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Employment Law Made Un-Scary: Independent Contractors

In this month’s continuing series on demystifying employment law, we focus on some of the most common and often confusing employment legalities. As we stressed yesterday, small businesses have it hard enough having to tackle the problems of the slow economic recovery and the uncertainty brought forth by the upcoming elections and looming fiscal cliff. However, the concerns don’t stop there for small business owners as they are constantly required to meet specific laws and compliance issues. There is nothing necessarily wrong with laws as many are to serve a beneficial purpose but the worst part is that there are so many employment laws to be concerned with, e.g. (ADA,  ADEA, COBRA,  FCRA,  FLSA,  FMLA,  GINA,  Harassment, HIPAA, Independent Contractors,  NLRA,  OSHA,  Title VII,  USERRA,  WARN).

Today we will focus on Independent Contractors. As Wikipedia defines it, an independent contractor, is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required, during which time he or she may be subject to the Law of Agency. Independent contractors are usually paid on a freelance basis. That may sound fairly straight forward but believe me, there are many details and nuances that you can’t afford to get wrong. Luckily, Manpower has created a terrific cheat sheet for dealing with Independent Contractors that we present below:

INDEPENDENT CONTRACTORS CHEAT SHEET

This list is a guide to help you determine whether an individual is an independent contractor. Generally, the more “yes” answers you have to the questions below, the more likely it is that the individual is an independent contractor. Please consult with your legal counsel before making any final decisions.

  1. Is the individual being hired to do work for a discrete project that is limited in time (as opposed to work that is ongoing and integral to the company’s normal business functions?
    ___Yes  ___No
  2. Does the work involve special skills and training not currently possessed by company employees?
    ___Yes  ___No
  3. Does the work involve skills and training which the individual already possesses (as opposed to skills for which the individual will need to receive training from the company)?
    ___Yes  ___No
  4. Does the individual pay for his or her own business expenses?
    ___Yes  ___No
  5. Does the individual pay for his or her own travel?
    ___Yes  ___No
  6. Is the individual responsible for his or her own federal and state tax obligations (i.e., the company is not paying payroll taxes for the individual)?
    ___Yes  ___No
  7. Is the individual being paid a set price per project or on a straight commission basis (as opposed to on a set schedule in the form of a salary, regular wage, or piece-rate)?
    ___Yes  ___No
  8. Does the individual provide the company with invoices for fees (as opposed to timesheets)?
    ___Yes  ___No
  9. Does the individual offer his or her services to entitles other than the company or to the general public at the same time he or she is performing services for the company?
    ___Yes  ___No
  10. Is the individual free to accept projects from other entitles at the same time he or she is performing services for the company?
    ___Yes  ___No
  11. Does the individual have a distinct occupation?
    ___Yes  ___No
  12. Is the individual self-employed?
    ___Yes  ___No
  13. Will the individual be performing services for the company as part of his or her own independently-established business?
    ___Yes  ___No
  14. Will the manner and means for achieving the specified result be left to the individual’s discretion?
    ___Yes  ___No
  15. Will the individual’s hours, places and order and sequencing of the work be left to the individual’s discretion?
    ___Yes  ___No
  16. Is the individual free of extensive supervision, especially in regards to the means and manner of performance?
    ___Yes  ___No
  17. Is the work going to be performed at a location separate from the company premises?
    ___Yes  ___No
  18. Does the individual have a significant investment in the facilities or equipment which will be used in performing the work? That is, is the individual responsible for providing the necessary tools, equipment and material for the performance of the work?
    ___Yes  ___No
  19. Is the individual permitted to select, direct and pay anyone who will assist in achieving the desired results?
    ___Yes  ___No
  20. Is dismissal of the individual premised on some type of failure to comply with an agreement, such as a failure to perform work (as opposed to the individual being subject to “dismissal at any time for any reason”)?
    ___Yes  ___No
  21. Is there an understood consequence to the individual for quitting prior to the completion of the project?
    ___Yes  ___No
  22. Is the individual free to reject additional projects from the company?
    ___Yes  ___No

Continue Reading – Employment Law Made Un-Scary: Independent Contractors
Source – ManpowerGroup

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