Independent Contractors Protection against Misclassification:

        Employee or Independent Contractor?


Companies wishing to hire an independent contractor should be aware of common mistakes in order to avoid potential penalties. An independent contractor agreement is a good first step. This document should contain a description of the services the individual will perform, how long the task should take and how the person will be paid. This agreement can serve as evidence of the person’s intended status with the employer should an investigation ever arise.

It is also wise to screen independent contractors before hiring them to complete a project. It’s best to develop a formal interview questionnaire to obtain the information needed to prove the person’s status. Here are some good questions to ask:

1. Do you have a legal entity established for your business?

2. Have you filed a fictitious business name (doing business as…)?

3. What is the address and telephone number of your business?

4. How many employees do you have?

5. What professional licenses do you hold?

6. How do you market yourself to obtain new business?

7. What type of equipment and supplies do you currently own to complete work?

8. What additional equipment and materials will you need to complete the task and how do you plan to obtain said materials?

9. What type of insurance coverage do you possess to cover your business?

10. Can you provide professional references?

While hiring an independent contractor provides many advantages to companies, it imperative that employers document and update records that can prove an individual’s status as an independent contractor. The pivotal detail to remember is that as the employer’s control increases, the likelihood that the individual can be classified as an independent contractor decreases. For this reason, it pays to be highly scrupulous when deciding to hire someone as an independent contractor.

Hiring an independent contractor offers employers many advantages. Unlike for traditional employees, employers do not pay taxes on independent contractors’ wages, and are not expected to provide benefits. Employers often save 30 to 40 percent on labor costs by using independent contractors. In addition, as independent contractors are generally hired for a specific period or project, employers have no obligation to rehire them after each contract period or project is complete.