What to Know Before Hiring a Contractor
What to know before hiring a contractor can be the difference between conducting business as usual or finding yourself in legal trouble. Contractors have rarely been more numerous or available than they are right now. In addition to traditional contractors, you can hire someone to create a website for your business, assemble your office furniture, or deliver your lunch. If you need help getting something done, hiring an employee or finding an independent contractor may be the right choice. It depends on your wants, needs, and applicable laws. However, you need to know the rules governing your business relationship with contractors. A person you think is your contractor may actually be an employee, with all the taxes, laws, and regulations that accompany them.
Maryland business lawyer Rebekah Lusk appreciates the practical and legal challenges involved in hiring a contractor. We will work with you to review the facts of your situation and give you advice based on how federal and Maryland laws may apply. Call our team at Lusk Law, LLC at (443) 535-9715 today.
The economy is doing well, and you may need help. You may have staff that left during the pandemic and never returned. The business has rebounded, and there’s more work than you can handle. What’s the best approach?
It’s Important to Understand What Laws Apply When You Hire a Contractor
Many state and federal laws cover the employee-employer relationship and they have different legal tests to determine employee status. A person may seem to be a contractor under one test but an employee with another. Depending on the situation, there may not be a clear difference. Generally, the more control you have over the person and the work, the more likely they’re an employee, so you must treat them as such. You could try to cut corners, but the consequences may be much more expensive in fees, fines, and legal action than the money you saved.
If a function requires regular hours and you need to oversee the work, an employee is probably a better choice. If it’s something out of the ordinary and you need assistance with an unusual issue that’s outside of the scope of your workforce, getting a contractor for the work may be the safer way to go.
Don’t assume you’re classifying workers correctly, if you have any doubts at all. You should know what laws apply when you hire a contractor. To prevent future legal problems, consult with our attorneys at Lusk Law, LLC.
How Do I Protect Myself When Hiring a Contractor?
The first thing you must know to protect yourself when hiring a contractor is who you’re bringing on board. Even a detailed written agreement between the parties stating that the person will be a contractor won’t get you very far. There’s a legal principle that you can’t agree to break the law, and that includes in worker classification.
For the Maryland Wage and Hour Law, if there’s a dispute over wages you didn’t pay someone because you claimed they’re a contractor, state courts use the “economic realities test” of control over the worker, which is also used for federal wage and hour claims. Different tests are used in states and by courts, and the economic realities test is one of the most worker-friendly. The test includes whether or not you …
- Had the power to hire and fire the person
- Supervised and controlled the work schedules or conditions of employment
- Decided the rate and method of payment, and
- Maintained employment records.
These are not supposed to be applied mechanically but to understand the overall situation and apply the law.
What Should You Not Say When Hiring a Contractor?
You need to be cautious in how you refer to contractors at work. There are things you should not say when hiring a contractor. When talking to the contractors, don’t call them “employees.” You may also want to avoid using “worker” and stick with “contractor” or “outside contractor.” Don’t talk about the job benefits you offer or the rules employees need to follow.
Tell them about the rules they need to follow, when they need to show up and leave, and what must be accomplished. But you should not give them detailed instructions about the work or closely supervise them. If you do, it would strengthen a claim that you have enough control over them to be considered an employer.
The more “hands off” you can be, the better. You can’t have it both ways and get the lower cost and reduced-regulation benefit of a contractor while also supervising and controlling them like an employee. It’s one or the other.
What Questions Should I Ask When Hiring a Contractor?
What to know before hiring a contractor includes whether they have insurance covering themselves and any employees working at a job site, if that applies. You may wonder, how do I protect myself when hiring a contractor? If the contractor you’re hiring is misclassifying their workers and they get hurt, it can cause insurance and liability headaches for you. They might claim you’re a co-employer (and should have provided them workers’ comp coverage) or that you’re responsible for their injuries.
What questions you should ask when hiring a contractor depends on the work they will perform. You should ask them to sign nondisclosure and noncompete agreements if they have access to your intellectual property (IP), including customer lists, mailing lists, and marketing or sales plans. You should discourage their theft of your IP as much as possible. Potentially this information could be used by the contractors for their own business or to sell to someone else.
You should also ask questions of your contractor related to who they have working for them and what type of insurance coverage those workers may have. It is best to insulate yourself from any potential liabilities.
Get Help with Worker Classification Issues Related to Contractors Before They Become Problems
Determining whether a worker is an independent contractor or an employee can be complicated, especially given all the state and federal employment-related taxes, laws, and regulations business owners must abide by. Business law attorney Rebekah Lusk can lighten your load by ensuring that your employment and contractor relationships, contracts, and agreements are above board and paperwork is correctly completed.
Call the Maryland business law attorneys at Lusk Law, LLC to have a long-term ally for you and your business. Call (443) 535-9715 today to schedule a consultation. As advocates for life’s obstacles and opportunities, we help businesses large and small.
Table of Contents
Our Latest Posts
- Whether you’re starting a business or thinking about changing the …
- Maryland has announced significant changes to the state’s Landlord/Tenant law, …
- How to establish a corporate veil is an essential issue …
- Our Maryland business lawyer can help protect you against unfair …
- It is good to know how to review a commercial …
- If you have a short-term need for extra staffing, you …
- As the Covid-19 pandemic continues, changes to Maryland eviction rules …
- The types of business contracts you’ll need depend on your …
- What should be included in a severance package depends on …
- You have a spectacular idea for a business, but for …
Sole Proprietorship vs. an LLC in Maryland
Whether you’re starting a business or thinking about changing the legal entity owning it, you may want to know the costs and benefits of a sole proprietorship vs. an…