Independent Contractors Rights: Everything You Need to Know
Independent contractors rights are a set of rules for workers that are not classified as employees.3 min read
2. Independent Contractor Versus Employee
Independent contractors rights are a set of rules for workers that are not classified as employees. The rights include:
- Right to Contract, which establishes the details of the client-contractor relationship. This contract should be reviewed and signed before any work is completed. A basic contract should include:
- The project's description
- The estimated time of completion of the project
- Terms for billing and payment
- Any conditions related to the termination of the contract.
- Right to Market Services, which is the ability to solicit work and promote your services to more than one business. Even with existing clients, independent contractors are allowed to work with multiple clients at a time.
- Right to Engage Other Contractors, which is the right to work with and hire subcontractors or other independent contractors for tasks and projects. If planning to use subcontractors or independent contractors, a good practice is to mention to potential clients that this may be a possibility during initial project negotiations.
When classified as an independent contractor, the management of your business is your responsibility. Management includes controlling fundamental aspects of your business, including:
- Setting your own hours; they cannot be dictated by the client.
- Documenting and filing taxes.
- Paying a self-employment tax that covers the employee and employer portions of Social Security and Medicare (FICA).
- Deciding how to complete the project as you see fit because you are hired as an expert in the field.
- Working from the location of your choice.
As an independent contractor, clients do not need to be responsible for giving benefits such as:
- Pension plans
- Paid vacation and sick days
- Disability insurance
- Paying employment taxes.
If a worker is concerned that he or she is misclassified as an independent contractor and believes that he or she is technically an employee, then the worker may request to be reclassified. An example of misclassification is when the worker is placed on a team where the work is identical to that of a W-2 employee. If the employer isn't willing to work to correct or to properly define classification, the worker can file an SS-8 form for a work status determination with the IRS.
Independent Contractor Versus Employee
Employees and independent contractors are inherently different in how the employer handles them. Under federal law, a worker is either an employee or an independent contractor, and this is determined by the control the employer puts on the worker. Independent contractors are usually contracted to complete tasks that existing employees cannot complete or don't possess the skills to complete.
An employer is not allowed to call an employee an independent contractor in an attempt to avoid state and federal legal requirements. Independent contractors are different from employees based on several characteristics, including:
- Payment is by project, not a set time frame such as weekly, biweekly, or monthly.
- The independent contractor provides the tools, materials, and equipment.
- Ability to work with multiple clients at a time.
- Working offsite is allowed.
- Choosing work hours is up to the independent contractor.
- Work can be subcontracted to others.
- A project may be completed at your discretion and without input from the client.
From the employer's point of view, there are benefits to using independent contractors related to federal employment statutes. The employers are not responsible for the following:
- Under the Fair Labor Standards Act, employers are not required to pay overtime or provide disability accommodations for independent contractors.
- Protection from employment discrimination under Title VII is not covered.
- Leave under the Family Medical Leave Act is not covered.
- Unemployment and worker's compensation benefits are not provided by the employer.
- Pensions and other employment benefits are not provided by the employer.
- Employment taxes for the independent contractor are not paid for by the employer.
As an independent contractor, each client must provide Form 1099-MISC, which is a history of payments made during the current tax year. The IRS Self-Employed Individuals Tax Center is a resource that should be used for any questions related to the filing and payment of taxes. Knowing the rights associated with running an independent contractor business will allow your business to run correctly and for clients to treat it fairly.
If you need help understanding independent contractor rights, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.