In order to determine your worker's classification, you'll need to analyze the job according to Federal requirements and according to your states' labor law test. Once you have correctly determined your worker's status, you will have to pay him or her accordingly.
Generally speaking, employees are afforded much more labor protections according to the law. The same cannot be said for independent contractors. Employees are entitled to unemployment benefits, worker's compensation, and workplace rights such as overtime, sick pay, breaks. In addition, you, as the employer, will have to pay part of your employee's payroll tax, social security contribution, and Medicare.
Independent contractors, on the other hand, are paid a lump sum for their work, meaning no income tax or employment taxes are withheld. Instead, independent contractors report their earnings on a 1099. They are not given any benefits, and their employer doesn't pay any part of their federal taxes.
The two main tests used by the IRS and some states to determine worker classification are the Common Law Test and the ABC test.