Do you currently assign work to independent contractors or plan to do so in the future? It’s a good idea to examine the reasons you have for classifying these workers as independent contractors instead of as employees.
Join Kara Govro, Senior Legal Analyst at our HR partner, Mineral, for a look into the differences between these two classifications, as well as a review of the related DOL and IRS tests. In this session, Kara will also provide tips to help you avoid misclassifying your workers.
This session was recorded on August 19, 2021
Webinar Transcript:
Kara (00:05):
Hi everyone. Good morning. It is nice to be here with you or afternoon, I suppose it could be afternoon in some places at this point. Today we are going to be talking about independent contractors and how you can avoid costly misclassification. My name is Kara. Many of you have probably been to my webinars before. I practiced employment law for a number of years before joining the team here where I’m a senior legal analyst, keep track of employment laws that are changing in all 50 states and at the federal level, and try to keep all of you up to date with that information and say it in ways that make sense.
Kara (00:42):
So that’s me, let’s launch into just a little bit of housekeeping here, the usual. We will send you a copy of this recording and the slides within about a day. So sometime tomorrow, possibly today, but by sometime tomorrow you will get a copy of this. So if you’re seeing things that you’re like, ooh, that looks really helpful. And I would like to look at that again. We will be sending it your way. We do have one little poll, love for you to participate. And I’ve got the Q&A box open on my screen. So if you want to send questions in, I would love to pick those off both as we go through and then I’ll leave some extra time at the end or I won’t leave time.
Kara (01:25):
I’ll probably end up staying over, but we will have time for Q&A. But use the Q&A box, not the chat box. There two options there. The Q&A box is the one that I will actually see. Also, an upfront note on that. I am an attorney, but I’m not your attorney. And I know from having given this webinar a number of times that a lot of you will chat in a very specific example and ask me, can this person be an independent contractor or not? And while I can sort of give my vague feelings about that, that’s going to be a very fact dependent, scenario dependent answer every single time. So me giving you my feelings on that is not a equal opinion. If you’re chatting that in, and of course there are many situations where I just won’t have enough information.
Kara (02:12):
But that said, hopefully, the information provided here will help you make those assessments on your own. So here’s our agenda. We’re going to talk about the benefits and the drawbacks of having independent contractors work for you. Then we are going to look at three different tests. We’re going to look at the test used by the department of labor, the test used by the IRS. Now, we’re going to look at the ABC test, which I just added the ABC test, not 20 minutes ago for your benefit. I didn’t use to cover that because it’s not a federal test. But it covers enough of the population now. And it’s probably interesting enough that we might as well touch on it. So that will not get nearly as much time, but we do have a slide on that.
Kara (02:55):
And then finally, we’ll talk tips and traps. So just some sort of general best practices for independent contractors. All right. So benefits, most of you are familiar with the benefits of having an independent contractor. That’s why you have them in the first place, or that’s why you’re considering them. So we don’t owe them overtime. We don’t, in fact, owe them minimum wage. If they are properly classified as an independent contractor we don’t have to do that. We also don’t have to pay taxes. We don’t have to worry about worker’s comp or an employment insurance. We don’t have to offer them benefits. You might be an employer that’s required through the ACA to offer health insurance. You’re not gonna have to offer that to an independent contract, assuming they’re properly classified.
Kara (03:43):
It also keeps your employee count down for state and federal laws that might apply at a certain employee account. Like 50, for instance. It will also, of course, reduce management burdens, hopefully. And maybe even a view office space. I feel like that’s probably less important now that we’ve kind of gone remote. But we haven’t all gone remote. So for some of you that may still be relevant if you’ve got no space left, but you’ve got an independent contractor who can work from home that might work out nicely. What are some of the drawbacks of using independent contractors? Well, you can’t manage their work as closely. And you might be saying, what do you mean? Why can’t I manage their work as closely?
Kara (04:34):
Well, one of the key elements of someone being a properly classified independent contractor is that they have quite a bit of control over the work, how they do it, when they it, where they do it, et cetera. So if you are managing them as heavily as you are managing a regular employee, that’s a bad sign. Along those same lines, we can’t impose as many expectations on them as we can a regular employee. And of course, if done incorrectly, it can be very expensive. So if the misclassification was unintentional, an employer is going to face at least some of these penalties here that I’m about to list for you. I don’t want you to quote me on this. In fact, the $50 may have been adjusted since I last looked at this.
