How can I make sure my independent contractors don't get reclassified as employees?

Learn a few steps you can take to avoid classification problems with independent contractors.

Question

My company occasionally hires independent contractors for one-off projects, like our website redesign. We also use contractors on an ongoing basis for things like freelance writing and proofreading. Are there any steps we can take to make sure the government doesn't come back later and reclassify them as employees?

Answer

The best way to ensure the government doesn't classify workers as employees is to not treat them like employees. The key is how much control you exercise, and have the right to exercise, over the worker. Generally speaking, your company shouldn't be telling contractors exactly how to do their work; they are supposed to be professionals, hired precisely because they have the expertise necessary to figure this out on their own. Your company will, of course, always have the right to reject the work the contractor does for you. However, your company should not be telling contractors what time they must get to work, exactly how they must perform their work, what tools or equipment they should use, whether or not they can hire their own employees, and so on. (For a list of factors that make a worker look more -- or less -- like an employee, see Independent Contractor or Employee: How Government Agencies Make the Call.)

You should also use independent contractor agreements with your contractors and freelancers. In the contract, you can spell out the project, payment schedule, and timelines. You can also include clauses that show the government you really did hire an independent contractor. For example, you can state that you are hiring the worker as an independent contractor, that the worker is free to hire employees or other help, and that the worker must pay his or her own taxes and carry liability insurance. Learn more about these contracts in Put Your Independent Contractor Agreements in Writing.

You can also ask the contractor to provide you with proof that he or she is running an independent business. These might include the URL for the contractor's business website, a copy of the contractor's business license, and business cards and stationery. In Require Documentation When You Hire Independent Contractors, you'll find more ideas.

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