Free Enterprise - The FindLaw Small Business Law Blog

How to Hire an Independent Contractor

When considering how to hire an independent contractor, it's important to understand how the law evaluates the difference between full time employee and independent contractors.

In practice independent contractors can seem like full time employees because they do similar tasks. But legally it's not enough to hire someone using the title 'independent contractor' and call it a day.

There is a multi-factor test that's part of their consideration. No single factor controls the decision but the combination of all these factors will help courts reach a decision.

  1. The employer's control over work product. Independent contractors generally have the freedom to decide the method and manner in which work is done. They can choose when and where to complete the job.

  2. Who pays for work facilities and materials. Full time employees generally have materials provided by the company. Independent contractors often provide their own tools and equipment and often work in their own office space as well.

  3. The employee's opportunity for profit or loss. Independent contractors have specific tasks to do and failure to complete them satisfactorily can mean they don't get paid. In contrast, full time employees received a fixed payment regardless of production.

  4. The permanency of employment. Intention to have a temporary arrangement is often seen as evidence of an independent contractor relationship. Full time employment is generally for an indefinite term.

  5. If the employee's work is central to the business. Full time employees do work that is vital to keeping the business running. Courts generally consider independent contractor work to be work that enhances the business but doesn't necessarily keep it afloat.

  6. If the employment can end easily. In some states, employees can only be fired if the employer can show cause. But an independent contractor arrangement generally allows the relationship to end at any time.

  7. What arrangement the parties believed they were making. It matters if the parties thought they were making an independent contractor agreement. But that isn't enough if everything else indicates the relationship is more like employer-employee.

Figuring out how to hire an independent contractor who is actually an independent contractor often comes down to expectations. Getting your attorney to write up a clear contract will help set up a relationship that is more likely to be seen as independent.

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