The federal government, as well as many state agencies, have targeted 1099 contract workers and those who employ them. During the COVID 19 pandemic the government realized how many people were operating outside of the basic protections afforded to w2 employees by becoming 1099 contractors; a status that can offer greater flexibility but affords the contractor fewer protections such as unemployment and discrimination protections. Although neither the contractors, nor their employers, had paid into the Unemployment Insurance system for those workers, many were still afforded those unemployment paychecks to protect their families, their livelihoods, and, frankly, our economy as a whole.
As we are working our way through the COVID 19 crisis, renewed emphasis has been placed on ensuring that these folks are correctly categorized and UI taxes paid. The federal and state government agencies can use different tests to determine if your contract worker should be considered a w2 employee, and the penalties for misclassification are severe. Moreover, even internally the government isn't consistent with its findings as the DOL and IRS can have two different determinations for the same worker.
I would advise you to look at the appropriate federal and state tests to determine the proper categorization of the employee. Do they operate with autonomy? Are they free to apply their skills to other clients? Do they have their own LLC, insurance, and tax history demonstrating how they have, essentially, their own consultation services rather than report to work for one company, on their schedule, take direction, and perform as directed like a w2 employee would.
The IRS and DOL have been clear in expressing their mandate to move many workers from salary exempt to hourly non exempt, and ensure that the protections due w2 employees are being offered appropriately; no side-bar discussions with an unwary contractor offering a slightly higher rate in exchange for abandoning the protections of w2 status for 1099 contract work.
That said, if you can prove that your 1099 associate operates with the proper autonomy in providing a service to a client company, there is no reason why the duration of such an arrangement should be called into question. However, if your associate is doing the same or similar work to the client's employees, lacks the autonomy to complete their assignments at their discretion, and depends solely on the work for this client as the basis for their income, then the odds are that your 1099 associate will be reclassified under scrutiny from the DOL and IRS; and a hefty fine will be levied to drive the point home.
As inflation rises, corporate profits have skyrocketed; leaving the average worker with less buying power than before. Several agencies, including the IRS, DOL, and the judiciary, have renewed their commitments to support the covenants of the Fair Labor Standards Act; ensuring workers are compensated properly and enjoy the protections of employment law.