Naperville Business Lawyer on the Importance of Classifying Independent Contractors Correctly

As a business owner, you have many responsibilities, and protecting your business and its best interests are certainly among the most crucial. Ensuring the staff you hire adheres to your policies and standards is critical because the livelihood of your business depends on it, as does your reputation. If you are a business owner who chooses to work with independent contractors, you are especially at risk for financial loss and headache if you do not handle the legal aspects of your relationship with those contractors correctly.

Why Working with an Independent Contractor Poses Certain Risks

Employers can run into costly fees because of overdue federal and state income taxes when they work with independent contractors. This stems from confusing independent contractors with employees, also known as the “misclassification of employees.”

Under Illinois law, employers who misclassify contractors are forced to pay higher unemployment insurance contributions, workers’ compensation premiums, as well as higher taxes. They can also end up owing money to Social Security and Medicare, as well as other financial penalties.

In addition, if a certain worker is found to be improperly classified by your business, you can be ordered to reimburse that employee for any and all improper deductions. With all this in mind, it is important to ensure that your independent contractor agreements are correct and valid.

How Do I Know if a Worker Should Be Considered a Contractor?

The law is rather vague when it comes to classifying workers as employees or independent contractors. There are no specific criteria that always make a worker a contractor or always an employee. Instead, there are a number of considerations that must be taken into account. A good way to start is by answering the following questions:

• Is the individual free from your direction and control during the time he or she performs the services? (You only have control or say over the end result of the project.)
• Is the individual involved in an independently established trade, occupation, profession, or business?
• Is the service that the individual is providing performed “outside” the place of business (or outside the usual course of the business)?

If the answer to these questions is “yes,” then the individual can usually be classified as an independent contractor, but exceptions do apply. Be sure to speak with a qualified attorney for guidance on classifying workers.

Call a DuPage County Employment Lawyer

Once you are certain that the worker you intend to hire will be an independent contractor, you will need to prepare a contractor agreement that protects you, your business, and the interests of the worker. Such agreements can be confusing, but an experienced Naperville business law attorney can provide the guidance you need. Call the Gierach Law Firm at 630-228-9413 to schedule a confidential consultation today.

Sources:

Illinois Department of Employment Security

Internal Revenue Service