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8 min read

How AI and Data Labelers Can Avoid Contractor Misclassification Risks

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Author

Jemima Owen-Jones

Last Update

July 04, 2025

Table of Contents

Why worker misclassification matters

How Deel helps tech companies hire, classify, and manage contractors compliantly

Avoid contractor misclassification with Deel

When managing a rapidly scaling tech company, it often makes sense to prioritize flexibility by hiring contractors—but recent headlines, like the Department of Labor’s plans to investigate Scale AI and Surge AI for misclassification, show how risky hiring contractors can be.

Misclassifying workers as contractors doesn’t just threaten your compliance; it can lead to costly legal penalties, reputational damage, and unwanted scrutiny from regulatory authorities.

At Deel, we understand these industry pain points because we support hundreds of tech companies across 150+ markets in navigating exactly this challenge. Our AI-driven classification tool and robust compliance monitoring are built for global employers who depend on agile talent but can’t afford to stumble over labor law.

In this post, we’ll break down how Deel’s Contractor and Contractor of Record solutions empower you to hire, classify, and manage your contingent workforce—confidently and compliantly, no matter how quickly you scale.

With expertise honed across ever-changing legal landscapes and local complexities, Deel customers consistently reduce compliance burdens and eliminate manual headaches, safeguarding their growth while building a workforce that’s truly future-ready.

Why worker misclassification matters

Misclassification occurs when workers who meet the criteria to be considered full-time employees are instead labeled as independent contractors. This practice, often illegal, is costly and damaging.

Hiring companies face fines for tax and labor law violations, while governments lose tax revenue and worry about fair worker treatment. For companies, the fallout includes potential investigations, costly penalties, and reputational harm.

Tech companies want flexibility—a contingent workforce that can scale up or down as projects demand. Governments want to ensure workers receive the rights and protections they deserve, and that all taxes are properly paid. Balancing these competing needs is complex.

See also: Employee misclassification penalties: Examples and protections

Global Hiring Toolkit
Misclassification Assessment
Mitigate worker misclassification risks using our combo of AI and award-winning research into employment court cases.

How Deel helps tech companies hire, classify, and manage contractors compliantly

Deel offers a comprehensive approach to these challenges, designed specifically to support AI and data labeling companies in building compliant workforces:

  • Accurate worker classification: Deel’s AI-powered classification tool uses the latest local case law to assess your workforce with 90% accuracy. Just answer a few questions to identify which workers should be classified as employees or contractors, reducing compliance risk
  • Compliant independent contractor agreements: Generate, send, and sign legally compliant contracts in over 150 countries within seconds. Deel ensures all agreements and documents meet local laws and regulations, helping you avoid costly errors
  • Stay ahead of changing laws: The Deel Compliance Monitor tracks updates in labor and tax laws worldwide, flags risks, and provides recommended actions, so you can fix issues before they escalate

Deel Contractor of Record gave us peace of mind when hiring people as contractors in any part of the world. I don’t have to worry anymore about compliance, it feels much safer.

—Chloe Riesenberg,

People Specialist at Project44

Continuous Compliance™
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Keep your finger on the pulse of global compliance issues like never before. Our Compliance Hub provides access to the latest regulatory updates and risk warnings, offering guidance and actionable alerts to enhance compliance—all in a single place.

Two options for managing your workforce

  1. Deel Contractor: A contractor management platform to classify workers correctly, create compliant contracts, automate payments, and access HR tools. Features include invoice automation, flexible payment options, and the Deel Card for convenient spending.
  2. Deel Contractor of Record: For organizations seeking to reduce liability from misclassification, Deel acts as the Agent of Record, taking on hiring responsibilities. This option includes rapid international onboarding, automated invoicing, and HRIS integrations, with Deel managing hiring, contracts, and compliance on your behalf.

With either solution, you gain access to Deel’s full people platform, which helps you:

  • Automate onboarding, reducing manual work and onboarding time by over 50%. Quickly run background checks, provision equipment, and send onboarding emails in just a few clicks
  • Manage day-to-day HR with a self-serve platform where workers can upload documents, track payments, request time off, and get tax support
  • Convert contractors to employees easily in 100+ countries through Deel’s Employer of Record services or via your own entity

We can consolidate more than 20 invoices at a time and make the payment at once, so it saves us a lot of administration time and money on swift transfers.

—Jay Choi,

CEO of Supercoder

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Avoid contractor misclassification with Deel

Tech companies working with AI and data labeling contractors face a delicate balance between workforce flexibility and legal compliance. Misclassification risks are real and costly. Deel’s contractor hiring and management solutions provide a clear path to compliant worker classification, helping companies avoid legal challenges and build trusted, agile teams worldwide.

To see how Deel can help you build a compliant contingent workforce, book a demo today.

Before Deel, hiring and paying our global team was an ordeal. Now for our hundreds of contractors we can manage contracts, compliance and payments all in one place. Deel’s changed the remote hiring world for us.

—Jonathan Siddharth,

CEO of Turing

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About the author

Jemima is a nomadic writer, journalist, and digital marketer with a decade of experience crafting compelling B2B content for a global audience. She is a strong advocate for equal opportunities and is dedicated to shaping the future of work. At Deel, she specializes in thought-leadership content covering global mobility, cross-border compliance, and workplace culture topics.

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