What happens if an overseas contractor gets held a de facto employee?
If a US court or the IRS holds a purported US independent contractor was a de facto employee, liabilities of the principal/employer are mostly contained to six categories: • Back tax withholdings • Back social security contributions • Back unemployment/workers compensation insurance • Back overtime (for non-exempt positions) • Back benefits due under the terms of certain employer plans • Interest and penalties Abroad, though, when an independent contractor gets mischaracterized, liabilities can run much higher, because outside the US there is no employment-at-will. Engaging an overseas independent contractor whom local law deems an employee subjects a multinational to liabilities on these same six grounds as in the US — plus on four potentially more expensive grounds: • Back vacation and back holidays • Back mandatory benefits like profit sharing, thirteenth-month pay, mandatory bonuses and payments to state housing funds and state-mandated personal unemployment funds • Severance pay,
