Independent Contractor Compliance Blog - by Collabrus™

I have a question for you this week.

Are you taking the proper precautions to insure your Independent Contractors are really IC’s?  Or have you assigned a weekend warrior to fight the career professionals who will be challenging the status of your consultants?

Most of you probably will answer, “Yes, of course, we are doing it right.”  However, in my thirty-plus years of experience I have found that most businesses think they are protected, but fall way short of what’s required.

Here are a few things to consider.

Did you properly set up the project to support Independent Contractor status?

When you set up your project and engage an IC:

1. Do you know exactly what they will do for you?
2. How will they operate in the context of your business?
3. How long the project will take?
4. What will the job will look like when it is complete?
5. How much the project will cost?
6. Is there a written contract, clearly stating all expectations so no one is surprised later? (You should develop this information up front in plan language that everyone will understand; not just techy-jargon only the project manager and the consultant claim to understand).
7. Did you engage an experienced IC compliance expert who will insure you set the project up correctly and the consultant qualifies as an IC?
8. Have you properly documented everything so three years from now you will be able to prove you did it right today?
9. Do you review the project periodically to guard against status drift?
10. Do you have someone with the responsibility and skills to insure you do all of the above correctly?

Most companies make an effort but fall way too short of what is required.

If you think this list is either obvious, or over the top advice please think again. I have encountered thousands of businesses that have not properly done these things. They made an effort, but usually fall way short of what is required to prevail under the close scrutiny of a worker misclassification conflict (class action lawsuits, workman’s comp claims, federal or state tax audits, third party tort actions, etc). When one of these events occurs they are shocked at the level of detail and substantiation needed to prevail.  However, unfortunately by then, it’s too late.

Why do their efforts fall short?

Typically, businesses don’t assign enough importance to setting up the project properly in the beginning.  The task is often pawned off to the project manager or the HR manager.  These managers have other talents and skills and generally numerous other duties and responsibilities on their plate.  For them it becomes a one-time task-something they are required to do so they can get back to their real work.  They do the task with a weekend warrior’s mentality and skill level, then promptly forget about it and never look back.

When the conflict comes, the company is probably on the wrong side of the issue.

When the project’s and consultant’s status is challenged two or three years down the road the company is probably in the wrong.  Why do I say that?  Because someone, either inside or outside the company, sees an opening-a weak spot-in the IC classification defenses and is attacking.  That’s what happened to Microsoft in the mid 1990’s and to FedEx more recently.  You hear about the big cases, but it happens everyday somewhere.  Most companies pay up, lick their wounds, and swear not to get caught that way again.  But they have paid a very expensive tuition for their education-many times more than they would have paid doing it right in the beginning.

How to protect your company:

Employ an expert to help you-someone with the knowledge and experience to be right the first time-not a weekend warrior with 25 other jobs on their plate.

This expert will:

• Verify the status of the project and insure it is set up correctly for IC compliance before the job starts.
• Before the consultant is hired verify they qualify as an IC.
• Take you through the above checklist to insure you are protected.
• Perform these tasks accurately, efficiently and cost effectively.

IC compliance is too important to leave to a weekend warrior.

Collabrus is a leader in the contingent workforce service and IC compliance industry.  For example, as Collabrus’ Compliance Service Manager, I have been making the proper employee-independent contractor status determinations, on one side of the tracks or the other, for over thirty years.  I have made literally thousands of these determinations in almost every conceivable industry.  Why do I mention this?  Because this is the level of expertise you must seek out to help you.  Why?  Because the other side will employ such an expert to prove you wrong when the conflict comes-bet on it!