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Rule #7 Independent Contractors

In our last post we warned that wage and hour mistakes are all too easy. A related concern is that it can be easy to misclassify a worker as an independent contract, when they should be treated as an employee. This sort of mistake can be tremendously costly because a misclassified worker may sue for back-wages—including overtime, and attorney’s fees.

10 Ways to Stay Out of Court: Rule 7 – Be Careful with Independent Contractors

Since independent contracting issues are so vexing we’ve created a special guide for employers on these issues. But employers should understand that the rules for independent contractors varies greatly by jurisdiction. For example, the California Supreme Court’s decision in Dynamex makes it exceedingly difficult to work with a contractor on an on-going basis.

Here are important points to keep in mind:

Require Documentation. Ask for documentation to establish that a worker is truly an independent contractor, such as business cards, licenses, a certificate of insurance, a tax identification number, evidence of incorporation, etc.

Put your Agreement in Writing. Set forth the terms of your relationship to show IRS and state agencies that the worker is an independent contractor. And it is a very good idea to have an attorney review if you intend to have an on-going working relationship.

Do Not Treat “Contractors” Like Employees. The more control you exert over a worker, the more likely they are to be deemed an employee. Accordingly, its essential that they are not subject to discipline or expected to abide by your company policies. For that matter, you should not be telling a contractor to take breaks or lunches.

For more guidance on how to stay out of court, check-out the following:

Rule 1 – Incorporate;

Rule 2 – Stay Alert on Taxes;

Rule 3 – Maintain Adequate Insurance;

Rule 4 – Hire Smart;

Rule 5 – Manage Fairly & Wisely;

Rule 6 – Catch and Correct Wage & Hour Violations;

NFIB Small Business Legal Center’s October 10, 2018 presentation in Salt Lake City, entitled: “10 Ways to Stay Out of Court.”

*While the information provided here is intended to be accurate, it is not legal advice. Employers are advised to seek counsel from a trusted employment law attorney.


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