It’s all about control. Regardless of what you call them, your “independent contractors” may very well qualify as employees for tax purposes. The degree of control the hiring party exerts over the party performing the work largely determines whether the person or company is an independent contractor or employee, regardless of the hiring party’s intention. Ensuring you have the proper contracts in place that clearly lay out the responsibilities of both the worker and the employer is an important step. These agreements should address specific information about things like the availability of employee benefits and the party responsible for tax reporting, among a number of factors that define the nature of the relationship between the hiring party and the contractor or employee.
(A version of this article previously appeared in the Valley Business Front.)
The CEO’s voice was controlled, but I could sense the panic underneath. He was about to crack. It sounded almost like he might even start crying.
“We have paid a total of more than one hundred thousand dollars for that web site over the years!” he said, his voice quavering with anger. “And now the developers won’t even give us a copy of it. I want you to sue them tomorrow. I want justice!” he said.
“Whoa, whoa, OK, yes, justice, of course,” I said, “but before we start a lawsuit, let’s figure out what they’re thinking, from a legal perspective. Do you have a written contract with this web site company?”
He did have a written contract. He sent it to me. It was about four pages long and mostly detailed all the various types of work that the developers were supposed to do on the web site.