Is your business growing and you are ready to hire some help? Would you like to work with someone who can jump in, spur of the moment, and help you without requiring training on all the how, what, when, where details? Sounds great, right! For the right situation, an independent contractor IS a great deal. It’s WIN-WIN.
What’s an independent contractor?
An independent contractor is someone who provides services to a business under a contract. Independent contractors typically do not work regularly for the business, but only when there is work available. You, as the employer, do not have control of the “how” or “when” the work is completed, but only the end product produced by the contractor. Whereas, with employees, you do control how and when by training and setting those expectations.
Independent contractors pay their own taxes, whereas employees have you withhold certain taxes and share that tax burden.
Before you do anything, it’s worth understanding the differences between independent contractors and employees. Because if you hire someone, misclassify them as an independent contractor, but the IRS determines that they are working for you as an employee — it is bad news bears. You might owe a lot of money. Yikes…
This post is NOT the post that dives into the difference between employees and independent contractors. If you need help in that area… check out this [INSERT POST] for information on the differences between an independent contractor and employee.
Ok, let’s presume you know you are hiring a contractor…don’t make the following mistakes.
- No independent contractor agreement.
Even if the relationship is obviously an independent contractor relationship (i.e., not an employee) you still need a contract to state exactly that! One slip up here and you are dealing with Uncle Sam…and, we know that leads to nowhere good. So, make it clear in a written contract that your contractor be responsible for paying their own taxes and that the relationship is that of an independent contractor.
- Treating your contractors like employees.
You might find yourself saying, “Wait…what?! My contractor is working with my competition!” and, to that, I say…Um, yea. Yes, sure, of course, that is perfectly fine. Because they are a contractor and by definition NOT obligated to you in any way, shape or form. You cannot stop the contractor from working for whomever they want to, and, also, you cannot tell the contractor to abide by certain hours or work a certain number of hours per week. Deadlines are ok within a certain context, but demanding certain schedules is a definite no-no.
- Requiring weekly time reports
Total no-no…because this looks a lot like what you’d do with an employee. You don’t want to exert that type of ‘control” for fear that this might be construed as an employee/employer relationship. No checking hours, no enforcing a strict schedule with contractors.
- Not setting goals and schedules
While you cannot control how the work gets done and the hours the contractor chooses to devote to the project, you can and should set timelines and due dates. You do have the right to make sure your contractor is going to accomplish the task on time according to the deadline. And, it is courteous to your contractor to make sure the contractor knows the expectations and can manage the job. Clear communication is refreshing…so let your contractor know about the big picture deadlines. This way, you have a good working relationship with your contractor, everyone is happy, and the job gets completed!
- Requiring a contractor to sign a non-compete instead of a confidentiality agreement
First, non-competes are one of those things that don’t always work like you might imagine. They are falling out of favor with courts because they restrict people’s ability to work in their industry. But certainly, there is a time and place for a noncompete. However, the independent contractor relationship is NOT the place. You simply cannot restrict the contractor in that way so don’t try it. But good news—generally what you need is to protect your own trade secrets, or your client’s, and you can do that with a confidentiality agreement. At Wick Law, we will draft your independent contractor contract so that any contractor you work with cannot use the things they learned from you with others.
Listen, friends – you do not need to do this alone! Contact Wick Law today for help understanding best practices when working with independent contractors.
Wick Law, LLC is a small business legal practice, representing owners, investors, and entrepreneurs in all aspects of commercial, corporate, and business law, estate planning, contracts and negotiations, business litigation, and real estate. For more information: Contact 614-572-6366, visit www.mwicklaw.com, or email us at firstname.lastname@example.org. Wick Law, LLC is located in Columbus, Ohio.
(Materials in this article have been prepared by Wick Law, LLC for general informational purposes only. This list is for educational purposes and is not to be considered exhaustive. More items could be added to this checklist based upon the type of transaction or industry standards. These materials do not, and are not intended to, constitute legal advice. The information provided is not privileged and does not create an attorney-client relationship with Wick Law, LLC or any of the firm’s lawyers. This checklist is not an offer to represent you. You should not act, or refrain from acting, based upon any information in this checklist. Wick Law, LLC maintains offices in Columbus, Ohio, and has lawyers licensed to practice in Ohio and in the United States District Court, Southern District of Ohio. The firm does not intend to practice law in any jurisdiction where the firm is not licensed.)
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