Missteps when hiring independent contractors: Answers

Scenario 1 Answer: No. If you establish the expected working hours, that could be a red flag and indicate someone is an employee and not an independent contractor. An independent contractor decides how and when to perform the work. Your company may set a deadline for completion of a project, but the contractor determines how to devote time and resources to achieve that outcome. If you set the expected hours, you've taken a substantial amount of control away from the worker. In fact, an employment relationship can be found if you have the right to control the working hours, even if you don’t actually exercise that control.

Scenario 2 Answer: No. Having an independent contractor sign a non-compete agreement could be problematic. An independent contractor must actually be independent. The contractor will normally have a business location, maintain bank accounts in the name of the business, file taxes as a business, and provide their services to the market. Having a worker sign a non-compete agreement would strongly suggest that the individual is an employee because it prevents the individual from offering their services to other potential clients.

Scenario 3 Answer: No. An independent contractor is normally used for a specific project, like the mechanic who replaced your brakes. Also, contractors will usually provide a service that your company doesn't normally offer. If a worker is hired for an indefinite period to provide ongoing services (particularly when those services are part of your core business), you have probably hired an employee.