Employee or Independent Contractor?

At times employers must decide whether a worker is an employee (W2) or independent contractor (1099).  In general, most people who work in an employer’s business regularly are employees, not independent contractors.  An example of an independent contractor is a painter.  An employer hires a painter for a project like painting the breakroom in its office. The painter brings his or her own paintbrushes, tape and floor cover.  The painter does not work exclusively for the employer; he or she does paint jobs for other people. Essentially, the painter’s work is not a core part of the employer’s day-to-day business.  Once the painter is done with the one breakroom project, the employer does not see the painter again until maybe months later when the employer finds some wallpaper it loves and wants the painter to put up.  Most people who regularly work in or on behalf of an employer’s business are not like painters.  They are not contractors.

An employer may be inclined to pay someone as a contractor because a 1099 tax form for independent contractors will save the employer money in employer taxes, or perhaps  the worker asks to be paid on a 1099 form so that he or she does not have taxes withheld from his or her check.  However, if the Department of Labor and/or a lawyer representing a now disgruntled worker finds out that an employer has misclassified the person as a contractor, rather than an employee, this misclassification could cost an employer much more than it would have cost to pay the worker as an employee in the first place.  The safest route is for an employer to pay its workers as employees.  Employers cannot go wrong by doing that in the eyes of the law.

If an employer does work with contractors, the company should make sure it takes steps to minimize legal problems later, which can include: having an independent contractor agreement, having the contractor submit invoices for payments, and making payments to your contractor’s business entity rather than an individual.

For more information about determining whether a worker is an independent contractor and taking the necessary steps to protect the employer’s business, contact us.

~Author: Antoinette Trott, 2018 Gate City Bar Summer Associate, Emory University School of Law, 2nd year Law Student