Did You Unknowingly Make an Independent Contractor Your Employee?
Michigan Independent Contractor Law
For the past several years, many Michigan companies have cut back on employment or using Independent Contractors to save on payroll, worker’s compensation, and other employee related expenses. Michigan employment laws often make compliance easier with Independent Contractors, but not all Independent Contractor arrangements meet Michigan’s definition of an Independent Contractor (When they don’t, the state of Michigan and the IRS considers them employees and imposes all of the compliance and withholding obligations associated with having employees anyway).
Independent Contractor Factors in Michigan
Below are the factors that are considered in determining whether an Independent Contractor is “independent” enough or if that person might actually be an employee (Hint: If you read through these like Jeff Foxworthy’s “you might be a redneck”, they are much less tedious). All of the factors are considered, and not one is determinative of your independent contractor’s status as an employee. If you read through these and are concerned that your independent contractor might not be independent enough, please call us to schedule a free initial consultation to discuss your situation with an experienced small business attorney.
Instructions. If your company retains the right to require the contractor to comply with instructions, you might be an employer of your independent contractor.
Training. If your company trains contractors, you might be an employer of your independent contractor.
Integration. If the contractor’s services are essential to your company, you might be an employer of your independent contractor. If they are ancillary to your company, it is an indication of a bona fide independent contractor relationship.
Services rendered personally. If the services must be rendered personally, you might be an employer of your independent contractor.
Hiring, supervising, and paying assistants. If the contractor can hire, supervise, and pay assistants, it is an indication of a bona fide independent contractor relationship.
Continuing relationship. If a continuing relationship exists between the contractor and your company, you might be an employer of your independent contractor.
Setting work hours. If there are set work hours, you might be an employer of your independent contractor.
Full-time requirements. If the contractor is required to devote himself or herself full-time to your company, you might be an employer of your independent contractor.
Doing work on business premises. If the contractor is required to work on your company premises, you might be an employer of your independent contractor.
Establishing the order or sequence of work. If the order or sequence of work is set by your company, you might be an employer of your independent contractor.
Oral or written reports. If the contractor is required to give oral or written reports, you might be an employer of your independent contractor.
Payment by hour, week, or month. If the contractor is paid by the hour, week, or month, you might be an employer of your independent contractor. But payment by the job or by straight commission is an indication of an independent contractor relationship.
Payment of business and/or traveling expenses. If the contractor is paid for business and/or travel expenses, you might be an employer of your independent contractor.
Furnishing tools. If the contractor supplies his own tools and equipment, it is an indication of an independent contractor relationship.
Significant investment. If the contractor invests in facilities that are used by the contractor in performing services that are not typically maintained by employees, it is an indication of an independent contractor relationship.
Realization of profit or loss. If the contractor could recognize a profit or loss other than wage loss, it is an indication of an independent contractor relationship.
Working for more than one firm. If the contractor performs more than de minimis services for a number of unrelated persons or firms, it is an indication of an independent contractor relationship.
Making services available to the general public. If the contractor makes the services available to the general public, it is an indication of an independent contractor relationship.
Right to discharge. If your company has the right to terminate the relationship without liability, you might be an employer of your independent contractor.
Right to terminate. If the contractor can terminate the relationship without any liability, you might be an employer of your independent contractor.
Contact Us.
If you have any concerns whether your independent contractors are really employees or if your employees would best be classified as independent contractors, please contact us to schedule a free initial consultation to analyze your situation.
