THESE AREN’T THE EMPLOYEES YOU’RE LOOKING FOR: STOPPING INDEPENDENT CONTRACTORS FROM BECOMING FULL-FLEDGED EMPLOYEES
The use of independent contractors is a growing trend in the American economy, and many believe the trend is here to stay. Independent contractors come in a variety of shapes and sizes. Companies like Uber rely almost exclusively on independent contractors, and there has been significant increase in the use of independent contractors for a variety of duties (in nearly all industries).
Using independent contractors comes with many benefits for employers. For example, the relationship between hirer and independent contractor is not governed by the Fair Labor Standards Act (“FLSA”), the National Labor Relations Act (“NLRA”), the West Virginia Workers’ Compensation Act (“WVWCA”), or the Family Medical Leave Act (“FMLA”), nor are employers liable for the payroll taxes or negligent acts of independent contractors. However, the demarcation line between an employee and independent contractor is beginning to get muddied. This means it’s even more important to understand whether your independent contractors really are independent.
Short Term-Control and Negligence Liability
In the average independent contractor/hirer relationship, the hiring party contracts with the independent contractor for one job, completed at a certain date, for an agreed on amount. Under West Virginia law, and most states, the hiring party is not liable for the negligent acts of the independent contractor. However, if a hiring party exercises enough “control” over the contractor, it may become liable.
For example, when you hire a painting company to paint the outside of your office building, the company would normally go about its business without much interference from you. Maybe you tell them when it needs to be done and which color paint to use. But, what if you decide you want the painter to use a certain type of ladder? Then you ask them to only use a certain type of brush, and you, for some reason, limit the type of safety equipment they use. At some point, you have exercised enough control that you can be held liable for the negligence of that independent contractor and may have to pay for injuries to one of the contractor’s employees or an innocent third-party.
Avoiding exercising control to the point of liability doesn’t mean you have to let the independent contractor run freely around your workplace. You, as the hiring party, can retain broad general power to supervise and direct things related to safety or access to the jobsite. However, you should be careful in directing exactly how an independent contractor goes about the work. Exactly where the line can be is a gray area, but the key is whether you stopped the independent contractor from doing the work its own way.
Long-Term Control and the Employee/Employer Relationship
Companies that use independent contractors as a foundational piece of their labor supply should be careful. Long-term control, or the right to control, independent contractors can have far-reaching implications. The two main issues revolve around the FLSA and NLRA.
Under the FLSA, if you hire an independent contractor, you may still be found to have an employer/employee relationship, depending upon the answers to the following questions: How integral is the work performed by the worker to the employer’s business? Does the worker determine his own profit or loss? Does the worker have a permanent relationship with the employer? How much control does the employer exercise over the worker? Does the hirer refer to the worker as an independent contractor? The implications of this are drastic as you, the hiring party, might have to comply with the FLSA (and FMLA) for overtime, vacation pay, breaks, and a myriad of other regulations.
Under the NLRA, the determination of employer/employee status is simpler. An employer may be a joint employer of an employee for the purposes of unionization under the NLRA when they either exercise control over the terms and conditions of employment or have retained the right to do so. You, as the hirer of an independent contractor, now merely need to reserve the right to control the contractor’s work, and you may find yourself across the bargaining table from a group of workers you thought were simply independent contractors.
Companies that use independent contractors should be careful. No company wants to unexpectedly owe overtime or vacation pay to a worker it thought was employed by another party. So long as companies respect the independent contractor/hirer relationship, and minimize the amount of control over the contractors, they likely can avoid being found as a true employer of the independent contractor.