In Pennsylvania, misclassifying workers as independent contractors instead of employees can expose your business to serious legal, financial, and reputational risks. The state presumes most workers are employees unless you can show they’re genuinely independent. With penalties, back-pay liability, and increased regulatory scrutiny on the rise, every employer should review how they classify labor. This guide outlines what you need to know to get your house in order and reduce exposure before a claim or audit arises.
Why Worker Classification Matters for Pennsylvania Employers
Worker classification isn’t just a paperwork issue—it affects nearly every part of your employment relationship. When a worker is considered an employee under Pennsylvania law, your business is responsible for:
- Withholding income taxes
- Paying unemployment compensation (UC) and workers’ compensation premiums
- Covering minimum wage and overtime obligations
If you classify someone as an independent contractor but the law sees them as an employee, you could face claims for unpaid wages, benefits, taxes, and penalties. Misclassification also creates competitive disadvantages for law-abiding businesses—and Pennsylvania agencies have made enforcement a priority.
For employers in construction, hospitality, healthcare, and gig-economy roles, the risks are especially high. A misstep could trigger back-pay investigations, audits by the Department of Labor and Industry, or, worse, class-action litigation.
How Pennsylvania Determines Whether a Worker Is an Employee or Independent Contractor
Pennsylvania’s default position is that a worker providing services for pay is an employee unless the employer can prove otherwise. To classify someone as an independent contractor, you must satisfy both of these conditions:
- The worker is free from control and direction in the performance of their services, both under the contract and in fact.
- The worker is customarily engaged in an independently established trade, occupation, profession, or business.
For construction work, the Pennsylvania Construction Workplace Misclassification Act (Act 72) imposes even stricter requirements. Under this law, independent contractors in construction must:
- Have a written contract
- Be free from control
- Carry their own liability insurance
- Perform work outside the usual course of the employer’s business
In practice, the line between employee and contractor isn’t always clear. Ask yourself:
- Do you control how and when the work is done?
- Does the worker use your equipment?
- Are they paid by the job—or by the hour?
- Can they make a profit or suffer a loss based on their choices?
If you answer “yes” to the first few or “no” to the last one, the person is likely an employee.
What Penalties and Exposure Can Employers Face in Pennsylvania?
The consequences of misclassification go well beyond correcting a tax form. In Pennsylvania, employers may face:
- Civil penalties of up to $1,000 per misclassified worker for initial violations, and $2,500 for repeat offenses
- Back wages for unpaid overtime, benefits, or tax withholdings
- Unemployment and workers’ compensation contributions going back several years
- Criminal penalties in cases involving willful misclassification
- Reputational harm, including public investigations and private lawsuits
Even a small error can multiply quickly if multiple workers or years are involved. And if your company contracts with third-party labor or uses temporary workers, you’re still responsible for ensuring correct classification under state law.
How an Employment Law Attorney Can Help
At Kozloff Stoudt, we help Pennsylvania employers proactively address classification concerns before they become costly problems. Whether you’re managing a small team or overseeing a large operation with multiple contractors, we can help to protect your business from unnecessary exposure.
Here’s how we support employers throughout Berks County and beyond:
- Workforce classification reviews: We evaluate how your employees and independent contractors are currently structured and identify any potential misclassification risks.
- Contract review and drafting: We help ensure your independent contractor agreements reflect the level of autonomy required under Pennsylvania law.
- Policy development: We advise on internal practices that balance control over independent contractors with efficient business operations.
- Manager training and compliance guidance: We work with your leadership team to clarify the differences between employees and contractors and what to avoid in day-to-day oversight.
Audit preparation and legal representation: If you’ve received notice of an audit or complaint, we’ll help you respond clearly, comply with requests, and resolve issues strategically.
Misclassification issues often arise not from bad intent, but from outdated practices or unclear roles. We’re here to offer practical, legally sound advice that helps you stay compliant, protect your business, and focus on your long-term goals.
Local Considerations for Employers in Berks County and the Wyomissing Region
In Berks County, many employers operate in industries that rely on flexible or seasonal labor—construction, logistics, professional services, and small business contracting, among them. These businesses often use independent contractors for short-term jobs, which can increase the risk of misclassification if proper procedures aren’t followed.
If you’re unsure whether your job descriptions, project-based workers, or subcontractors are correctly classified, it’s worth having your structure reviewed. Local enforcement agencies may refer complaints to state-level investigators, and audits can happen with little notice.
At Kozloff Stoudt, we’ve worked with businesses across the Wyomissing region to implement classification policies that withstand scrutiny—before problems arise.
Getting It Right Protects Everyone
Employee misclassification can be a costly legal problem that affects your business operations, finances, and relationships with workers. Taking the time to classify your team correctly protects you from penalties, ensures fair treatment, and demonstrates your commitment to compliance.
If you’d like help evaluating your classification practices, revising contracts, or navigating a Pennsylvania audit, contact Kozloff Stoudt in Wyomissing. We help employers create strong foundations for the people they rely on every day.