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There's the story about a developer who outsourced his work to China so that he could browse reddit:

Doesn't the IRS view that if you cannot substitute labour, then you are not a contractor?

(Couldn't find the same simple checklist on irs.gov).

So it seems quite within his rights to outsource, no? Unless there's some clearance restriction or I'm just misunderstanding these guidelines?

He FedEx'ed his rotating RSA key fob to China. The Chinese worker used it to access the company network daily for 6 months.

I imagine the company could press some heavy charges if it wanted to.