Many entrepreneurs today are well familiar with the principles of a lean startup. In a nutshell, they are guiding ideas on how startups can operate with much less waste. But over the years, what was really a theory on how to quickly build products that would be accepted in the marketplace became a practice on how to create entrepreneurial organizations with minimal financial investment. "Bootstrapping" and "working on a shoestring" have become synonymous.
Operating as leanly as possible makes much sense to most entrepreneurs--especially those who have not yet been funded. Many startups will leverage free and inexpensive services and technology to cut costs, and others will forgo hiring employees and instead rely on contractors to perform much of the work. While the latter may seem like a wise approach to building a lean organization, there is growing risk in that model. There are fundamental legal differences between a contractor and an employee, and startups fueled by the work of contractors need to be aware that government (state and federal) are cracking down on organizations that are intentionally or inadvertently violating labor laws.
Workforce magazine refers to the misclassification of employees as independent contractors as "the topic du jour in employment law." According to the U.S. Labor Department's Wage and Hour Division's formal interpretation of the federal Fair Labor Standards Act, “Misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States, in part reflecting larger restructuring of business organizations." The government advisory concludes, "In sum, most workers are employees under the [federal law's] broad definitions."