The Team - Employee & Consultants

Difference between consultants and employees

 A consultant (also called an independent contractor) is an expert in a particular field who is in the business of providing companies with his or her professional services. Consultants generally set their own hours, use their own equipment (e.g., as opposed to a company-issued laptop) and are not subject to the direction or control of the company to which they provide services. Every state has its own rules to determine whether a person is an employee or a consultant. In Massachusetts, for example, a consultant must perform services that are “outside the usual course of business” of a company. It is extremely difficult for an individual to satisfy the stringent tests to be properly classified as a consultant in Massachusetts (and some other states as well), and there is a presumption that any person who provides services to another is an employee. If these factors (and others showing a consultant’s independence) are not satisfied, an individual will be deemed an employee.

Startup companies often try to classify workers as consultants, because there is generally no requirement that consultants be paid minimum wages under federal and state laws, be covered by unemployment and workers’ compensation insurance, etc. However, there are significant legal ramifications to misclassifying an employee as a consultant. For example, if the state determines that the person was really an employee and the company has not been paying the person the required minimum wages, the state can force those wages to be paid, and in many states, can impose significant penalties—often on the officers of the company personally.