Kara (05:23):
But at one point in time owe $50 for each form W2 that employers failed to file because of classifying workers as an independent contractor. That’s pretty minor. Since you didn’t withhold income taxes from that independent contractor who was misclassified, there penalties of 1.5% of their wages plus 40% of the FICA taxes that weren’t withheld from the employer. 100% of the matching FICA taxes that the employer should have paid. There’s interest accruing on these paid, on these, excuse me, on these taxes that weren’t paid from the date that they should have been paid. There’s also a very specific failure to pay tax penalty of 0.5% of the unpaid tax liability for each month up to 25% of the total tax liability.
Kara (06:14):
If the IRS suspects fraud or intentional miss conduct there are more fines for that. You could be subject to penalties including 20% of all wages paid plus 100% of the FICA taxes. And this is just for the government. That doesn’t cover the kind of trouble you could be in if you have been working an independent contractor to the bone and it turns out they should have been an employee, and now they’re talking to the state or federal department of labor and saying, “I didn’t get minimum wage and I didn’t get overtime.” That’s really probably where you’re going to get hit, particularly, if you’ve been working someone a lot as an independent contractor. So we want to get this right. This can get it very expensive, very quickly.
Kara (07:05):
So let’s look at the tests that we’ve got out there to determine if someone is in fact, an employee or a properly classified independent contractor. And I know it’s really annoying that I keep saying properly classified, but that’s really key. Just because you call someone an independent contractor doesn’t mean that they are. Just because they sign something saying I’m an independent contractor doesn’t mean they are. And just because they ask to be an independent contractor, doesn’t mean they can be. So proper classification is key here. This all boils down to sort of legal meanings. And we can’t get creative with those. And employees and workers cannot sign their rights away.
Kara (07:54):
So there are two federal tests for worker status. We’ve got the DOL test, which is called the economic realities test. And we’ve got the IRS test, which is about control over the work. Good news for all of us. These tests are very, very similar. They sort of lay them out a little differently, but they are, at the end of the day, fundamentally the same. So I wouldn’t engage in a lot of handing over which of these to use. I mean, I would encourage you to look at both of them. But chances are, if you pass one or if an employee passes one, excuse me, an independent contractor passes one, they will also pass the other.
Kara (08:40):
So let’s take a look first at the DOL economic realities test here. We are looking at the extent to which the work performed is an integral part of the employer’s business. We’re looking at whether the workers managerial skills affected their personal opportunity for profit or loss. We’re looking at the relative investments in facilities and equipment by the worker, as compared to the employer. We’re looking at the worker’s skill and initiative. We’re looking at the permanency of relationship with the employer. And then we’re looking at the nature and degree of control exerted by the employer. We’re going to talk about each of those individually now. First up, work integral to business. So if they are doing something that is integral to your business, it’s more likely that they are an employee.
Kara (09:38):
So let’s say you are a business consulting firm or an HR consulting company. And the work of your consultants is what you sell. It is integral to the business. It’s what you offer. It’s what you put on the market. So your business consult are doing work that’s integral to the business, makes them much less likely to be independent contractors. On the other hand, your IT support team or the person you hire occasionally to come in and do the work of a handy person, they are not integral to your business. They’re not part of you offer. You might need them to keep things up and running, but they would not be considered integral in this sense. So they would be safer as independent contractors.
Kara (10:27):
Another example would be in a restaurant, the work of the cooks and the wait staff is integral to the business, same with the bartender. However, if you hire someone to do the interior design or to create a new menu for you, that is not integral to the business. That person’s going to be safer as an independent contractor. We also look at the managerial skills of the worker and whether they’re using those managerial skills for personal profit. So this isn’t about whether you treat them like a manager or whether they manage any of your people. It’s about how much basically they’re running their own business. And a true independent contractor should exercise managerial skills.
Kara (11:13):
They’re making decisions about staffing their own projects, about advertising and purchasing. They’re negotiating contracts with the people they work for deciding which jobs to perform, et cetera. And that will affect their opportunity for profit and loss.
Kara (11:34):
We’ll also look at the relative investment and risk of loss. Relative being a keyword here. So the DOL emphasizes that we’re not looking at the nature or size of the workers’ investment, but rather how the workers’ investment compares to the employers of investment in its overall business. So the DOL says that the worker’s investment must be significant in nature and magnitude relative to the employer’s investment in its overall business to indicate that the worker is an independent contractor. So the DOL says that investing in tools and equipment is not necessarily a business investment that indicates that the worker is an independent contractor. So the fact that they’ve purchased their own laptop doesn’t mean that they’re in IC. If they have purchased a whole lot of things, they’ve purchased a laptop and a entire software suite and a company vehicle and a company website.
