One American company was working on a fulltime basis with an IT freelancer in Slovakia for approximately three years. The American HR director decided to contact Acumen International to employ this freelancer. The HR director feared that would risk an employee / independent IT contractor misclassification case sometime in the future.
We provided an offer to employ the Slovakian freelancer. However, the US finance department did not approve our proposal since it was higher than what they were currently paying the freelancer. An employee misclassification case did not seem imminent, so they decided not to act.
Half a year later the same company contacted us to employ the Slovakian freelancer. Our offer got approved but the freelancer refused to sign our employment agreement. In this half year, the relationship between the freelancer and the US company went sour. The freelancer decided to go to the labor authorities instead.
The US company had to register their own legal entity in Slovakia due to employee misclassification. We never heard the ultimate verdict but from communication with the HR director we understood that they risked paying the due social security taxes, vacation, severance payment and additional fines. The total claimed amount was approximately 70.000 EUR.