Independent Contractors Archives

“Non-Solicitation Agreements – Ten Practical Questions”

Published on February 2nd, 2016 by Alan L. Sklover

Question: Dear Alan: I was laid off two weeks ago from my position at a marketing firm. In my severance agreement, there is a “Non-Solicitation” clause that says this:

“I agree that, for six months, I will not, directly or indirectly, solicit, contact, or identify any of the Firm’s clients or prospective clients on behalf of any person or company.”

I have decided to open up my own marketing firm and have several questions for you. Can you please answer them. Thank you

Cheyenne, Wyoming

Answer: Dear Erica: Here are my answers to your questions:
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“Becoming a Consultant? – Here are 21 Smart Points to Raise”

Published on May 19th, 2015 by Alan L. Sklover

“The second mouse gets the cheese.”

– Terry Pratchett

ACTUAL “CASE HISTORY: These days, as employers are seeking to limit employee-related expenses, yet retain the services of valuable individuals, they are increasingly turning to the hiring of individuals not as employees, but as independent consultants.

The reduction in employee headcount provides employers with lower overall expense, especially as to benefits and legally-required payments, such as mandated contributions to healthcare under the Affordable Care Act, Social Security, unemployment benefits, and workers’ compensation plans. In addition, most of the many other laws that protect employees from discrimination, retaliation, harassment and non-payment of wages, are not applicable to independent consultants.

For this reason, we are seeing more and more people “selling their services” as consultants rather than as employees. The most common scenario is for a company to provide to a consultant its “standard form” of consultant agreement for signature. And just as commonly, important points in those “standard forms” are slanted heavily in favor of the interests of the company, and not the consultant.

But, “forewarned is forearmed.” You have every right, and an obligation to yourself and your loved ones, too, to request changes in the language and terms of any agreement. Here are the most important points to raise if it is a Consulting Services Agreement.

LESSON TO LEARN: Most employees do not have written contracts, for many different reasons, chief among them that employers commonly view written agreements as commitment they don’t want to make, and may be difficult to get out of. (That said, senior executives do commonly have written employment agreements that do protect them.)

On the other hand, most consultants do have written contracts, provided by the company, that lean heavily toward the protection of the rights and interests of the company. As a consultant, you look to your own resources – and not legal protections – to protect you and what should be yours. If you do not, you have only yourself to blame.

WHAT YOU CAN DO: In any Consulting Services Agreement submitted to you for your review and signature, look to see if these “21 Smart Points” are already provided and are clear, and in your interests. If not, consider asking that they be inserted to clarify and modify the consulting services agreement, either (a) incorporated into the main agreement given to you, or (b) set forth on a “Rider,” “Addendum” or “Amendment” in each instance to be signed by both sides when the main agreement is also signed.
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Independent Contractor or Employee? The Basics

Published on April 30th, 2012 by Alan L Sklover

 “If you are not happy with who you are,
you will never be happy with what you get.”

–  Unknown

ACTUAL “CASE HISTORY”: Ira was two years out of law school, but still unable to land his first full-time law job with a law firm. Over that time he had registered with a temporary help agency that specialized in part-time lawyers, and through that temp agency Ira had taken on some short-term assignments to help out law firms for specific cases. When the case was over, his job was over, too.

Some six months before coming to our firm for a consultation, through his temp agency Ira had been hired by a large law firm to work on a large case that was expected to last for two to three years. His job was to review documents and summarize them for the trial team. He worked at the law firm’s offices, was given a small office to work in, and expected to be there Monday to Friday, 9:00 am to 6:00 pm each day. Some weekends Ira was required to work, as well, especially if a deposition had been scheduled and the trial attorneys needed documents reviewed for it.

Unlike the law firm’s other attorneys, Ira received no benefits, no paid vacations, no paid holidays, no sick days and no 401k. It wasn’t a “real law job,” but it was enough to keep Ira afloat.

Ira didn’t see any difference between what he did and what the law firm’s associate attorneys did, and wondered why he was considered an “independent contractor,” and they were considered “employees,” and why he was not entitled to all of the benefits they were.

Ira had good reason to wonder, and much to gain by asking questions.  

LESSON TO LEARN: Our lives are full of different relationships, and often they can be unclear and confusing. Your doctor performs services for you, and you pay your doctor for those services. Does that make your doctor your employee? Why or why not? Can an employer use your services, and pay you for them, and still say you are not “employed?” Why or why not? If a partner in a company performs services for that company, and the company goes out of business, is the partner entitled to Unemployment Benefits? Why or why not? In each of these instances, the correct answer to the question is derived from the correct view of the underlying relation.

Despite frequent confusion and lack of clarity, we put a variety of different labels on people who (i) perform services and (ii) get paid. These labels include “employee,” “partner,” “independent contractor,” “vendor” and the like. Though each label has legal and financial implications, we often interchange them, sometimes to our benefit and sometimes to our detriment. As with everything else in life and at work, knowing what you are doing is most important.

