“Hiring” an Independent Contractor

If you’ve ever used the words “hire” and “independent contractor” in the same sentence, listen up. The Department of Labor is cracking down on employment misclassifications. Cynthia Watson, regional administrator for the DOL Wage and Hour Division, said in a January news release, “We are aggressively expanding efforts to combat the misclassification of employees as independent contractors and are targeting sectors where we know workers are vulnerable and violations are rampant.” If you or someone you know has “hired” an independent contractor, here are 7 common signs (independent of each other) that the worker should actually be an employee:

1. You “hired” the worker.
   Employers hire employees, not independent contractors, and maintain control in regards to pay amounts, work hours, and how the work is performed. Independent contractors typically bid against their competition for a job and generally work on their own.
2. The worker is paid on a regular basis.
   Anything other than a per-project pay basis (or upon completion of steps within the project) may indicate that a worker is actually an employee. And if you pay an independent contractor on an hourly basis, odds are 99.9% that you have a misclassified worker. Being paid regularly also insinuates that the work is ongoing rather than a short-term project, meaning this is likely employment.
3. The worker can quit or be fired at any time.
   If you are able to fire the worker with or without notice, that indicates you have the right to control the worker as an employer. Unless terms of the contract have been violated, independent contractors are there until they complete the job.
4. You provide instruction or training for the worker.
   Independent contractors do not need training; this is their business, their livelihood, their expertise! If training is required, the worker is probably an employee. Unskilled or semi-skilled work is 99% of the time going to be employment.
5. You provide the tools, supplies, and equipment to do the work.
   Employees depend on the company to provide the tools needed to work, whereas independent contractors have invested money into their own equipment and supplies, as they are in business for themselves.
6. You have employees who do (or did) the same type of work.
   If the work being done by an independent contractor is typically done (or historically has been done) by any of your employees, even if it’s a short-term or one-time basis, the work is employment.
7. The worker signed a non-compete agreement.
   Independent contractors advertise their services and are proactively seeking out more business for other companies similar to those performed for you. Non-compete agreements are for employees, not for independent contractors.

In addition to these signs, independent contractors have their own Federal Employer Identification Number (FEIN) and should be licensed and insured. When determining employee classifications, you must review what the Department of Labor calls the “totality of the circumstances.” There is no “one point clarifies all,” but all duties must be considered. When in doubt, the worker is likely an employee.

For questions about your employee classifications, please contact us.