Kara (12:40):
Now, we’re looking at some investment. So again, we’re looking at relative investments here. We will also want to see that they’re using their business skill and initiative elsewhere. So are they on the open market? If you are the only person they work for, that’s usually not a good sign. Granted, you may have hired them for a really big project. You need that menu redesign right now and you’ve got a really deep menu and they’re not going to be doing anything else for the next four weeks other than redesigning your six different menus. That’s fine that they don’t have other clients in the meantime. But if you’re the only client they’ve worker for the last two years, you’ve got this open-ended contract, they’re constantly doing 40 hours a week of work for you and not anyone else. They don’t have a business website. They’re not advertising on Craigslist or LinkedIn. They look a lot more like an employee.
Kara (13:50):
Having a registered business is also another good sign that they are sort of legitimately out there. We’ll also look at the permanency of the relationship. So I sort of mentioned this just a second ago, but if someone has worked for you as an independent contractor for a very long time, and it’s an open-ended deal where it looks like they might continue to keep working for you for a very long time, that again, looks like an employee. If they never stop working for you, we’re going to start questioning whether they’re really an independent contractor or whether they should be an employee, something else. So we do want to spell out the nature of the relationship early on, although, like I said, not 10 minutes ago, because you spell it out in writing doesn’t necessarily mean that it’s legal.
Kara (14:46):
So you can’t just get around one of these things by writing it out and agreeing to it. But it certainly doesn’t hurt for everyone to sort of be on the same page and have that understanding. Finally, we’re looking at the nature and degree of control. And this is actually a really big one. It doesn’t sound quite as specific as the others, but we want to see that the person doing the work, if they’re an independent contractor is really in charge of how that work gets done. So when it gets done, where it gets done, how it’s done. If you are telling them that they need to be in your office between 8:00 and 5:00, Monday through Friday, they’re going to sit at this particular desk, they’re going to use this particular suite of software, and you are going to have them follow steps one through five when getting the project done. That is a lot of control on your part. That is almost certainly too much control over an independent contractor.
Kara (16:03):
Can you occasionally dictate what they’re doing, where they’re doing it, when they’re doing it? Yes, of course. If you need them to be in the office for a particular meeting each week where topics that are relevant to their project that they’re working on for you are happening, that’s okay. That’s a minor bit of control that you are exerting there. But if you’re controlling them like you control an employee, then they’re probably an employee. All right. We’re going to pause for a minute here and do a poll question just to sort of see where you are all at right now. So tell us if you are reliant on the work of ICS, if you have maybe a few ICS but they don’t make up more than about 10% of your business. You can ballpark that. Basically, they’re not a lot of your workers. Looks like a lot of you already are pretty reliant on ICSs.
Kara (17:12):
Some of you have not used them in the past, but you’re considering it. And then last answer, we don’t have any or want any, you’re just here for the cookies. I wish there were cookies. But maybe, it’s Thursday morning and you felt like learning something. And that is totally cool. And we’re glad to have you here as well. All right. I would say that good chunk of you have participated. So what this looks like, I’ll share the results, they’re anonymous after all. Is that about a quarter of you are reliant on the work of ICS, which is more than I expected. So I’m glad you’re here. Hope hopefully you learn something and hopefully what you learn makes you feel good about how you have people classified. A whole lot of you have a few ICS. So also good that you’re here to double check that classification.
Kara (18:04):
A few of you are considering it, and a few of you are just here to learn or have out. Welcome, and we’re glad to have you as well. Thanks everybody for filling that out. Okay. Now let’s hop onto the IRS control test. So like I said, this is a lot of overlap with the DOL test, just kind of organized differently. So we will not spend quite long on this one. But first up, we’re gonna look at behavioral control. So what type of instructions are given to employees? An employee is generally subject to the business’ instructions about when, where and how to do the work is that I mentioned before. All of the following are examples of types of instructions about how to do the work.
Kara (18:59):
And I’m thinking I pulled this right from the government. So when and where to do the work, what tools or equipment to use, that’s considered control. What workers to hire or who will assist with the work, where to purchase supplies or services. This is a little bossy. This is a little too controlling. What work must be performed by a specified individual. So if you’ve hired a team and you’re like, no, I want that person to do that part. And this other person to do that part. That’s too much control over your independent contractor’s business and who is actually doing the project for you. And then what order or sequence to follow when performing the work. This is all a little too instructive. We’ll also look at degree of instruction. So the more instructions you’re giving, the more this person looks like an employee that’s pretty straightforward.
