So what is worker classification?

Worker classification is the process of determining whether someone should legally be treated as an employee or an independent contractor. Sounds simple enough — but it’s not.

It’s not based on what you call the role, or whether you want them on payroll. It’s based on how the person actually works and what the law says in the region they’re working in.

That includes things like:

• How much control you have over their hours or workflow

• Whether they can work for other clients

• If they use your tools and systems

• How central their work is to your business

And every country (and in some cases, every state) has its own tests to determine the correct classification. You might think you’ve hired a contractor — but if they work like an employee, the government might disagree.

Why it matters more than ever

In a globally distributed world, these lines get blurry — fast. Startups and scaling teams hire contractors to move faster, skip red tape, and avoid the overhead of onboarding full-time employees. And in many cases, that works — if the classification is correct.

But as remote work has become the norm, tax authorities and labor agencies are paying closer attention. And when they find a misclassified worker, the consequences are real:

• Unpaid taxes

• Backdated benefits

• Fines and penalties (per worker)

• Legal settlements or class actions

• Reputational damage

• Even personal liability for company directors in some regions
  
  

What companies get wrong

The most common mistake? Assuming that just because a worker is part-time, remote, or outside the country — they must be a contractor.

But that’s not how classification works. You can have full-time contractors. You can have part-time employees. You can even have someone in a different country who still legally qualifies as an employee under local labor laws. What matters isn’t how you define the relationship. It’s how the law sees it.

And that’s where things get tricky — because the rules are complex, inconsistent, and often unclear to non-lawyers.

8 public examples of misclassification gone wrong

If you think this is just a compliance detail, here’s some perspective:

These companies all got worker classification wrong — and paid the price.

• Nike

  • Potential fines: $530 million

  • Thousands of “temporary” workers were classified as contractors across four countries. Authorities found they should have been employees, creating a massive compliance exposure. Read more →
    
    

• Romero Remodeling

  • Fine: $144,000

  • Hired 192 workers as independent contractors on construction jobs in Pennsylvania. The Department of Labor fined the company for misclassification violations. Read more →
    
    

• Force Corp & AB Construction

  • Penalty: $2.36 million

  • Found to have misclassified dozens of construction workers in Massachusetts. Required to pay back wages and damages. Read more →
    
    

• Midwest logistics firm

  • Settlement: $2.1 million

  • After nearly 10 years of litigation over contractor misclassification, the company agreed to a multi-million dollar settlement. Read more →
    
    

• East Coast transport company

  • Settlement: $5.75 million

  • Long-running classification case involving drivers who were misclassified as independent contractors. Read more →
    
    

• Drywall company (Pennsylvania)

  • Fine: $32,250

  • Misclassified 43 workers as contractors. Read more →

The pattern is clear: it’s easy to get this wrong. And expensive to clean up.

So how do you get it right?

That’s why we built Plane’s Worker Classification Tool — a fast, simple way to figure out whether your next hire should be a contractor or employee.

Here’s how it works:

1. You answer a short set of questions about the role

2. We analyze risk factors based on legal frameworks

3. You get a clear classification recommendation — and why it matters

It’s designed to help HR, People Ops, Finance, and hiring managers move faster, with confidence that they’re making the right call.

No spreadsheets. No blind guesswork. Just clarity.

Before you onboard that next contractor or employee…

Run them through the classification tool. It takes less than 3 minutes — and could save you months of legal cleanup.

In a world where one misclassified worker can trigger a lawsuit, an audit, or a multi-million dollar penalty… Checking first is just smart business.

Try the worker classification tool now →