LEGAL TOOLS By Brooke Duncan
Brooke Duncan is one of the nation’s leading labor attorneys and a partner with Adams & Reese in New Orleans.
From Contractor to Employee?
QUESTION: Is it legal to hire someone for 30 days as an independent contractor and then switch them to employee status if they work out?
DISCLAIMER This response is intended for general informational pur- poses only and should not be construed as legal advice or a legal opinion, nor is this column a substitute for formal legal assis- tance. For help with particular legal needs, members are invited to consult with ACCA’s LegalTools Counsel, Brooke Duncan III of Adams and Reese LLP.
ANSWER: Yes, but it’s not a great idea. Here’s the problem. Labeling a worker as an independent contractor raises all kinds of issues with the IRS, the U.S. Department of Labor, your state labor department, your workers comp carrier…you really don’t want me to go on. The IRS likes their tax withholdings, so they take a dim view of an employer who avoids withholding taxes because the worker is not a W-2 employee. Federal and state labor departments worry that calling someone an independent contractor may be a ruse to avoid extending benefits to the worker. Workers comp is a potential issue because your comp policy may
or may not cover independent contractors. If an independent contrac- tor gets hurt while working for you, and your policy doesn’t cover independent contractors, you may get stuck with a lawsuit for medical payments and lost income. These are problems that can arise even if independent contractor status is temporary. But you have an alterna- tive. Many employers place new employees on probation for the first few weeks of employment—a try-out period—during which it’s under- stood that the company will be deciding whether the worker is a good fit. Depending on your benefits programs, you may be able to delay enrolling a new employee until the probation period has been satisfied. Try the probation alternative. Calling a worker who performs the same work as your employees an independent contractor is a red flag.
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