Final answer:
It is true that both an employer and employee violate the law if they knowingly engage in misclassification, where an employee is treated as a contract laborer. This affects tax liabilities, eligibility for benefits, and protection under labor laws.
Step-by-step explanation:
The statement that knowingly working as an employee while the company treats you as a contract laborer constitutes a violation of the law is true. Misclassification of employees can have serious legal implications because it affects tax liabilities, eligibility for benefits, and protection under labor laws.
Employment laws require employers to classify workers appropriately and for workers to disclose their working status accurately. This includes abiding by contracts that outline the terms of employment, responsibilities, and the rights of both parties.
For instance, under laws related to immigration and employment, such as the Immigration Reform and Control Act, it's illegal to knowingly hire or recruit unauthorized workers, and employers must verify an employee's right to work in the country.
Such regulations are intended to prevent situations like debt bondage that can occur when contract laborers buy goods from an employer-owned store, among other scenarios. Moreover, amendments and acts throughout history have been established to protect various aspects of workers' rights.