Is Your Contractor a Stealth Employee?

Did you know that even if you hire someone as a contractor, they may still be classified as an employee? Who cares right?

Well, this is something that can have real consequences for your company, including owing social security, medicare, back wages, overtime pay, vacation and holiday time, sick pay, unemployment taxes, and workers compensation insurance. It’s not a good mess to get caught up in.

Here are a few things you can do to keep your contractor in the right camp:

  1. Avoid providing supervision or direction to the contractor. Rather, provide clear project specifications where the methods and delivery are left to the discretion of the contractor.
  2. Avoid providing the contractor with training or methods to accomplish the job.
  3. Avoid the job having permanence or regularity.
  4. Allow the contractor to sub-contract or hire assistants without your approval.
  5. Allow the contractor to set their own hours.
  6. Allow the contractor to provide the work on a non-exclusive basis.
  7. Allow the contractor to determine the location to perform the job.
  8. Avoid providing equipment for the contractor to perform.
  9. Avoid paying for the contractor’s business expenses.
  10. Avoid an at-will relationship where the company can fire the contractor at any time without consequences to the company.
  11. Have a well-drafted agreement between you and the contractor that acknowledges the status as independent contractor.

Did you notice that most of the factors above do not have to do with an agreement? Don’t get me wrong, that agreement is critical as it lays the foundation for the relationship and defines many of the above terms. But how you actually treat the contractor will override the agreement. If they are treated as an employee, then the contractor status in the agreement is irrelevant. Deeds, more than words, make the difference here.

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