From Business 2 Community, Kerry O’Shea Gorgone provides some good advice on how to engage with independent contractors pursuant to the Administrator’s Interpretation recently issued by the Department of Labor. Kerry writes:
“You should speak to an attorney before creating a hiring policy, but here is some information to help you in your quest to engage independent contractors rather than hire employees:
1. Don’t rely too heavily on a single contractor
If someone works full-time hours for you, they’re probably not a contractor: They’re probably an employee.Using the same person for every project can be tempting, especially if they’re exceptional at what they do, but resist the temptation: Otherwise, they could be an employee in the eyes of the law.
2. Work with freelance employees who have other clients
This reduces the likelihood that they’ll be “economically dependent” on your company specifically. Using contractors who have other clients to serve will also limit their availability in terms of hours, which helps to establish their independent status.
Independent contractors have “economic independence,” because they’re operating a business of their own. If someone’s only doing projects for you, he really doesn’t have a business of his own: He’s reliant upon yours. This makes him an employee.
3. Use contractors for non-integral projects
The Department of Labor uses the example of construction companies hiring carpenters: carpenters are integral to running a construction business, which makes them employees rather than independent contractors.
Applying this logic, it seems clear why Uber is having problems, too. Uber can’t work without drivers: Drivers are an integral part of Uber’s business, which makes them employees in the eyes of the law.
If you need to staff up during heavy work periods, contract out support projects or tangential functions. Don’t use contractors for projects integral to your business.
If you provide legal services, don’t use contract lawyers. Hire full-time lawyers and use contract paralegals or support staff, instead.
4. Use limited-term contracts
One factor courts use to distinguish contractors from employees is whether the work arrangement is permanent or indefinite in terms of time. A permanent arrangement obviously looks more like employment, but an indefinite term can resemble “at-will” employment (which is the kind most employees have).
If you want to use independent contractors, use them on a short-term basis. Work with an attorney to create a contract that states a start date and end date for the project: Don’t leave things too open.
5. Don’t micro-manage freelance employees
You pay independent contractors to complete projects, not sit at a desk from 9 a.m. to 5:00 p.m. As such, don’t dictate when or where they should work on your project. And don’t be picky about how they dress while working on your project. Why should you care? They’re not an employee, right?…”
Read the full story at New Legal Guidelines May Impact Many Freelance Employees