Hiring Independent Contractors

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independent contractors
The penalties for misclassification of ICs can be high.

New laws are raising questions about who can be defined as independent contractors. Attorney Jeffrey Ment, who specializes in the travel and hospitality industries, provides some best practices.

The definition of who can be classified as independent contractors (ICs) varies depending on the federal agency or state that is setting the criteria—and these are rapidly changing. Most famously, California’s new AB5 law has caused a great deal of uncertainty and forced many companies to rethink their use of ICs.

“California ICs may suffer as everyone adjusts and figures it all out,” said attorney Jeffrey Ment, who specializes in the travel and hospitality industries. “The law is less black and white than many people realize.”

“Nothing is a free pass, but there are some things that taken together, can help maintain an IC status,” he said.

Steps for ICs

For the independent contractor, Ment’s suggestions include:
• Have an LLC or corporation
• Send invoices on your business letterhead
• Try and distinguish your business from that of the hiring company, if possible
• Have your own business cards
• Negotiate your rates and set your own working conditions;
• Have the ability to work for others in the industry.

Steps for hiring companies

For companies seeking to work with independent contractors, Ment’s advice includes implementing a written agreement that states all or some of the following:
• The worker is responsible for paying his/her taxes;
• The worker receives no benefits;
• The worker is not prohibited from working on projects for other employers;
• The term is fixed and not open-ended.

A company can set goals for an IC, but it should not attempt to guide the worker in the method, manner or means of performance, he advised.

“When I talk to business clients, I ask them to think about who might complain about classification,” said Ment. “The penalties for misclassification can be high so if a situation is unclear, seek legal counsel from a specialist who can help your company remain compliant with the changing regulations.”

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