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Nebusa Inc. is a consulting firm. Sam and Arnie are analysts for Nebusa. Sam was hired as an employee, and Arnie was hired as an independent contractor. They both work five days a week during standard business hours in the same Nebusa office and under the same supervisor. Both almost share the same job responsibilities. Sam is paid a salary and the required federal and state tax withholdings are also made by the company. In contrast, Arnie is paid by the project with no federal and state withholdings and does not even receive benefits such as retirement and health insurance. Which of the following is an implication of this scenario? Explain your answer choice.
A) Nebusa has properly classified Arnie as an independent contractor.
B) Nebusa has willfully misclassified Arnie as an independent contractor and is liable under Fair Labor Standards Act of 1938.
C) Nebusa has no rights to withhold federal and state taxes for Sam if he is classified as a full-time employee.
D) Nebusa has to provide more health and retirement benefits to Arnie than Sam because Arnie is an independent contractor.
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