There are two types of employees – "exempt" and "nonexempt." An exempt employee is not entitled to overtime pay and other protections according to the Fair Labor Standards Act (FLSA). Nonexempt employees must be paid minimum wage, overtime, and provided breaks and are protected by the rules of the FLSA.
You probably know that it costs less to use an independent contractor than to have an employee on staff. The reason: the cost of payroll taxes, along with insurance and benefits, apply only to employees. But don’t think you can simply reclassify a worker who’s been your employee as an independent contractor. The IRS, as well as other government agencies, are on the lookout for just such action.