Independent Contractor Compliance Blog - by Collabrus™

Do you have two minutes? Take this short test to see if you are misclassifying your consultants.

My clients often ask me for the silver bullet, the quick and simple way to know for certain if a consultant is properly classified as an IC or not. 

The truth is there is no silver bullet. Common law is a complex area and it takes an expert to make the right decision, or to help you set up an IC relationship properly so that down the road a government auditor, or court, won’t reverse your decision.

There are, however, some universal Red Flags that shout out “Employee Misclassification.” I’m going to share them with you today.

The questions below will give you some insight about these Red Flags and if your company is at risk or not. You need to be brutally honest in answering the questions (just like an objective third party would) because this is how a government auditor will approach it!

Answer the following questions for any consultant you currently have classified as an IC.

Answer ‘Yes’ or ‘No’ to the following:

1. Have you renewed the consultant’s contract several times, with minor changes in the deliverables, which has had the practical effect of extending the initial engagement for an indefinite time period?
2. Do you provide the consultant with a work station at your facility?
3. Do you provide the equipment needed to do the job (a computer, software, office supplies, vehicle, or tools)?
4. Do you pay the consultant’s expenses?
5. Do you pay the consultant by the hour?
6. Do you pay the consultant even if a job needs reworking?
7. Do the day-to-day duties vary for the consultant depending on the needs of the company?
8. Does a manager in your company oversee the consultant’s work and have the authority to insist on reworking or changing the method of doing the job?
9. Has the consultant become exclusively dependent on the work you provide for his/her livelihood because he has either dropped his other clients, or never had other clients?
10. Is the consultant expected to attend regular meetings with your employees?
11. Was the consultant once your employee and now does substantially the same job, under similar working conditions, as an IC?
12. Can you decide what hours the consultant will work?

Scoring

If you answered ‘Yes’ to four or more questions for a consultant you classify as an IC, there is a possibility the consultant is misclassified.

If you answered ‘Yes’ to six or more questions the consultant has a high likelihood of being misclassified.

However, to be sure you need a full evaluation because this list is not complete and the weighting of each factor may vary depending on a number of other factors. 

One Last Thought

If you do not know the answers to these questions then your company could be at serious risk. You need to gain control now before it become a much bigger problem. This type of evaluation is one of the services Collabrus provides to clients throughout the United States.