A variety of benefits exists regarding working with independent contractors instead of hiring regular employees. Still, the laws and regulations that govern who you may classify as an independent contractor are extraordinarily complex. A knowledgeable employment law attorney can help remove doubt.
The law takes incorrectly identifying employees as independent contractors seriously. Accordingly, the penalties for misclassification are serious. That is, your organization may face both civil fines and criminal penalties. While there is no hard-and-fast rule for determining whether an independent contractor is really an employee, you can watch for some signs. Here are four of them:
1. You provide tools, equipment or supplies
Independent contractors usually have their own tools, equipment and supplies. If your company provides these, the individual may not actually be an independent contractor.
2. You set work hours
Generally, the more control you have over a worker, the greater the likelihood that he or she is an employee instead of an independent contractor. If you require a worker to be at the job site for a strict set of working hours, he or she may be an employee. On the other hand, if you only have general guidelines for accomplishing work, the individual may be an independent contractor.
3. You exclusively provide work to the individual
True independent contractors usually have more than one client. If your worker exclusively works for your company, he or she may be an employee. The same is true for individuals who perform core business services. If your company cannot operate without the worker, he or she may very well be an employee rather than an independent contractor.
4. You have no deadline for work completion
Some independent contractors take years to complete a project. Still, most have some deadline. Because independent contractors usually work on a temporary basis, having an indefinite relationship with one may indicate that he or she is really an employee.
Determining whether a worker is an employee or independent contractor may require careful legal analysis. Nonetheless, because the penalties for misclassifying workers can be extreme, you should watch for signs that your independent contractor may actually be an employee.