Independent Contractor or Employee?

I am asked all the time, “I 1099ed that person, she is a contractor. Right?” For some reason lots of decision makers believe that a 1099 and calling someone an independent contractor makes a person a contractor.

The truth is . . . nope.  Whenever I talk to folks about this issue, I try to get them to think about trades people; a plumber is the classic example of a contractor, unless you are running a plumbing business.  But for this discussion we aren’t.

When we hire a plumber, he comes to where we want the work done, drives his own truck, brings his own tools, pays his own expenses, and he does the work using his own experience; we don’t give him any direction as to how the job should be done.

The plumber’s work has no bearing on the work of our businesses.  Once the plumber is done, we pay him and he moves on to the next job.

Now, with that example in mind, take a look at your current workforce.  Do your contractors look like the plumber or do they look like employees. They may be employees if:

They have been working for you for an extended period of time;
They work in the same business as your business;
You provide them with direction in the means and manner of their job;
You pay them like your employees; or
They only work for you.

I could go on, but if you answered yes to any of these questions, your contractors might be employees.

The Texas Work Force, the IRS, the Department of Labor, and Texas Courts use multi-factor tests to determine if an independent contractor is truly an employee.  So, if you are relying on a 1099, to justify calling someone an employee, you might have some issues. You may need to reclassify them as employees and that is where it gets tricky.
Post by: Michael Melder