Kara (20:00):
Less detailed instructions reflect less control, making it more likely that someone is a properly classified independent contractor. Of course, this is going to vary between jobs just because you need to give someone some instructions, even specific instructions does not necessarily mean that they’re automatically an employee. Both these tests are called balancing tests or factors tests, which are really annoying. I would much prefer a test where it’s 20 questions and if you get more than 15, they’re an independent contractor. Unfortunately, that’s not what we’ve got out here. So you have to look at all these things together and then do some balancing on your own and hope that you’ve come up with the right solution.
Kara (20:47):
So really at the end of the day, if you’re in doubt, make somebody an employee to avoid all those potential fines and penalties and lawsuits and wage and hour issues. So but, of course, you’re here because you want to find the line and that’s okay. We’ll also look at whether you’re using an evaluation system. So if you’re doing performance reviews on an independent contractor, that is a very bad sign. Granted maybe somebody is doing a fairly lengthy project for you and you’re going to meet with them three times, give them some feedback on whether you like what they’re producing, that’s okay. But again, if you’re doing a full blown performance review situation, that person looks like an employee.
Kara (21:32):
And then finally we’ve got training. So if you’re providing training on how to do the job this indicates that you, the employer want the job done in a particular way. And that’s pretty strong evidence that what you have is an employee, not an independent contractor. Someone asked, so if you provide a company email address to a consultant, would that make them an employee? No. No. That would not automatically make them an employee at all, in my opinion. If you do all of these other things then yes, you may have an employee. But just one little thing here or there is not going to tip the skills. We just talked about, these are factors tests. So if you’ve got 15 things that look really solidly like an independent contractor and then also you give them a company email address, I don’t think that’s going to sink, yeah.
Kara (22:35):
Someone asked, how do we report competitors for breaking these rules? We’re at a competitive disadvantage because our competitors only use independent contractors and we can no longer use independent contractors. I don’t know. I have no idea how you report other companies for breaking the rules. I mean, for employees, there’s the department of labor wage an hour hotline basically, that they can call. And I suppose as you could try to report your competitors using the hotline, I think it’s probably unlikely that the DOL is going to follow up on that. Just because if we could freely report competitors like that I think they would be a big mess, would be a big mess. The DOL, that’s all they would be doing. So I think they need sort of like credible evidence from a injured employee to probably launch into an investigation.
Kara (23:38):
But I suppose you could give it a shot and just see if that hotline works for you. Probably not. But all right, let’s look at the next element of this test which is financial control. Again, we’ve sort of talked about all of these things with the DOL tests as well. So are the business aspects of the worker’s job controlled by the company. The business aspects, the money aspects. So have they significantly invested more than just the laptop? Everybody’s got a laptop, okay. Everybody has an iPhone. Have there been other investments? If they’re a cleaning service, do they have their own vacuums and their own cleaning products and their own company vehicle that they bring all of those things in, et cetera? Are there unreimbursed expenses?
Kara (24:32):
If you’re paying somebody back for their expenses, that is an indication that they are an employee. Could you agree with an independent contractor that certain things they’re going to do for you will be reimbursed at cost? Yes, you could of course do that. Just be careful with it. If they’re submitting absolutely every little thing, they stop looking like an independent contractor because an independent contractor could work that into how much they’re charging you. What their bill looks like. Again, we’re looking at opportunity for profit offer loss. So how well are they managing their own business? Are they advertising it? Are they out there? Are there services available to the market? Method of payment. This is sort of like, I don’t know, payroll, right? So if they’re on your payroll, it now looks more like an employee.
Kara (25:27):
We’d probably like to see separate checks be as business expenses to pay independent contractors. Finally, we’ve got type of relationship. And we are going to look at whether the parties are clear on what type of relationship this is. So the fact that a worker has gone into it thinking that they’re an employee is a bad sign. So we do want a written contract. Like I said, a written contract doesn’t actually get you around the law, but it certainly helps as a piece of evidence that that is what is intended and that everyone understood. We also really don’t want to see this person get employee benefits for the most part. Permanency of the relationship. We’ve talked about that. Generally we want to hire independent contractors for a certain project or a certain length of time, not indefinitely.
