That's a commonly prosecuted source of tax fraud. If someone works like an employee (how and when they do their work is dictated by a manager, etc), the IRS says they are an employee. Microsoft was famously dinged for this a few years back.
Ahh! You just enlightened me as to why my manager (I'm a contractor) hardly ever talks to us. He's maintaining a hands off non-management management style. Which is kind of OK, but surprisingly disappointing.
If the company you work for provides office space, equipment, and sets your hours, you may be able to force them to pay for half your social security tax, etc. It's a fuzzy line between employee and contractor.
