- Glicel Sumagaysay
Grow Your Business with Subcontractors
You may want to hire individuals to help you start or expand your business. You don’t have any employees, and you don’t want employees. You want to hire or work with others only for certain projects. It is important to understand the legal ramifications for doing so.
A typical misstep in independent contractor and hirer relationships is hiring an individual who should have been given employee status instead of independent contractor status. A large factor in determining whether a worker is actually an independent contractor versus an employee is whether the hirer has complete control over the manner and means in which the work is conducted. If the hirer does have such control, the workers are typically found to be employees. Some other factors usually considered in this inquiry are: whether the worker has specialized knowledge that the hirer does not have; whether the worker typically engages in an independent business; whether the work is done under supervision; whether the work being done is of the same industry as the hirer; whether the worker performs the work using his own tools and supplies; whether the worker is paid hourly or per project.
Some tips to consider when with working with or hiring others include:
Ensure you do not exercise too much control over the person or company with which you are contracting.
Try not to exercise too much control over the whole project and its details.
Ensure your contract is solid. Good contracts usually include clear clauses as to:
Duties of the independent contractor
Details, compensation and payment regarding the project
Nondisclosure of information regarding your business
Tax treatment (that the contractor is responsible for his or her own taxes with respect to the project.)
The contractor’s skill (that the contractor is qualified to complete the work properly.)
The contractor’s expenses (that he or she will be responsible for their own expenses)
Non-solicitation of your customers
The deadline for the project
Confidentiality (any information that the contractor should keep confidential, whether it be yours or your client’s)
Remember that independent contractors are protected by California’s anti-harassment laws.
If you are somehow found to be an employer of the contractor you hired, you can be subject to penalties for willfully misclassifying an employee as a contractor to avoid employee status and requirements. You can also be subject to paying unpaid payroll taxes, unemployment insurance, minimum wage and overtime. You could also be liable for violations of anti-discrimination laws.
Arrangements with contractors can open up new possibilities and attract more business when done properly. However, it is important to ensure you are taking proper action when engaging a contractor.
*This article is for informational purposes only. It does not constitute advice or an attorney-client relationship. It may be considered attorney advertising.
I wrote this article for the newsletter of the National Association of Professional Organizers San Francisco Bay Area Chapter in preparation for a panel on January 13, 2016 at 6:30 pm. For more information, or to attend, see the following link.