Labor & Employment Law Articles

The Risk of Using “Independent Contractors”

In recent years, companies have sought to avoid providing benefits and the consequences of the numerous employment statutes by treating workers as independent contractors or by leasing workers from other companies. The supposed benefits of these practices can prove to be illusory, and employers who engage in these practices can be subject to substantial exposure.

If individuals are treated in every respect as employees, the mere fact that they are designated as "independent contractors" will not establish such status. In order to establish "independent contractor" status, companies must show that the individuals involved have the right to control the manner and means by which they perform their work. This can include setting their own hours, the right to refuse assignments, the right to subcontract work, or the right to work for other companies. Many government agencies also require some evidence that the individual has some investment in equipment and the ability to sustain both a profit and a loss.

Companies who lease employees from other companies and anticipate immunity to the various employment statutes may also be surprised. Even though leased employees may be on the payroll of another company, that does not preclude them from being considered the employees of the lessor company. A lessor company and a lessee company can be joint employers where the lessor company retains control over the terms and conditions of employment of the leased employees. In determining joint employer status, the National Labor Relations Board will look at such factors as supervision of the workers, ability to hire and fire, involvement in day-to day labor relations, establishing wage rates, promoting and disciplining. The bottom line is that if these leased employees are treated the same as your regular employees, they will be legally deemed to be your employees as well as those of the leasing company.