Hiring and the Law —Independent Contractor or Employee?

Devora L. Lindeman, Esq., Partner at Greenwald Doherty LLP, is providing us with insight and information regarding the hiring process. Ms. Lindeman is a management-side employment lawyer and has exclusively represented managers and companies in federal and state agencies and courts with regard to their labor and employment needs for many years.

Questions addressed to Ms. Lindeman may be addressed in this column.

Hiring and the Law
By Devora L. Lindeman, Esq.*

Question:  I’m hiring a bookkeeper to clean up my accounts so my accountant can do our taxes.  Can I retain her as an independent contractor or does she have to be an employee?

Answer:  To answer your question let me review your options—when you bring on someone to help you they can fit into one of a number of categories.  First is the one you identified—is the person an employee or an independent contractor?  However, there are also different types of employees and understanding what those are can also help to answer that question.

One type of employee is what’s called a “regular employee.”  Sometimes companies incorrectly call this a “permanent employee.”  A “regular employee” is one who is hired for no particular period of time, but is expected to remain employed as long as they want to be there, and as long as the employer wants to retain them.  A regular employee can be full-time or part-time.  There’s no legal definition of what is considered “full time.”  Rather, that’s something that is set by the company.  Usually, companies provide benefits for “full time” employees that are not provided for “part-time” employees.  When defining employees as full or part time, however, make sure that the definitions of these classifications work together.  For example, don’t define “full time” as someone who is regularly scheduled to work over 35 hours a week, and “part time” as someone who is regularly scheduled to work less than 20.  What happens if you hire someone who is regularly scheduled for 30 hours/week.  Are they full time or part time?

If an employee is not a “regular employee,” he or she is likely a “temporary employee” – or a temp.  Temps can be hired through a temp agency, or can be hired directly by your company.  Temps are usually brought on for a project, or to cover for an employee who is out on disability leave.  In other words, you have an idea how long they will be there, and they are not expected to remain beyond the end of the project.  Temps can be “full time” or “part time” and, as long as they are properly defined as such in your employee handbook, Temps don’t usually need to be provided with company benefits, either.

So let’s look back on the bookkeeper question—she’s there to clean up accounts so the accountant can do the taxes.  That seems like a relatively short term project, but it is not clear whether there are other projects after that one is done.  If not, this sounds like a temporary situation.  Therefore, we can rule out “regular employee” as a possible classification, leaving “temporary employee” or “independent contractor.”  If the bookkeeper has a business and hires out to various companies to do bookkeeping projects, it is possible she could be an independent contractor.  However, if she’s an individual who you will expect to be in your office Monday through Friday, 9: – 5: until the project is done, it is possible that she’s a temporary employee and not a contractor.  The difference between the two has to do with who controls the manner and method of work, how much supervision is provided, and other factors—including whether she is paid on a W-2 or 1099 basis, but that is far from the determining factor.  In short, I don’t have enough information to tell whether the bookkeeper is your temporary employee or your independent contractor, but it is very important for you to ask this question and get it resolved with your employment lawyer before bringing this person on board.

*Ms. Lindeman is a Partner at Greenwald Doherty LLP, a law firm that exclusively represents businesses in all aspects of labor and employment law.  These columns are intended to be general information regarding the topic discussed and are not to be considered legal advice regarding a specific situation. Contact a management-side employment attorney familiar with the law of your jurisdiction for specific advice.  Ms. Lindeman is admitted to practice law in NY and NJ and may be contacted at DL@greenwaldllp.com.  She is under no obligation to respond to reader inquiries personally, but may answer general employment law questions through this column.

© 2011 Greenwald Doherty.  May not be reprinted without permission.

As the law varies in each area, please check with an attorney to ensure you are applying these tips within the law.

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