What are the key characteristics of an independent contractor? To a business owner, it seems clear: you have the person fill out a W-9, you ask them to go do the work – whatever it is – and you pay them when it is done.
More and more though, the relationship of businesses and independent contractors is being scrutinized. Part of this is regulatory – with national healthcare legislation businesses with more than 50 employees will have to meet certain requirements. But if 49 of those employees are “contractors,” what happens then? Another driving force is financial. States and the federal government think it is easier to collect taxes from the business owner, not the individual.
So you have Mary, who works for you from time to time. She does some filing, the copying and this and that around the office. She doesn’t have a set schedule and isn’t there on set days. You generally pay her every other week, along with your other “employees.”
Some factors to consider when deciding if Mary is an independent contractor or an employee:
- Is there a contract or agreement in place defining the relationship between Mary and the business?
- Is Mary in the general business, either as an LLC or as a doing-business-as, of assisting other businesses with general office tasks? Does she do similar work for other businesses?
- Does the business tell Mary when and where to be, or does Mary decide when and how she will work?
- Does the business keep an assigned work space for Mary?
- Does Mary receive paid holidays?
The general question to consider is whether the business has control over Mary. If there is a set schedule and a set place to work the business could actually be employing Mary. On the other hand, if the business has a written agreement with Mary outlining the scope of work and detailing the amount of money Mary will be paid for the work, the business may be able to legitimately argue that Mary is an independent contractor and not an employee.
Do you hire independent contractors? Is there an agreement in place? If not, you should consider using one.
(c) KJD Legal