Many small businesses have to squeeze down costs any way they can just to survive. One way many businesses do this is by hiring workers as Solution The independent contractor is hurt in the following ways: 1. Works like an employee in almost every aspect except a legal employment contract and hence cannot receive employment benefits like pension, housing perks, promotions, regular increment, etc. 2. Has to pay more tax as they are now subject to self-employment tax. 3. Moral issue on account of filing of income tax i.e. even though they are aware about the 20 factor test and they can be termed as employees, they have to file a return as independent contractors. 4. May face problems in job switching as they are not on payroll of any organisation but only a contractor. If a business takes an aggressive position and interprets the law in a very slanted way, it is not very ethical. They are taking away the benefits of their employees by naming them as Individual Contractors and at the same time they are falsely stating it in the income tax returns. Doing this will definitely hurt the independent contractors as stated above but it will also hurt the business through the following ways: 1. Goodwill among the society 2. Poor efficiency by contractors / employees 3. Income tax audits, fines and penalties, etc. can be levied at a future date. .