Hiring an independent contractor when staff leave or company owners want interim covering may be legally difficult. Learn how to do it correctly.
What you’ll discover:
Is it lawful for a freelancer to work an hourly shift?
Can a company engage a contractor as an employee for short-term coverage?
What can a company do if a contractor refuses to be paid as an employee?
Is it legal for a company to engage a former employee as an independent contractor?
The COVID-19 pandemic continues to disrupt corporate operations in the United States, creating worker interruptions at a number of firms. Company owners and managers have discovered that their once consistent staff is decreasing or moving. It is normal for company owners to resort to freelancers and contractors to cover gaps and ensure work gets done during periods of significant turnover. Meanwhile, company owners may be concerned about the complicated labor rules that regulate independent contractors. These are the answers to often asked legal issues concerning employing freelancers or contractors when workers leave.
Table of Contents
Is it lawful for a freelancer to work an hourly shift?
The answer is a little tricky since it truly relies on the task being done. When assigning independent contractors to perform regular hourly hours that employees would normally work, business owners should exercise caution since doing so might result in major complications for businesses. If a company incorrectly classifies a worker, there may be legal and financial ramifications, such as fines, penalties, and back pay. Employers must grasp the legal distinction between independent contractors and employees, as well as how these distinctions affect how workers are categorized in the eyes of the law.
The distinction between employees and independent contractors is based on the worker’s relationship with the company rather than the title. Laws fluctuate from state to state, and state laws differ from federal laws, complicating classification even further.
In general, the more the company owner’s influence over the person and their job, the more probable it is that the worker is an employee rather than an independent contractor. Consider the following questions when you consider your connections with your employees:
Who chooses when, where, and how work is completed?
Workers often work a predetermined number of hours (a shift) at a fixed location (such as an office or factory), as established by management, who monitors the employees while they work. Independent contractors, on the other hand, are often free to work on their given duties whenever, whenever, and whatever they choose as long as they satisfy the company owner’s timeline and work product requirements.
Who decides how much a worker is paid?
Workers work for the company owner and are paid on a regular basis. Independent contractors determine their own rates and are paid when the task is finished or as specified in their contract.
Who controls the resources and tools?
Company owners often supply workers with the tools and resources they need to execute their jobs, and such equipment and resources remain the business owner’s property. In most cases, independent contractors bring their own tools to the work.
Is the job time-sensitive or discrete?
Employees are often hired by businesses to execute their given tasks forever, unless either the company owner or the employee chooses to part ways. Independent contractors are employed for specific time periods or activities, such as administering a social media account for one week or authoring a single contract.
Assigning an independent contractor to work an hourly shift each day gives the business owner control over when the contractor performs their work, increasing the likelihood that the IRS or a court will classify the contractor as an employee if the worker’s classification ever came up in a court of law. Depending on a variety of conditions, you, the employer, may be liable for paying taxes and other penalties if the person was judged to be an employee but was classified as an independent contractor.
Can a company engage a contractor as an employee for short-term coverage?
Occasionally company owners realize they will only need an additional employee for a short time. An important employee may take paternity leave or care for a sick parent, or the summer season may bring a big amount of consumers into a business before traffic decreases in the fall.
Owners of businesses should exercise caution when hiring people for such brief durations as contractors rather than employees. Even though a work contract is time-limited, it may not be sufficient to designate the person as a contractor rather than an employee. If the person who was replaced was an employee, the contractor who replaced them may be as well. It’s vital to know that firms may engage temporary workers by employing an Employment Contract with a fixed length.
If you do not want to recruit a temporary employee, you might come up with some innovative options. A temporary solution is one option. Staffing companies function as employers of record for their employees, enabling you to cover a gap without recruiting a new employee while yet maintaining control over the job.
Another possible method is to divide the job into individual tasks. What is the employee you are replacing responsible for on a daily basis? Might they be separated and temporarily allocated to various contractors? Conversely, by delegating some of those jobs to contractors, might you or an employee take up the slack? Instead of employing a temp to replace your administrative assistant, consider hiring an off-site contractor to monitor and reply to emails while you answer the office phone.
What can a company do if a contractor refuses to be paid as an employee?
Federal and state laws govern whether a worker is an independent contractor or an employee. It makes no difference how employees desire to be classed or how corporate owners want to classify them.
If you think a person who should be categorized as an employee wants to be paid as a contractor, you may explain the repercussions of misclassification. They may include back taxes, fines, and interest, as well as unpaid worker’s compensation premiums.
If the employee continues, try restructuring the relationship such that it is designed for an independent contractor rather than an employee. Remember that control is the most important issue in this decision. The less influence you have as a manager over the employee’s job, the less probable it is that they will be classified as an employee by a court or the IRS. Whatever conditions you finally reach with the employee, be sure to commemorate them in an Independent Contractor Agreement that properly specifies the relationship.
Is it legal for a company to engage a former employee as an independent contractor?
Sure, firms may engage former workers as independent contractors if the relationship warrants it.
For example, you may engage a former employee as a contractor to teach new employees, or you could execute a project or two on your own. Yet, you cannot engage a former employee as a contractor and treat them the same way you did when they were an employee. Rather, the work relationship must adjust to reflect the categorization change. In reality, this means you should have less say over when, how, and where your ex-employee does their task.
