOC, an attorney, or anyone else the employee can talk to will see it that way, so be extremely cautious when using “at will” as a termination reason.