A contributor from the Association for Consulting Expertise answers a reader’s question about the legal pitfalls of hiring in the gig economy.
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Q. I’m an employer, and I’m concerned about the current economic forecast. I have a variety of staffing needs from backroom support to project expertise; can you tell me more about how I might fill them legally with gig workers?
ACE advises: As my colleague, Terry Johnson, has noted: “From an employer’s perspective, independent contractors, hired on a project basis and free to take on other gigs, may make more sense than a full-time hire in a bad economy.” It’s unlikely that most employers will look at a downturn as an opportunity to replace their workforce with a fleet of gig workers. There are also legal limits on when it can be done.
Not all cases are clear-cut, and misclassification can be costly. In general, though, these are the hallmarks of an independent contractor:
- The worker is responsible for a result, as opposed to series of incremental tasks, and is free to determine how the result is achieved
- The worker has a skill set achieved through education or experience qualifying as a trade (electrician), profession (optometrist), occupation (hair stylist), or business (distributor)
- The worker keeps profits associated with accomplishing the result cost-effectively
- The worker is free to hire or contract with others to assist in accomplish the result
- The worker free to offer her skilled services to others, provided she fulfills her contractual obligations to her customers and clients
When these factors are present, the worker (in most cases) could be an independent contractor or could also be hired as an employee. At this point a business can look at economics, which will obviously include matters such as insurance, access to benefits, withholding, and payroll taxes, and the cost of misclassification.
To learn more on this topic, see “What an employer should know about the gig economy” at consultexpertise.com/blog/9340266.
Carrie Green Yardley is an attorney at Yardley Esq. PLLC, a law firm providing services to small businesses and their owners from startup through estate planning. She can be reached at carrie@yardleyesq.com.