Kara (26:25):
And then we want to know if the services provided our key activity of the business. So this is back to that whether what they do is integral or not. Somebody asks, is there a statute of limitations for an employee to report misclassification? Generally, it’s three years. It will depend on state law. State law might be shorter or longer. I believe federally it’s generally three years. Usually, they’ll only look back two years. But if they see intentional misconduct, intentional misclassification, they’ll often look back three years. So it’s a while, it’s not super short but it’s also not a whole decade. So at most, employees are likely to get three years of back pay and you’re going to potentially get into three years of trouble. Often that will just be two years though. Kind of depends on whether it looked intentional and whether you did it repeatedly or not.
Kara (27:36):
And then someone asked, by on payroll, do you mean we’re paying employees and independent contractors biweekly? Now, I really mean paying them through the payroll system. But again, these are factors tests. The fact that you issue their pay through every two weeks through the payroll system does not necessarily mean like, oh no, they’re an employee now. But generally we like to see them paid as a outside business expense, kind of like you would pay for the catering for lunch as opposed to how you pay your other employees. Okay. Let’s take a look at the ABC test really quick. So the ABC test applies in California, Massachusetts in New Jersey, when it comes to sort of like their own state department of labor.
Kara (28:25):
So that’s a very controlling test in those states. But many states do use it to figure out whether someone’s entitled to unemployment insurance, which totally is weird to me that you’d have different rules with the wage an hour group and department or agency, and the unemployment insurance department. So basically, you could have one hired as an independent contractor using the DOL and the IRS test. Everything’s hunky-dory. They finish their project for you. If they go to file for unemployment insurance, which they probably shouldn’t be doing if they’re real independent contractor. If there’s any real debate about it in many states, I think maybe more than half, the unemployment insurance department will apply the ABC test to see if they were, in fact, an independent contractor or an employee.
Kara (29:24):
And if it looks like they were an employee, according to the ABC test, they could be granted unemployment insurance. And the duration that they worked for you would be incorporated into their base here, whatever. So you can look that up on the internet. I don’t have the list in terms of unemployment insurance departments, but when it comes to wage an hour claims, we do know that California, Massachusetts and New Jersey used this test. And this test is extremely strict and extremely hard to pass. So for the ABC test, the worker is free from control. Period, end of story. It’s not a balancing test. It’s not a balancing question. If you have control over how they do the work, they’re not an independent contractor.
Kara (30:10):
They have to be performing work that’s outside the usual course of your business. So if you offer consulting services and you hire them to offer consulting services, they’re an employee. End of story. And then they are customarily engaged in an independently established business. So they have a business of their own. Again, sort of period, end of story. And all three of these have to be met in order for someone to be an independent contractor if we are applying the ABC test. All right. I see that I am already running over. I do apologize for that. The next couple slides are just some tips and traps. They’re not too deep, so we can run through them pretty quickly.
Kara (30:53):
And then I can hang around to answer a few more questions. So things we don’t want to do. We don’t want to give independent contractors an employee hand. That is a very strong indication of control. It’s 50 pages of instructions and exactly how we want things done. So don’t do that. Can you give them certain policies? If they’re going to be in and out of your building or interacting with your other employees in any way, probably a good idea to give them your unlawful harassment policy among others. Okay. So that’s probably really the most important. We want everybody to get the don’t harass other people policy, even if they’re independent contractors. We, of course, don’t want to forbid working for competitors. That’s not going to end well.
Kara (31:41):
And we don’t want to be using independent contractor schemes to avoid overtime because as I’ve said a few times, that could be a very expensive mistake. Final slide here. What we do want to do. I’ve said it a few times, put the relationship in writing. Just because it’s in writing doesn’t mean it’s legit, but it helps. Provide deadlines instead of micromanaging. So as I mentioned before, you can check in with them and see if you like how their work is looking. If it’s going to be good for you. We don’t have to be 100% hands off, but providing deadlines and check-ins is going to be a much safer way than sort of speaking with them on a very regular basis about the work they’re doing. And along those same line, we want to give them as much control as possible.
Kara (32:28):
All right, thanks everybody. One more reminder, we will send you a copy of the presentation as well as the slide deck within about 24 hours. I’m going to hang around and see if there are a few more Q&A’s that I can pick off here. Somebody said, so the ABC test needs to be all three? Yes. You have to meet all three elements of that. Not two, not one, all three. If you don’t meet all three, you’ve got employee in those states, or if the unemployment insurance department is looking into it in a whole bunch of states. Somebody asks, is the state location for the ABC test where the ICS is located or where the business is located? So that’s a great question. And it is going to depend on what the state law says.
