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Just a Friendly Heads-Up:
The links below are provided purely as informational resources. We’re not attorneys, and we don’t pretend to be—no suits, no gavels, no courtroom dramas here. We're a consulting company, simply offering tools and insights for you or your organization to consider.
If you're looking for legal advice, we highly recommend chatting with someone whose diploma actually says "Juris Doctor."
Contractor Relationships
Contractors vs. Employees: Who’s Really in Charge?
Contractors vs. Employees: Who’s Really in Charge?
Can companies manage contractors the same way they manage employees?
It’s a common question—and a common mistake. While it might feel natural to direct a contractor’s every move, doing so could blur the legal lines between contractor and employee.
Below are helpful links to guide you through the nuances of working with independent contractors. But first, a quick disclaimer:
We’re not attorneys, and we’re not here to tell you how to apply the law. We’re simply sharing publicly available information to help you make informed decisions. If you need legal advice, we recommend consulting a qualified professional (preferably one with a law degree and a penchant for fine print).
Understanding the Line: Contractor vs. Employee
Understanding the Line: Contractor vs. Employee
Some managers assume they can treat contractors just like employees—assigning tasks, setting schedules, and giving detailed instructions. But can you? According to the IRS, control is the key factor
When you hire a contractor, you’re paying for results, not the process. Think of it like hiring someone to build a deck:
You can specify the size, materials, and deadline.
But you don’t get to tell them how to swing the hammer.
The same logic applies to other roles as well. Imagine telling a surgeon how to perform an operation—probably not a great idea. Similarly, if you hire a contracted doorman and start micromanaging where they stand, how long they sit, or what they say, you may have crossed into employee territory.
Why does this matter?
Misclassifying a worker can result in severe tax and legal consequences. If you’re directing how the work is done, reimbursing expenses, or offering benefits, you might be creating an employer-employee relationship, whether you meant to or not.
See IRS website link below.
https://www.irs.gov/businesses/small-businesses-self-employed/behavioral-control
Lawsuit:
Lyft & Uber misclassified independent contractors rather than employees.
https://www.usatoday.com/story/tech/2016/05/11/lyft-agrees-27-million-settlement/84257158/
https://www.insurancejournal.com/news/west/2016/06/27/418411.htm
NEW
Excerpt from Article link
"Some legal experts say that the earlier decision in Dynamex may bolster an argument in this new case around unfair competition that has previously been difficult to win on in federal court. In short, Diva Limousine just might succeed where other federal lawsuits have failed.
"This test simplifies a court's analysis for an employment relationship and gives predominant weight to the control-of-work factors," Michael H. LeRoy, a law professor at the University of Illinois at Urbana-Champaign, emailed Ars."
Now, you might be thinking:
“We don’t hire independent contractors—we hire a business. They send someone over, and I just tell that person exactly what I want done.”
Well… read on.
This brings us to the Labor Board and the concept of joint employment. If you thought contractor classification was tricky, joint employment can be even more complex. When you start directing someone else's employee as if they were your own, you might unintentionally step into a joint employer relationship, with all the legal responsibilities that come with it.
If you take too much control over a contractor, you could unintentionally create a joint employment situation—bringing added responsibilities and risks to your company.
"Under the pre Browning-Ferris joint employer test, which the Board had restored in Hy-Brand, two or more entities were deemed joint employers under the National Labor Relations Act (NLRA) if there was proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and did so directly and immediately (rather than indirectly) in a manner that was not limited and routine."
Passed House amended (11/07/2017)
Passed House amended (11/07/2017)
(This measure has not been amended since it was reported to the House on November 1, 2017. The summary of that version is repeated here.)
Save Local Business Act
(Sec. 2) This bill amends the National Labor Relations Act and the Fair Labor Standards Act of 1938 to provide that a person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment such as hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, or administering employee discipline.
UPDATE: 9/13/18
Just a friendly reminder: we're not lawyers—we don’t even play them on Zoom. For any legal clarification, please consult actual legal counsel. We're just here to provide information, not courtroom strategies.
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