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HR Hot Topics |
Independent Contractors
Independent contractors can do valuable work for your organization without the complications of hiring them as employees. You need to make sure, however, that those workers don't turn out to be your employees after all. Some of the factors that courts will consider when deciding whether someone is an independent contactor or employee are who controls the manner in which the job is done, who sets the worker's hours, whether the work is performed on your property during regular business hours, how long your company's relationship with the worker lasts, the method of payment, who provides the tools necessary to perform the job, and whether the work is part of your regular business. Related articles on Independent Contractors Misclassifying workersIncorrectly classifying workers as independent contractors can be a costly mistake. If a court decides they're really regular employees, your company can incur significant liabilities. Misclassified workers are entitled to the benefits they would have received if they had been classified correctly. This could include health insurance, retirement benefits, and stock options. Discrimination and harassmentEmployees, unlike independent contractors, are protected by discrimination and harassment laws, including your duty to accommodate any disabilities. But, if your employees harass or discrimination against an independent contractor because of his race, your company can be liable under Section 1981 of the Civil Rights Act of 1866 (yes, 1866). The law protects minorities' right to enter contracts, including an independent contractor's agreement to perform work for your company. Overtime and minimum wageYou might also have to reimburse misclassified workers for wages you should have paid them under the Fair Labor Standards Act. That includes overtime and minimum wage. Tax ramifications for misclassifying workersIf an independent contractor turns out to be an employee, your company might have to pay back taxes and/or penalties for federal and state income taxes, FICA, and unemployment. Workers' compensationInjured workers who have been misclassified as independent contracts are eligible for workers' comp benefits the same as other employees. Your state's workers' comp law determines who's an "employee" eligible for workers' comp benefits.
Related articles on Independent Contractors from the State Employment Law Letters
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