There’s absolutely nothing wrong with hiring independent contractors. Many industries thrive because of them.
However, there is a problem with hiring an employee and misclassifying them as an independent contractor. The worker ends up being denied benefits that he or she needs, including overtime pay, unemployment, workers’ compensation and medical leave. As an employer, you can face heavy fines and other consequences with the Internal Revenue Service if you’re caught.
Most of the time, employers don’t set out to purposefully break the law. They just don’t quite understand the difference between an independent contractor and an employee. While you have to look at the totality of the situation, there are some important differences that you can use as a guide:
1. Does it matter that the worker has several employers? Most independent contractors work with several clients at once. You can only restrict an employee’s ability to work for others in your industry.
2. Who sets the worker’s hours? You can specify a deadline or make an agreement that will keep the independent contractor available at certain times, but he or she has to be relatively free to change the schedule or direct his or her own hours.
3. Who controls the work? The more you control how the work is done, where it is done and when it is done, the more likely it is that you have an employee and not an independent contractor. Independent contractors are relatively free to operate under their own direction, may work off-site if possible (depending on the nature of the work) and decide how they’re going to complete a project with relatively little direction from the client.
4. Does the worker have a specialized skill, education, experience or talent that is important to the project? If a job takes only general knowledge or ability to perform, you probably have an employee and not an independent contractor.
Many times, employers will confuse temporary help with an independent contractor. However, even if someone only works for you for a day, he or she may still be an employee if you are directing the work, controlling the hours and the job doesn’t take any special skills to perform.
For more information on this issue or other employment law concerns, contact an attorney for advice.
Source: Findlaw, “Being an Independent Contractor vs. Employee,” accessed May 10, 2017
