You may ask: Why would I want to change an independent contractor (IC) into an employee? Over the years, I’ve encountered numerous companies that engage the perfect independent contractor and slowly, inadvertently convert him/her into a misclassified employee.
Here are some “best practices” of these misguided companies. You may use them to either follow their lead or, better yet, to avoid their mistakes.
“Best Practices” to convert a bona-fide independent contractor into a misclassified employee:
1. Have a project description with goals and deliverables that are vague, confusing or non-existent, so it is not clear what the successfully completed project looks like, or when it will end.
2. Keep the IC, originally engaged for a three-month project, working indefinitely. You can draw up a “new contract every six months,” making changes in the project description and deliverables, to give the appearance that a new project or new relationship has been created.
3. Encourage the consultant to drop all other clients and work exclusively for you. This will insure the consultant becomes financially dependent on you.
4. Insist the consultant works full-time for you.
5. Watch over the consultant’s shoulder, as often as you wish, and provide detailed instructions about what tasks to perform next and how they should be performed. (The goal here is to control the consultant’s activities and time, not the end results).
6. Require the consultant to perform other duties occasionally, especially tasks that are not directly related to the original project.
7. Require regular activity reports to account for the time spent working for you.
8. Provide the consultant with supplies, equipment and workspace.
9. Require that the consultant performs the work at your business location, even if it could logically be done elsewhere. 10. Insist the consultant attend your routine employee staff meetings and other company functions, especially if they are not related to the project.
I’ve probably missed a few things you could do, but it doesn’t matter, since no single item on its own is sufficient to make the difference. Also you don’t need to do all of these things, but of course the more of them you practice the more likely you are to convert your IC into a misclassified employee.
The reason this list applies is because it does not matter if you sign a contract and call the consultant an IC as much as how you treat the consultant on the job and the nature of the project’s day-to-day working environment.
Disclaimer: Given the general nature and context of this article, the material presented should not be relied upon or construed as either tax or legal advice. For specific information on recent developments, the effects of particular factual situations or of a particular law in regards to your business, or before making decisions based upon this presentation, you should obtain the opinion of a qualified expert.