Read This Before Hiring Your Next Independent Contractor

Read This Before Hiring Your Next Independent Contractor

Hiring employees can be a chore. Employers face numerous rules and obligations, spending time, effort, and money to manage employees and comply with state and federal law. That’s why many businesses turn to independent contractors for their needs.

Under Texas law, an independent contractor is a self-employed individual whose work is not subject to the direction or control of another and who is solely responsible for her expenses and taxes. On the other hand, an employee is an individual whose work is subject to the direction or control of her employer, who is responsible for reporting her wages and submitting employment taxes. 

It sounds great, but independent contractors come with their own rules, and if you don’t follow them, you can create a lot of problems. Employers must know the difference between the two to avoid confusion about roles and responsibilities, operational snags, and legal noncompliance. As such, evaluate your independent contractor relationships with the following rules:

1. Know the Benefits and Drawbacks

Independent contractors can be a godsend for businesses that don’t want to tangle with employee burdens. Independent contractors are low maintenance—you don’t manage them like employees, train them, provide them with equipment, report taxes for them, or offer them benefits. You simply hire them for a specific job, let them work, and pay them.

However, that low maintenance comes with a small degree of control. You cannot force a contractor to keep regular hours, tell them how to work, require them to use your equipment, take your training, offer them benefits, dictate their pay schedule, or prevent them from working with other clients.

2. Calling Someone an Independent Contractor Won’t Make Them One

Labeling a person as a contractor when they act more like an employee won’t be enough to convince courts. Your company must be intentional and careful by creating a distinct difference between your employees and your independent contractors.

For example, don’t require your contractors to keep a typical 9-5 schedule at your place of business. Don’t dictate how they should perform their work or require them to use your equipment and training programs. Don’t pay them on a biweekly schedule, offer them benefits, or incentivize them with stock options. And don’t require them to become your “exclusive independent contractor.”

3. Watch Out for Independent Contractor’s Making Decisions on Your Behalf   

Under Texas law, an agent is someone who, by mutual agreement, acts on behalf of a principal and is subject to the principal’s control. Principals can empower agents to act with broad or limited authority. However, principals must be careful that agents don’t create undue obligations for the principal as it can be difficult for the principal to escape liability.

This pitfall is especially true for independent contractors. While employers have more protections against employees acting as agents, protections are looser concern contractors. As such, you need to decide if you want your independent contractor to be able to authorize decisions on your behalf, and if so, what kind of decisions and under what conditions.

Experienced legal counsel can remedy all of the above issues. Your counsel can tailor solutions to your needs, be it creating your business’s independent contractor policy, drafting contracts to lay out expectations, and managing the authority of any contractors acting as agents on your behalf. 

Does your business use independent contractors for vital work? How do you protect yourself in contracts with them? Don’t wait for a lawsuit before you clarify expectations. To learn more about cultivating appropriate working relationships with your contractors, schedule a consultation.


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