The two “working relationship labels” that are most often confusing to people – and that get more people in “trouble” – are “employee” and “independent contractor.” Though there is no exact “bright line” test that differentiates the two, our analytical focus is always on one word: “control.”

a. What is an employee? An employee is under the “control” of his or her employer. The employer almost always (i) tells the employee what days and hours to work, (ii) tells the employee where he or she should work, (iii) tells the employee what work to do, (iv) tells the employee who will supervise his or her work, (v) tells the employee how much money he or she will be paid, (vi) tells the employee when he or she will get paid, and (vii) tells the employee how to do his or her work. That list of “control factors” is not exhaustive: in general, the employer “controls” all aspects of the employee’s work.

Also, an employee is generally provided by the employer the tools, equipment and supplies necessary to accomplish a task, whereas an independent contractor generally provides his or her own. In addition, the longer a working relation lasts, the more it is viewed as an employment relation.  

b. What is an independent contractor? An independent contractor is just what the title says: one who is “independent” of the employer’s total control, and “one who makes a contract” of sorts regarding the provision and payment for his or her services. Do you or does your plumber decide when he or she will perform services for you? Of course, the plumber does. Do you or your plumber decide how much the plumber gets paid? As a general rule, the plumber sets his or her own hourly rate. Do you provide your plumber with paid sick days, vacation or holidays? No. Do you supervise the plumber’s work? No. Overall, do you control your plumber? Hardly. For these several reasons, while your plumber provides services and you pay for them, there is no employment relation, but an independent contractor relation, instead.

Though there are many other factors we look for to determine whether someone is an independent contractor or an employee, “control” is the overriding issue.

The distinction between employee and independent contractor can be a blurry one, and it should not be surprising that, after reviewing all of the factors, one court might find that employment might exist, while another court might find that an independent contractor relation might exist. Nevertheless, a “best answer” almost always arises from a common sense review of the facts and circumstances of the parties’ interactions.

c. In a very few instances, the law dictates which working relation exists. For certain occupations, state and federal laws sometimes dictate which of the two working relations you can be. We call these “statutory employees” and “statutory non-employees.” For example, even if a person is clearly an independent contractor, if he or she does any one or more of the following, the U.S. Internal Revenue Service (“IRS”) requires employers to treat them as employees: (a) a driver who distributes beverages, meat, vegetables, fruit or bakery products, or who picks up and delivers dry cleaning, if his or her pay is fully or partly paid in commissions; (b) a full-time insurance sales agent primarily for one insurance company; and (c) an individual who works at home using materials supplied by the company and must be returned to you when not needed, if the company furnishes specific requirements for the use of the materials. These people are designated by the law as “statutory non-employees”: licensed real estate agents, direct salespeople, and certain home companions, provided each has a written agreement stating so.   

d. What difference does it make? The law requires that employers obey many laws regarding how they treat employees, which don’t apply to independent contractors. As examples, (a) employers must contribute about 7% over and above an employee’s income to the employee’s Social Security retirement fund, but are not required to do so for independent contractors; (b) employees must be protected by workers’ compensation insurance, in case they get hurt on the job; independent contractors have no such protection; (c) if an employee is not paid his or her earned wages, state labor departments of most states will assist them in their collection efforts; independent contractors are “on their own.” Employers are also required to make contributions for employees’ federal Medicare and state-required minimum disability coverage.

While many employers provide their employees with paid sick days, paid vacation, contributions to health care, and paid holidays, generally independent contractors do not get any such benefits.

On the other hand, independent contractors have certain advantages that employees do not. As examples, (a) they can charge whatever fees they can negotiate, (b) they can determine their own work schedules, (c) taxes are not withheld from their paychecks; they arrange for their own tax payments, (d) they can deduct from their income taxes their work-related expenses, and (e) they can have multiple “clients” at the same time. As I frequently say, “Being your own boss is either the best thing in the world, or the worst thing in the world, depending on who you are.”

e. Many laws protect employees, but not independent contractors. One important difference is that the federal and state discrimination laws protect employees, but they do not protect independent contractors. So, for example, it is entirely legal to decide that you want a doctor of a certain race, you don’t want a lawyer of a certain gender, or you want a plumber of a certain religion. “Discrimination” in the choice of which independent contractor to hire is not prohibited by the law, but is entirely legal. As another example, the Family Medical Leave Act (“FMLA”) provides employees with a right to time off to take care of a medical problem, but does  not provide these same protections to independent contractors. 

f. Many employers try to call people independent contractors in order to save money. The most common scenario seen by employment lawyers and Courts is for employers to try to characterize true employees as independent contractors in order to save money on such things as (a) employee benefits, such as vacation, sick days and health insurance; and (b) legally required payments, such as unemployment, Social Security contributions, and workers’ compensation coverage.     

g. The most important lesson is this: Once you know the differences between being an employee and being an independent contractor, you can (i) negotiate to minimize those differences to you, and/or (ii) file a complaint to get proper treatment. Though few understand this important lesson, it is the essential lesson to learn: (a) you need to know the differences between being an employee, on the one hand, and being an independent contractor, on the other hand, and (b) once you understand the differences, most – but not all – of those differences are negotiable.  

WHAT YOU CAN DO: Understand the difference between the two working relations, and understand, too, that you can negotiate and navigate the best of both relations. Here are the five basics you need to keep in mind:   Read the rest of this blog post »

“Does an independent contractor have a duty of loyalty?”

