The guy who came to fix your cable box: Employee or independent contractor? The package delivery agent running up your sidewalk: Employee or independent contractor? The beautician at your salon: Employee or independent contractor?

It can be hard to tell. The distinction is important because employers’ labor costs are substantially lower for contract employees, giving employers a powerful incentive to misclassify employees. Now the Obama administration intends to crack down on that practice. With the goal of claiming an estimated $2.72 billion a year in unpaid Social Security, unemployment insurance and income taxes from both employers and workers — as well as protecting workers’ rights — enforcers are charging out of the gate.

And hitting a stumbling block: Just who are the estimated one in five U.S. workers who are independent contractors? Donald Main didn’t think he was.

 The Kansas City area resident, who temporarily drove his car for the 7/A Luxury Transportation service, thought he was an employee. So when he wasn’t paid as he expected, he called the Labor Department’s Wage and Hour Division, the Internal Revenue Service and Legal Aid. He said all told him that he was an independent contractor. If he wanted to get paid, he’d have to sue the employer in small-claims court. “I was surprised I didn’t have an employee’s rights,” said Main, who subsequently got paid without filing suit.

Main’s confusion is shared by many. The Fair Labor Standards Act, the basis of American wage and hour law, along with years of judicial opinions, regulatory opinions and IRS rules, has yet to produce a clear distinction between who is an employee and who is an independent contractor. “It is a tricky area,” acknowledged James Koren, district director of the Wage and Hour Division in Kansas City, Kan. The Labor Department has estimated that up to one-third of U.S. employers are incorrectly classifying as least one employee — some by intent, others in error. ( please click on link to read full story)