Allowing independent contractors to manage company employees is generally not a recommended practice.  Independent contractors or consultants are often hired for their specialized expertise. The intention is that the relationship will be short-term and focused on providing services that existing organizational employees are unable to provide. Independent contractors are usually engaged using consulting agreements, which outline the services they will provide, the manner and means for providing these services, and the expected results. Independent contractors are bound by the terms of their consulting agreement, not by the organization’s personnel policies, employee handbook or employment-at-will doctrine.

This is not a recommended practice. The former employer may contract that person through a third party like ClearPath  to do some work on a W-2 basis, but the restrictions of the independent contractor relationship would apply. A worker receiving a W-2 and 1099 in the same tax year could trigger an audit.

As a rule, Independent Contractors are their own business and have  to pay for their own benefits. Independent contractors are not eligible to receive tax-free benefits from the organization. Some states are making changes to this rule.

The Fair Labor Standards Act does not apply the minimum wage payment requirement to independent contractors. However, merely classifying a person as a contractor instead of an employee does not automatically keep the worker from being considered an employee entitled to minimum wage. Since improperly classifying a worker as an independent contractor carries with it legal repercussions, you must fully examine the work a person will take on for your company and compare it to labor standards.

The Fair Labor Standards Act only applies to employees working for an employer, not to independent contractors. No overtime applies to ICs. However, merely classifying a person as a contractor instead of an employee does not automatically keep the worker from being considered an employee entitled to minimum wage. Since improperly classifying a worker as an independent contractor carries with it legal repercussions, you must fully examine the work a person will take on for your company and compare it to labor standards.

Under the federal Fair Labor Standards Act (FLSA), employees are either classified as exempt or nonexempt. Exempt positions are excluded from the rights and regulations under the FLSA, including minimum wage and overtime, however, there is different criteria for their qualification. Non-exempt employees are covered under FLSA regulations. Exempt status under the Fair Labor Standards Act only applies to employees working for an employer, not to independent contractors. In addition to the FLSA, many states have their own set of wage requirements and laws that employers must also abide by. 

In general, a worker cannot be both an employee and an independent contractor for the same company. An employer can have some employees and some independent contractors for different roles, and an employee for one company can perform contract work for another company. It is not recommended, that a person have one role as an employee and another role as an independent contractor for a single company. But there are some exceptions, it is possible to have a W-2 employee who also performs work as a 1099 independent contractor so long as the individual is performing completely different duties that would qualify them as an independent contractor. Some legitimate examples that we have seen of this circumstance are:

• • A Receptionist also owns a cleaning service business with their spouse. The company contracts with the team to perform janitorial services after hours for the office. The receptionist work would be W-2 employee.

• A Sales Manager also performs graphic design work for several local non-graphic design businesses after hours. The company contracts with the individual to create a new logo for the company. The graphic design work would be independent.

Interns will generally receive guidance and direction from the employer, including daily job duties, training and coaching. Services an intern performs will most likely be controlled by the employer, and once an employee-employer relationship exists, an intern cannot be classified as an independent contractor.

The National Labor Relations Board has adopted a broad definition to distinguish independent contractors from employees. That means, the NLRB ruled, ICs are not covered by the National Labor Relations Act. Federal law does not permit independent contractors to unionize.

There is no specific time limit on how long a worker may be classified as “temporary.”  For more information, please click here.

The intention of using an IC is that the relationship will be short-term or on an as-needed basis and focused on providing services that existing organizational employees are unable to provide. Although there is no hard and fast rule on the length of time a company can keep an IC, an on-going relationship may suggest an employer/employee relationship.

Typically, best practices recommend that a company re-evaluate each Independent Contractor after some period on a project to verify and determine if anything has changed from when the manager and worker took the original surveys. There is no hard rule on the time period for a re-evaluation, as this will depend on your threshold of business risk. We suggest 12 months but encourage you to discuss with your IC-compliance-trained attorney. At the very least you should be tracking the IC’s expiring supporting documents, such as their business insurance and business license, if applicable. We recommend a re-evaluation solution that is diligent and systematic in your re-evaluation process and that it is applied consistently to all your ICs.

