Startups often rely on independent contractors to handle essential duties as a company gets off the ground. The benefits are obvious: work is paid for as needed and you get clear returns for the money you invest. Waste is minimal – and you do not have to pay for employment tax or workers’ compensation insurance. However, you have to be careful about the demands you make on independent contractors as they work.
What Makes a Contractor Independent
The standards of independence in fulfilling duties like bookkeeping, website design, and recruiting are relatively clear. If you control the manner and means governing the way a contractor does the work, you risk coming close to a typical employment relationship. That includes how contractors manage their time, whom they use for subcontracted work, and the precise way in which the job gets done.
Generally, if you are micromanaging a contractor and asking everything you would ask of an employee, you risk having a claim made. A qualified business attorney in Los Angeles can help you avoid blurring the lines, and it starts with leeway. Giving a contractor the freedom to perform the task on their own schedule is one essential element; you can still have deadlines for your project milestones. Another is allowing the contractor freedom regarding technique, as long as the result is what you desire.
Fines and Back Taxes for Mislabeled Individuals
If you willfully misrepresent an employee as an individual contractor, you risk fines and will have to pay back taxes and other standard obligations employers have when they hire a new employee. Health care obligations may also apply if your company is large enough to fall under insurance mandates.
When you intended to get services from an individual as a contractor but later began making demands that are typical of an employer, a court may decide you have to go back and submit payroll taxes and other obligations. Having an agreement in writing is not enough; it is how you handle each freelancer and contractor that determines your obligation under the law.
Be aware of the fine points distinguishing between employees and independent contractors in California. If you need an experienced and reputable business attorney in Los Angeles, contact Hakim Law Group at 310.993.2203 or visit www.HakimLawGroup.com for more information.