Overview: Having independent contractors offer benefits and risks. The benefits include avoiding certain taxes, legal liabilities and administrative challenges.
However, the risks can be great. Before filling a position with an independent contractor, it is essential to carefully consider the myriad factors that go into proper employee classification a worker as an independent contractor. An independent contractor should qualify not only under the tax code, but also several other state and federal employment laws that may come into play. Inaccurately classifying someone as an independent contractor can set an employer up for costly enforcement actions.
Trends: Government enforcement of independent contractor misclassification is stricter than ever, as the Internal Revenue Service, the U.S. Department of Labor and state agencies cooperate to enforce the laws.
Author: Michael Cardman, Legal Editor
A previous independent contractor task force established in 2007 has been merged with two other task forces to form the new Joint Task Force on Employee Classification and Worker Exploitation.
Updated to reflect information on the Supreme Court of Connecticut ruling that the homes of an employer's customers are not necessarily 'places of business' under the state ABC Test for independent contractor classification.
Updated to reflect forthcoming laws that will provide for a declaration establishing a rebuttable presumption of an independent contractor relationship and establish independent contractor criteria for certain sharing economy workers.
The Arizona Declaration of Independent Business Status can be used to establish a rebuttable presumption of the existence of an independent contractor relationship under the state's labor code.
Updated to include whistleblower immunity notice under the federal Defend Trade Secrets Act, effective May 11, 2016.
Updated to reflect forthcoming FLSA overtime exemption requirements.
On this podcast, one of the nation's leading authorities on wage and hour laws weighs in on what the Department of Labor's recent joint employer rule changes mean for employers. "Every word of it is concerning," says Littler Mendelson's Tammy McCutchen. She adds that the new standards could lead to a decrease in subcontracting and franchising.
Updated to include information on the 1st Circuit ruling Schwann v. FedEx, which preempts application of the second prong of the ABC Test to motor carriers.
The 5th Circuit Court of Appeals has ruled for the first time that Section 504 of the Rehabilitation Act authorizes employment discrimination lawsuits filed by independent contractors. The court's ruling in Flynn v. Distinctive Home Care, Inc. is significant in its finding that the Rehabilitation Act offers broader protection than Title I of the Americans with Disabilities Act (ADA).
Seattle has become the first US city to allow drivers for Uber, Lyft and other ride-hailing company apps to unionize. The Seattle City Council voted unanimously to enact this groundbreaking measure. But Uber may challenge the ordinance in court, so this is likely not the last word on the issue.
HR guidance on legally classifying and managing independent contractors under federal tax and employment laws.