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 email@example.com or call 435.610.1431.