For these reasons, it is imperative that employers distinguish independent contractors from employees within their companies to avoid liability and litigation. Below are several best practices that workplaces should follow:
1. Always have a written agreement with independent contractors. Under the current state of law, it is always best to have a contract or written agreement establishing the terms of the working relationship with an independent contractor.
2. Require independent contractors to complete a W9. This makes the distinction clear for tax purposes and potential audits.
3. Do not give an independent contractor a job title within your organization. A title can be used to represent employee status. Contractors should be hired to complete a task or project, not serve a role within the company.
4. Keep independent contractor files with vendor files. Contracts and documents shared between your company and independent contractors should be stored with those of other vendors providing a service to your company. They should not be considered and stored as personnel files. In the case of an audit, it will go a long way for independent contractors to have files that are separate from personnel files.
5. Do not provide independent contractors with employee-type benefits. This includes vacation, paid holidays, sick leave, retirement, and other benefits your company offers employees.
6. Do not conduct performance evaluations with independent contractors. Evaluations reflect an employer-employee relationship. If there are performance issues with the independent contractor, they should be addressed as a breach of contract issue, not as an employee disciplinary issue.
7. Determine if the company’s competitors classify similar workers as independent contractors. In other words, understand how others in your industry are treating the same category of workers. Industry standards are often considered in cases.
8. Do not control the details of the independent contractor’s work. Focus on the end result, not the details on when, how, and where the work is performed. Avoid having scheduled times for independent contractors to come into the office or workplace whenever possible. Do not prohibit an independent contractor from providing their services to other companies
9. Avoid having an independent contractor do the exact same job as another employee at the company. And avoid having the contractor perform work that is integral to the business operations.
10. Pay independent contractors by an agreed upon fee. Independent contractors should not be paid in a form that is similar to a salary and should not be reimbursed for business expenses.
11. Avoid giving independent contractors physical items that indicate they have a similar status as employees. Avoid having independent contractors wear uniforms and/or badges. Do not give an independent contractor a business card that represents your company. And do not give them an employee handbook. Instead give them guidance about your code of conduct and inform them that while working with the company, you expect them to comply.