Kara (33:20):
So usually we apply laws where the employee is doing the work. However, California, for instance, tries to make all of their laws apply regardless of where employees are or where employers are. They work really hard to cover every, they spread their regulatory wings, as I like to say. So if you’re in California, then I would probably apply the ABC test to someone working for you, even if they’re in Colorado, because that’s how California wants it to work. Would California win that in a court case? I can’t be sure about that. We’re not entirely sure that California gets to do the things that they try to do. But until they’re challenged, I would just do what they think they are able to do. So check state law on that one.
Kara (34:16):
Oh, good. That actually answered a couple of questions. Several of you were asking the same thing. All right. Here’s a good one, what should we do if we suspect an independent contractor is actually an employee? So the unfortunate answer is that you really need to call an attorney at this point in time. An attorney will help you figure out how much trouble you’re in and the best way to approach that. So if you, for instance, have someone who’s an independent contractor who you have been working to the bone, right? They’re doing way more than 40 hours a week for a long time and now you’re like, “Ooh, they probably should have been an employee this whole time.” There’s going to be a lot of financial liability attached to that misclassification.
Kara (35:03):
And the best way to mid that would be to talk to an employee, an employee, talk to a lawyer sooner than later. They may be able to help draft an agreement or a release or something with that worker to save you some money, basically. You want to get out in front of it. So if you are in that situation, I would talk to an attorney who practices specifically employment law in your state. I talk to a lot of people who say, “Oh, I asked an attorney what they thought about this.” And I say, “What did that attorney do?” And they’re like, “Oh, it’s my next door neighbor. He does personal injury.” Personal injury guy doesn’t know anything about employment. Okay. So we, for the most part, know a couple areas of law of TAFs, so you’ll want to find some who specifically does employment to get into that issue.
Kara (36:02):
Similar question, of we change status of an independent contractor to an employee now could penalties for the time they were an independent contractor be applied? Yes, absolutely. And by the way, a lawyer probably can’t rate out of any of those penalties. People tend to be able to keep wage an hour claims even if, basically, they’re hard to settle away. Which is why you should talk to an attorney, because they will be able to help you in some fashion before you step in even harder. And if you don’t deal with these things right away and the independent contractor who should have been an employee goes out and finds their own lawyer, I mean, really what you’re saving yourself from is hopefully a lot of attorneys fees.
Kara (36:53):
You might not be able to get out of any of the penalties or any of the wage an hour back pay liquidated damages, et cetera. That may all be the same, whether you get an attorney now or not, but you could settle the whole thing pretty much right out of the gate instead of three months from now when your independent contractor/employee has been talking to an attorney nonstop, and that attorney now sends you a bill for $15,000 for the work they’ve done. So that’s really what we’re sort of heading off at the past here. All right. Lots of questions rolling in now. I’ll take just a couple more because I know we’re over time already. Is there a ratio of items passed versus failed on the DOL or IRS tests that can be used as guidelines? Nope. Nope. No one will say what that ratio is. I want the ratio to be really, really high. I feel like 80%, but that just me sort of pulling a number out of nowhere.
Kara (38:07):
So half and half, we’re not looking for just over half. If you’re like, “Oh, they’re just over half leaning toward independent contractor.” I would make that person an employee. Personally, that’s just me. I don’t want to mess with this. I have done these wage an hour claims and like I’ve said a few times, they get very expensive, very quickly when you’re misclassifying people. So I would certainly err on the side of making someone an employee, unless in my estimation the ratio was something like 80%. Does 80% even guarantee that you stay out of trouble? No, it doesn’t because these are annoying factors and balancing tests. But 80% feels pretty strong to me. Again, not your attorney. All right. Let me see if I can just find one more in here. All right. Here’s a fun short one. Must the independent contractor send you an invoice? No, that is not required by any of the tests that they send you an invoice.
Kara (39:12):
However, it’s a really good idea because it does sort of indicate that they have the wherewithal to run a business and send an invoice. And either tell you that they’ve completed the project or they’ve done X number of hours per week. I did a lot of contract work as an attorney way back when, and I always sent an invoice. It didn’t have to be complicated. It could be a word document that says, I did six hours at $50 an hour. Please pay me. But required, absolutely required. No. Is it really good evidence that they are an independent contractor? Yes. I would definitely ask for an invoice. I don’t think there’s any particularly good reason that someone shouldn’t be able to provide you with that. All right. Thank you all so much for joining me today. I hope this was educational and we will get this deck to you in about a day. Have a great rest of the week.
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