In an era of flexibility and fluctuation in employment, employers are increasingly adapting with unconventional work arrangements. While these unconventional arrangements afford employees much-desired flexibility, they may pose dangers for the unwary employer.
A common method of providing employees the perk of flexibility is to offer employment as an independent contractor. These arrangements offer benefits to both parties. For the party seeking a worker, they may schedule work to suit fluctuations in business and allow variable compensation. Consequently, the worker enjoys a flexible schedule and the ability to determine how much or how little they would like to work.
Unfortunately, these arrangements are, in many instances, illegal. Increasingly, individuals and courts are becoming aware of the inherent dangers of independent contractor relationships as they give rise to a rising number of lawsuits. Independent Contractors are a strict class of individuals qualified to provide services in exchange for compensation. When a true independent contractor relationship exists, the purchaser of work is free from obligations such as providing health insurance, sick leave and personal time or paying the independent contractor’s federal and state taxes, L&I, or unemployment insurance. However, there are few truly legal independent contractor relationships and employers who are unaware of the legal test may find themselves on the wrong side of state and federal law.
In Washington State, employers must look to WAC 162-16-230 to test whether an individual fits the criteria for an independent contractor. WAC 162-16-230 contains a comprehensive approach to determine whether someone is properly classified as an independent contractor or should be classified as an employee entitled to all rights and benefits as an employee. The most critical factor in this test is the control of work. If the person engaging the other for work controls the manner and means of performance of work, they are most likely an employee. Further, if the tools and place of work belong to the purchaser of the work, the individual is most likely an employee. Other considerations include supervision, the detail of the control over the work, the frequency of the work, and whether the person engaged to do work carries their own business license or otherwise evidences an intent to conduct business for themselves. The existence of a contract identifying the provider of work as an independent contractor is not, in and of itself, conclusive to determine whether the individual is an employee.
Employers would be well served to consider these aspects prior to engaging in an employment agreement. Ultimately, the burden is on the person asserting independent contractor status to prove the status. In the event a person is incorrectly classified as an independent contractor, the employer may be required to repay state and federal obligations to employees such as taxes and resulting penalties.