November/December - Albany Colonie Regional Chamber of ...

November / December 2011 Visions
Hiring employees and retaining the services of
independent contractors: A world of difference
27
By: Albany Law School
As a business grows, it often becomes
necessary to hire employees or engage
the services of independent contractors
(ICs). It is vital for business owners to
properly define and formalize these
relationships and ensure compliance
with legal labor and employment
requirements. Legal issues involved
in hiring employees and engaging the
services of independent contractors
can include distinguishing between
independent contractors and employees,
entering into independent contractor
agreements, identifying key issues
related to worker employment, and
special considerations such as hiring,
compensation, and employer insurance.
For example, there is a common
misunderstanding that the classification
of workers as employees or independent
contractors can be made arbitrarily by
the business owner. However, there are
specific rules set forth by a number of
state and federal agencies that govern
such classification. The Internal Revenue
Service (IRS), the NYS Department of
Labor (NYSDOL) and the NYS Workers’
Compensation Board (WCB) each have
standards that govern the classification of
workers. Accurate classification of workers
is crucial to insure compliance with state
and federal laws applicable to employers,
as well as to avoid liability for additional
unemployment taxes and interest.
According to the NYSDOL, an employeremployee
relationship depends on the
degree of supervision, direction and
control that an employer has over the
worker and the services provided by
the worker. In addition, an employeremployee
relationship is generally found
to exist if the worker is paid a salary, an
hourly rate of pay or a draw against future
commissions with no requirement for
repayment of unearned commissions.
An employment relationship also is
likely to be found where the individual
receives certain fringe benefits such as
reimbursement for business or travel
expenses.
Under the Workers’ Compensation Law in
New York State, most workers providing
services to a for-profit company are
deemed an employee for the purposes
of workers’ compensation insurance.
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