Running a business means making important decisions every day. Some choices have immediate consequences, while others won't seem significant until months or even years later. Employment classification is one of those decisions. Whether a worker is classified as an employee or an independent contractor, or whether an employee qualifies as exempt or nonexempt, affects everything from payroll taxes to overtime pay. Many business owners don't intentionally classify workers incorrectly. Laws change, job duties evolve, and positions often grow beyond their original descriptions. Even an honest mistake, however, can expose a company to financial penalties and legal claims. Recognizing these risks early can help you avoid costly problems later.