Why Worker Classification Matters in Utah
If you run a small business in Utah and pay anyone to do work for you, you need to know the difference between an independent contractor and an employee. It’s not just about how you pay them—it affects your obligations for taxes, insurance, benefits, and even liability.
Misclassifying a worker can lead to serious consequences, including audits, back taxes, penalties, and lawsuits. And Utah is enforcing these rules more aggressively every year.
The Risks of Getting It Wrong
When a business misclassifies someone as an independent contractor, it usually means the company isn’t:
- Withholding or paying employment taxes
- Paying workers’ compensation premiums
- Covering unemployment insurance
- Complying with minimum wage, overtime, or break laws
If the Utah Labor Commission or IRS finds that a worker should have been classified as an employee, you may owe thousands in back pay, penalties, and interest.
The Legal Tests Used in Utah
There’s no single definition of “employee” versus “contractor.” Different agencies use slightly different tests, but in general, both state and federal law look at how much control the employer has.
Key factors include:
- Who sets the worker’s schedule?
- Does the worker use their own tools and equipment?
- Can the worker take other jobs or subcontract work?
- Is the work part of your business’s core function?
- Do you supervise how the work is done?
The more control you exercise, the more likely the person is legally considered an employee, even if you call them a contractor on paper.
Common Misconceptions
Some Utah business owners think they’re in the clear if:
- The worker signed a contractor agreement
- They pay the worker by project instead of hourly
- The worker agreed to be treated as a contractor
- The worker has an LLC or EIN
Unfortunately, none of those factors alone determine classification. Courts and agencies look at the reality of the relationship—not just the labels.
Best Practices to Avoid Misclassification
If you want to properly hire independent contractors, make sure:
- They operate their own business and invoice you
- You do not control how they complete the work
- They provide their own tools and resources
- You have a written agreement—but don’t rely on it alone
- You avoid assigning them a job title or integrating them into your staff
When in doubt, treat the worker as an employee until you get legal advice. It’s often safer to use payroll than risk an expensive reclassification later.
Final Thoughts
Misclassification might save money in the short term—but if you get audited or sued, it won’t feel like savings for long. The rules are complex, and the cost of getting it wrong can be steep.
If you’re unsure whether your workers are properly classified, or you need help drafting contractor agreements that hold up under scrutiny, Duckworth Legal Group can help.
Call (801) 882-7444 or email info@duckworthlegalgroup.com for a consultation before misclassification becomes your next legal headache.