What do I need to know about working with Independent Contractors?

Once you’ve correctly identified that the person you are working with is properly classified as an independent contractor, it’s important to memorialize your independent contractor agreement in writing.  Be careful however, sometimes an independent contractor agreement can have certain terms that actually designate the worker as an employee rather than an independent contractor, thereby converting your independent contractor agreement to an employment agreement.  

We actually just had a client come to us where he hired an independent contractor to act as his receptionist.  The receptionist had formed her own company and together they engaged into a signed independent contractor agreement.  This independent contractor agreement however, had language that allowed the independent contractor to have vacation days.  This switched the arrangement between what was intended to be an independent contractor to an employee-employer relationship.

Additionally, we had another matter where the employee came to the employer and asked to be classified as an independent contractor.  The business owner agreed and then was sued by the employee for misclassification.  Unfortunately for our client, it’s not the best defense to say the employee asked for it.

When a misclassification occurs, the business owner must pay the worker for all time they’ve worked over the last several years as an employee, the business owner owes back employment tax and possibly overtime.  Additionally, civil penalties can range from $5,000-$25,000 per penalty for each violation.  Not only are their monetary damages for misclassification, a court can order the business owner to post on their website for all employees and the general public to see, that they’ve engaged in this type of behavior – misclassification. 

If you have questions when engaging an independent contractor run this by your attorney and document everything.  For a complete list of factors to consider when determining whether a worker should be classified as an employee or independent contractor, email me at Cindy@HacklerFlynnLaw.com and I’ll send you the list.