When you start a business and want to expand it, you’ll probably need to hire additional help. Often, businesses owners believe hiring an independent contractor will reduce the business’ risk and paperwork while increasing the business’ capacity to serve its customers. Under Utah and federal law, regardless of what you call a person who works for or with your company, the actions of the hired person will define if they are an employee or contractor.
Contractors have their own business. Contractors provide their own tools, can have other clients, are licensed businesses, and have a separate place of business. A lawyer is a contractor in that I serve multiple clients at my discretion and as ethically allowed with conflicts of interest, I have my own office, I provide my own computer, printer, etc., and I maintain my own business license with the state and city.
Contractors are paid in lump sums or to complete a project. Unlike an employee, contractors are paid to complete a job or project. For example, my practice is paid in flat or hourly rates but the professional relationship ends when the project or court case is complete. Defining the “completed project” should be in any contract signed between a contractor and an entity. Whereas my employee will work for me into the indefinite future.
Contractors hire their own employees. A contractor can hire or fire their employees. If I am unsatisfied with a contractor’s work, I can end the relationship and work with another contractor. For example, I hired a contractor to build a fence. I have no control over who he hires unless I specify any legal limitations in the contract such as workers must be legally able to work on this job (age, citizen status, etc.).
Contractors meet project objectives. My fence builder was given specifications for the end project and he quoted me a price. But I am not managing the job, defining what should be done, providing tools, or giving a timeline beyond clarifying the completion date and payment rate. My employee is also given projects to complete, but I define the process, quality control, and tools.
Employees follow directions. Employees are told when and how to do a task. With my employee, I can give process directions for contacting clients, managing the office, and interacting with the public, opposing counsel, and service providers. Unlike the fence builder, I can ask my employee to be at the office working on my projects for exact periods of time with my equipment and under the premise of working for my company.
Additional questions? Ask Utah department of Workforce Services. They have offices in Loa, Panguitch, Junction, and Richfield. Their state-wide phone number is 866-435-7414. Your taxes pay for this service, so use it to answer employee/contractor questions and build your business.
If you would really like to get in the weeds of this topic, check out this handy flier.
Disclaimer. As always, my column is not legal advice, instead merely insight into the law and legal profession. If you have a general question about the law or legal profession, please email me at firstname.lastname@example.org or call 435.610.1431.
I have a tree next to my house that has seen better days. The power company has done its work, my fence and mailbox are within four feet of it, and it’s next to the road, my spigot, garden, and house. And it’s a 60 foot box elder with some odd colors on the trunk indicating rot. So, after asking my husband multiple times if he knew someone who would be willing to cut this tree (he said no, there are too many obstacles / he would like to continue to have friends) I’ve decided to hire a tree company to remove it.
Before hiring this company, I considered the following and you should too for your next project.
Choose the right contractor. Before contacting contractors, determine the scope of your project, what you want the contractor to do and your budget. If possible, you can learn more about the type of work you want done. For example, tree removal becomes more expensive with the size of the tree, risk of rot, and obstacles next to the tree.
Call references. A good contractor will have references for you to contact. Be suspicious if the contractor fails to provide references, you cannot get a hold of the references, or the references are very respondent to your questions about the contractor. I asked my friends who they would recommend for tree removal.
Require licensure and insurance. All contractors in the state of Utah are required to be licensed and insured. Even the tree removal company though they are not building a house, or a in a specific “trade” such as plumbing, electrical, or glass.
Review the contract. The agreement should be concise, complete, and clear and contain the contractor’s name and contact information, a payment schedule, the estimated start and completion dates, what you and the contractor are individually responsible for, termination and penalty clauses, and how a change in the contract or orders will be handled. For my tree, I really only need the contractor information, agreement of when to pay and how to pay, and when it will be completed. The damage will be obvious if the tree is removed incorrectly. However, with more specific projects, you need the contract to have more details.
Get permitted. Make sure the contractor or yourself get the proper permits before starting construction. Keep a file of the paperwork.
Prevent a mechanic’s lien. A mechanic’s lien is a lien on real property that contractors have the right to place if you do not pay them as agreed by the agreement between you and the contractor. In Utah, the contractor must protect this right by filing within a certain number of days before starting the project. If the contractor fails to file its right with the state, the contractor cannot later file a mechanic’s lien on the property.
If a contractor wrongfully files a mechanic’s lien on the property, the penalties are stiff and can result in the contractor paying the owner and the contractor possibly losing their license.
If you do not remove a mechanic’s lien from the property, your credit score may be affected, and you will struggle to refinance or sell your property in the future.
If there are problems. If the contractor and you have a problem, first try to resolve it between yourselves. Have the dreaded discussion. Document all problems with pictures, correspondence, and other communications. Rely on your written contract for guidance. Complain to the state professional licensure office.
If the work is unprofessional and you and the contractor cannot agree to a remedy, you may need to file for damages in court. Further, if you need a mechanic’s lien released, you may need to contact your attorney. Always be wary if the contractor requests more money amount to fix an obvious, unprofessional problem or to remove a mechanic lien.
Pay your bills. Lastly, as a consumer, pay your bills. Like lawyers, construction companies and professionals are vilified by the very few who are unprofessional and predatory. Most problems between a client and company is a break-down in communication. So, when in doubt, always try to communicate first with the contractor and resolve the issue. Miscommunication is fixable.
Disclaimer. As always, my column is not legal advice, instead merely insight into the law and legal profession. If you have a general question about the law or legal profession, please email me at email@example.com.
To be published in the Wayne & Garfield County Insider, 1/25/2018.