Posted on Monday, June 13th, 2022.
You have or are considering using independent contractors in your business. As we have previously discussed, there are specific criteria that need to be met in order for the individual to be deemed an independent contractor. First among the factors is the individual needs to be free of control: A Test. This is to say the individual is not subject to control or direction in the performance of the services nor has the employer reserved the right to control the individual’s performance.
Factors looked to in assessing this are – does the individual have the authority to accept or reject work that is offered? If the individual rejects work, will there be repercussions? Does the business provide direction and instruction on how to perform the work? Does the business provide the equipment to perform the services? Is the individual able to hire others to perform the work? Does the individual perform the work on their own schedule? Do they need to follow work rules and requirements set by the company?
These are only some of the criteria that are looked to in determining what level of control a business has over an individual.
If you are engaging an individual who has discrete obligations, does them on their own schedule, does not receive oversight from the business in performing the work, uses their own expertise to perform the work, and has the right to accept or reject work as it is presented, then the individual likely can be classified as an independent contractor. For instance, if the business engages a bookkeeper to maintain the business’s financial books, the bookkeeper does this on his/her own schedule, is not overseen by the boss (that is why you hired a bookkeeper) but rather uses his/her own experience to perform the work, then the individual is likely an independent contractor.
In contrast if you have too many clients to service yourself and you engage someone so you can delegate work overflow work, it is likely that the individual is an employee, not an independent contractor. The individual would likely have to accept work you direct to them, performs the work up to your standards an in the manner you direct, you will oversee and approve the quality for the services, the services will be billed through you, the individual likely represents themselves as part of your organization, and performs the work out of or through your office, among other things. All of these items indicate control, as defined by the A Test, undermining an independent contractor status.
Our office has worked with many businesses which look to engage independent contractors. We understand that the companies often believe that the individual is not “controlled” by the business, but rather they are allowed to perform the work as they deem fit. However, more is involved in the analysis than the level of management and oversight. We recommend that if you have independent contractors or are considering engaging them, you speak to an experienced employment attorney such as those at Trimboli & Prusinowski to ensure that the company’s operations do not establish control under the ABC Test. See related post How Independent Contractors Can Kill Your Business