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Avoiding the Misclassification of Employees: Why Your Independent Contractor Agreements Need to be Safeguarded

Posted on in Independent Contractors

independent contractors in illinois, Arlington Heights business lawyerAmong the many responsibilities you have as a business owner, protecting your business and its best interests is perhaps one of the most crucial. Ensuring the staff you hire adheres to your policies and standards is critical because the livelihood of your business depends on it, as does your reputation. As a business owner who chooses to work with independent contractors, you are especially at risk for financial loss and headache if you do not handle the legal aspects of your relationship with those contractors correctly.

Why Working with an Independent Contractor Poses Certain Risks

Employers can run into costly fees because of overdue Federal and state income taxes when they work with independent contractors. This stems from confusing independent contractors with employees, also known as the "misclassification of employees."

Under Illinois law, employers who misclassify contractors are forced to pay higher unemployment insurance contributions, workers' compensation premiums, as well as higher taxes. They can also end up owing Social Security, Medicare, and other financial penalties.

In short, if a certain employee is found to be improperly classified under your business, you can be ordered to reimburse that employee for any and all improper deductions, which is why it is so important your independent contractor agreements are correct and valid.

Safeguarding Your Agreements

So, how do you safeguard your agreements with any independent contractors you decide to work with? How do you know if you are covering all your bases and protecting the best interest of your business? First, determine whether the individual you are signing the agreement with is, in fact, a contractor by answering the following questions:

  • Is the individual free from your direction and control during the time he or she performs the services? (You only have control or say over the end result of the project.)
  • Is the individual involved in an independently established trade, occupation, profession, or business?
  • Is the service that the individual is providing performed "outside" the place of business (or outside the usual course of the business)?

If the answer to these questions is "yes," then the individual can be classified as an independent contractor. The next step is to speak with a qualified, knowledgeable Arlington Heights business law attorney who can direct and counsel you as you prepare your agreements. Do not run the risk of making technical and legal mistakes that could end up costing your business. Contact A. Traub & Associates today at 847-749-4182 for a consultation.


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