Many companies throughout the United States (and in many foreign countries) use independent contractors as well as employees in conducting their business operations. Exactly when and how you should use independent contractors can be vexing, and involves the interrelationship between various factual and legal criteria. Indeed, the applicable legal standards used in determining who is or is not an independent contractor can be dizzying. Businesses quite legitimately make use of independent contractors all the time. On the other hand, one’s ability to safely contract with independent contractors must run the gauntlet of a variety of state, federal and local laws.
Brown, PC has represented clients in virtually all phases of these endeavors. We are often called upon to assist a company in evaluating, writing or revising independent contractor agreements, and/or in implementing contractor relationships into a client’s workforce. Generally, such tasks involve a comprehensive review of the nature of the business and the tasks to be performed by both contractors and employees. A properly crafted independent contractor agreement, and a properly implemented relationship between company and contractor, must serve a plethora of goals.
First, it must secure independent contractor treatment for employment tax purposes, employee benefit plan purposes, and even for purposes of applicable labor and employment laws. There is no tax liability for income and employment taxes paid to an independent contractor. However, if the Internal Revenue Service or state taxing agencies recharacterize the worker from independent contractor to employee, the employer’s liability can be draconian.
A properly crafted and implemented independent contractor arrangement must also preclude the respondeat superior liability for tort and contract liabilities that employers face with respect to the conduct of their employees. On the surface, by using independent contractors, an employing individual or company has no liability under the doctrine of respondeat superior. However, this liability can be imposed if the independent contractor is recharacterized as an employee.
In addition to such objectives, the company’s relationship with the worker must satisfy the company’s need for the goods or services which the contractor will provide. Meeting such a multiplicity of high-stakes goals is no mean feat.
Indeed, virtually no independent contractor agreement is free from liability or immune from attack. Although the same can be said for employment agreements, independent contractor agreements face a fundamental characterization question that can make their status particularly emotionally charged. These disputes are enormously hard on companies too, since they often involve an apparent setting aside of agreed-upon legal and contractual relationships, either at the behest of the workers themselves or at the insistence of governmental agencies. In either case, such recharacterization can have enormous financial consequences.
Lawrence Brown has successfully handled the assessment, drafting and implementation of independent contractor and employment agreements, guiding companies through the multiple shoals of liabilities to the workers and the public, as well as liabilities to various governmental agencies. Mr. Brown has also successfully defended companies facing attacks from taxing agencies.