Published on October 2nd, 2011 by Alan L Sklover

Question: If an independent contractor is a subcontractor to a business, can the independent contractor bid against that business on a totally unrelated project? That is, does an independent contractor have a duty of loyalty, like an employee has?

Also, can an independent contractor be liable for anything under the law of agency?

Honolulu, Hawaii

Answer: Dear Dawn: As you may know, I am not licensed to practice law in Hawaii, and am not familiar with its laws. However, I can share with you my understanding, gained over many years, of the law in most of the United States, and elsewhere, as well:

1. An independent contractor has only those duties to its client that it has agreed to. The relationship between an independent contractor and its client is an “arms-length” relationship. It is created by agreement, and is limited by the limits of that agreement (whether in writing or spoken.)

Unlike an employee, who has an implied duty of loyalty to his or her employer, an independent contractor has no duty of loyalty under the law to the other party, unless that independent contractor has agreed to such a duty in an agreement. So, an independent contractor has every right to compete with the party to which it is an independent contractor.

2. That said, an independent contractor is bound by the common law that forbids, for example, theft of secrets. While direct competition with an independent contractor’s client is fine, an independent contractor cannot, as examples, take advantage of confidential or proprietary information of its client that it may have learned of in the course of doing business, for that would be common law theft of trade secrets, or take equipment or supplies, for that would be considered theft of property.     

3. In turn, the client of an independent contractor is also bound only by its agreement, and nothing more. In turn, the business who hires an independent contractor has essentially no duties to the independent contractor, except as is set forth in their agreement. So, a client of an independent contractor is not required by law to provide that independent contractor with the things it has to, by law, provide its employees, including (a) a safe workplace; (b) overtime; (c) unemployment insurance; (d) workers’ compensation; or (e) social security contributions.

4. An independent contractor who has agreed to act as an agent is bound like an agent. An agent is someone who acts in the place of, and on behalf of, another person or entity. Independent contractors sometimes act as agents for others, such as when an attorney (who is an independent contractor to his or her client) acts on behalf of his or her client in negotiating a business deal, and on behalf of that client may agree to deal points or even sign a contract. If an independent contractor acts as an agent, then that independent contractor is liable under the law of agency. It’s that simple. Incidentally, the “law of agency” is a reference to the principles of law applicable to agents and their “principals,” which principles of law vary little from state to state.  

If you’re interested in obtaining a Sample Independent Contractor agreement that you can adapt for your own use, simply [click here]. 

Hope this helps. Thanks for writing in. Please consider subscribing, because that way, you can pick up more pointers each day. And – it’s free!

Al Sklover

Looking for a Job? We offer a Model “Thank You” Letter After an Interview. To obtain a copy, [click here.]

P.S.: If you would like to speak with me directly about this or other workplace-related subjects, I am available for 30-minute, 60-minute, or 120-minute telephone consultations. (Even 5-minute “Just One Question” calls). Just [click here.] Evenings and weekends can be accommodated.

© 2011 Alan L. Sklover, All Rights Reserved.

Employee or Contractor: Do I Have a Choice?

Published on March 31st, 2009 by Alan L Sklover

Question: I have been working as a permanent part time hourly employee for approximately 1 and 1/2 years with a very small firm. I have repeatedly asked to work from home due to a very non-productive and unusually noisy office environment. There is great tension in the office, a lack of communication exists, teamwork is non existent and regardless of what I say to the boss, nothing is wrong, other than my dissatisfaction. I had stated recently that I would prefer to work independently as opposed to being in the office. With that, my boss looked into that option and prepared a contract that he offered for me to review. I have decided that being an independent contractor for him won’t make anything improve, and in fact could worsen the communication gap. He has now told me (in writing) that I will be off of payroll as of March 30th or thereabouts and I told him that I am not prepared to be on my own. He also has presented me with a list of what he wants me to agree to in order to fulfill the contract. At this point, he has forced me to resign or he will terminate me. What is my next step? Both he and I are already contracted under a statewide contract and I told the contractor that I am no longer going to be working for the guy. I asked to get on with moving forward and was told that he needed to review my tasks and could not provide me with anymore work until he had a discussion with the statewide contractor. So, I am stuck where?

Mary, New York

Answer: From all you have described, it seems that the office environment is highly dysfunctional, and your employer is no better. I agree with you: whether or not you are an employee or an independent contractor, it’s not at all likely that you’ll soon see communication, teamwork and a productive environment at that company.

I would NOT suggest you resign, because that waives all of your rights, including the right to get unemployment benefits. I’d suggest you (a) look for a new job, (b) apply for unemployment benefits (which you should get), and (c) consider speaking with the statewide contractor about working directly for him, in light of your familiarity with the statewide contract. Hope that helps.

Best, Al Sklover

P.S.: For individual attention and assistance, I am available for telephone consultations lasting 30-minute, 60-minute, or 2-hours. If you would like to set up a consultation, just [click here.] Evenings and weekends can often be accommodated.

© 2011 Alan L. Sklover, All Rights Reserved.

Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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