How to Deal with an Independent Contractor

Most small businesses have to rely on employees or contractors as part of their operations. With the most recent economic recession taking a heavy toll on the bottom line, small businesses have resorted increasingly to temporary help to operate.

How to Deal with an Independent ContractorUsing temporary workers, however, can have some drawbacks. Temporary workers, for example, tend not to view their long-term well-being tied to the success of the business, thus they may not have the same incentive to perform as full time employees.

The type of employees a small business uses is important, and small businesses must have proper policies and procedures in place that delineate the proper relationship between the business and the employee.

Take independent contractors, for example. It is usually cheaper for businesses to hire independent contractors instead of employees. Independent contractors are responsible or their own expenses, taxes, equipment, etc. Moreover, using independent contractors may limit a small business’s liability. Under Illinois law, there is no vicarious liability (liability for an act of an employ for which the business is responsible) for independent contractors because there is no principal agent relationship.

However, there are many cases where it is not clear whether there is an employer/employee or independent contractor relationship. Illinois courts use a multi-factor test that looks at the surrounding circumstances to determine the type of relationship.

Each case is different and presents unique challenges. Often, judges will rely heavily on whether the business could control how the independent contractor performed the work. If the independent contractor had to follow a specific method, it is highly likely that they are considered to be an employee. Another important factor is the form of payment, with regular paychecks being strong evidence of an employee-employer relationship.

Of course, a smart business owner can avoid these issues with a little strategic planning. At the very least, a smart business owner would have an experienced Illinois small business attorney prepare an independent contractor agreement that can over the basic requirements.