Using an online platform is great way for companies to find top talent for their projects and for individual consultants to find projects. But transactional jobs, the gig-economy, and freelancers come with risk. Companies need to be vigilant when using independent contractors that they engage for project work. Just because the freelancer technology platform offers the ability to pay the workers as an independent contractor/1099, doesn’t mean that the worker “qualifies” as an independent contractor. Some online staffing and human cloud-based platforms warn clients that worker classification is the client’s responsibility. Freelancers may be classified as Independent Contractors or as Employees. Because only the Client knows the requirements of their project and how they plan to work with the Freelancer, it’s the Client’s responsibility to classify Freelancers correctly.

Generally, no.  Independent contractors should include their estimated expenses in the cost quoted for the work performed.  The independent contractor is responsible for making a correct estimate and covers his or own expenses out of this fee.  If the project changes, the contractor should issue a new bid or a change order rather than having the organization pay his or her expenses as they would an employee’s.

Independent contractors are usually paid a flat fee on a milestone or deliverable basis. Although in some professions, such as legal services, independent contractors can be paid hourly wages.

Generally, no. Just because a worker wants to be paid as an IC, doesn’t necessarily mean you should. The worker does not have the option of choosing independent contractor status, nor will a signed agreement convey independent contractor status if the common law factors indicate otherwise. The federal and states have several tests to be applied by employers in the classification of workers, and the employer bears the full responsibility for compliance. Worker misclassification can result in employer liability for state and federal tax withholding, social security and Medicare withholding, state unemployment insurance, and the employer’s share of Medicare, social security and state disability. In addition to paying the taxes not withheld and the employer portion of the taxes, the employer may also be liable for thousands of dollars in penalties.

Generally, no. Just because a worker has a business structure doesn’t mean they can be paid as an IC. Having a business structure is a very good first step. Determining whether a worker qualifies as an independent contractor or not can be a complicated issue. The fundamental problem is that no single, uniform test, let alone a single factor, can be used to determine who qualifies. Federal and state agencies and courts use different criteria and tests. Businesses must weigh all these factors against the inherent risk of misclassifying workers when making these critical decisions. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor.

Generally, no. Just because a worker has a contract or agreement with the hiring entity, doesn’t mean they can be paid as an IC. Having an agreement is a very good first step. Determining whether a worker qualifies as an independent contractor or not can be a complicated issue. The fundamental problem is that no single, uniform test, let alone a single factor, can be used to determine who qualifies. Federal and state agencies and courts use different criteria and tests. Businesses must weigh all these factors against the inherent risk of misclassifying workers when making these critical decisions. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor.

It depends. Just because the worker only performs occasional services does not mean they automatically qualify as an IC. Workers for whom you establish set hours of work are more likely employees. In contrast, independent contractors generally can set their own work hours. Workers whom you require to work or be available full time are likely to be employees. In contrast, independent contractors generally can work whenever and for whomever they choose.

It’s not recommended. Companies should not pay ICs on a weekly, biweekly, or monthly basis. Instead, require ICs to submit invoices, and pay them at the same time you pay other outside vendors.

An IC and employee should not be performing the same job. It doesn’t matter if one is part-time and the other is full-time. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. If an employer-employee relationship exists (regardless of what the relationship is called), you are not an independent contractor. An IC worker performs work that is outside the usual course of the engaging entity’s business. If the ICs services are integrated with activities of the company, then they are an employee. If the success of the employer’s business significantly depends upon the performance of services that the worker provides, they are an employee. Independent Contractors should provide supplemental services but shouldn’t be an integral part of your business. For example, if you use a contractor to build a website for your construction company, that’s not a core business service. But if your business is designing websites — and your web designers are independent contractors — that could be a problem.