PROS

1.     An Employer Saves Money

• The employer won’t pay for benefits, including health and disability insurance, vaction time, sick days, overtime and retirement plan-benefits.
• The employer won’t pay the employer’s share of social security and medicare taxes and won’t contribute to state and federal unemployment insurance funds.
• The employer won’t have to pay for training for an independent contractor.  Independent contractors already have experience in their fields and require no specific training from employers.

2.    Flexibility

• An employer doesn’t have the issues of hiring and firing and morale.
• An employer can hire an independent contractor for a specific task or project, knowing that the independent contractor will be gone when the job is finished.  This is especially beneficial if the employer’s workload fluctuates.
• The employer gets specialized expertise for a short period of time without having to pay for training.

3.    Reduced Exposure to Some Lawsuits

• Independent contractors are not subject to many laws designed to protect employees, including overtime and minimum wage requirements.
• An employer is not subject to complaints for job discrimination and wrongful termination.

CONS

1.    An Independent Contractor Can Sue for Negligence

• If an independent contractor is injured on the job then the independent contractor can sue.  Typically, when an employee is injured on the job, s/he can’t sue because they are covered by workers’ compensation.

2.    Less Control

• Independent contractors can decide when, where and how the work is done. They don’t have to follow any instructions, and the only control the employer has over the work is the end result.
• Independent contractors decide how much their work is worth.
• An employer can’t count on any given contractor to be available when needed for a new project.  Additionally, a qualified independent contractor may be difficult to find compared to regular job candidates.

3.    Misclassifying Can Be Economically Devastating

• Any number of state and federal agencies might audit a business if it believes it has misclassified employees as independent contractors.
• If an independent contractor is misclassified the employer will be required to pay the IRS all back taxes owed, with interest plus a penalty of up to 35% of the tax bill.
• At the state level, an employer could attract the attention of its state’s unemployment compensation or workers’ compensation agency if a worker it classified as an independent contractor applies for benefits.  An employer could also face an audit from its state’s tax agency.

Before deciding to hire an independent contractor for its business needs, an employer should find out about the legal differences between an independent contractor and an employee in the state where it’s located.  If an employer doesn’t find out the rules before making the decision, it may find itself with heavy penalties down the road that far outweigh the benefits it received from hiring independent contractors.  An employer should never hire someone as an independent contractor if it plans to treat them as an employee.

NOTE:  The use of independent contractors is on the radar of Congress.  On July 30, 2009, Rep. Jim McDermott (D-WA) introduced H.R. 3408 to amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees, and for other purposes.

Related posts:

1. Washington Law Updates for May 2009

1.  Failing to regularly update your handbook.  An employee handbook is a living document that needs constant examination and revisions.  A factually inaccurate handbook or one that is not representative of actual practices can be as problematic as statements that are illegal.  It is a good idea for an employer to update its handbook at least once a year.

2.  No disclaimer.  An employer should print a disclaimer stating that the handbook does not constitute an employment contract.  An employer also wants something in the disclaimer that says that it is not a complete description of the employer’s policies and procedures. To cover your bases, the disclaimer should be in the front and the back of the handbook, in a larger font and in bold.

3.  Not using straighforward language.  An employee handbook should be written on a level that all employees will understand.  If the handbook is too vague or too technical it may not serve its purpose. 

4.  Neglecting to detail anti-harassment and discrimination policies with reporting procedures.  Employee handbooks provide an excellent means of conveying the company’s equal employment policies and practices for how alleged violations must be reported.  As Supreme Court decisions have illustrated, well-drafted policy and complaint procedures to deal with harassment and discrimination issues will serve as a useful tool in limiting employer liability. 

5.  Not taking into consideration federal, state and local laws.  An employee handbook should not just focus on federal law requirements.  Often state laws provide greater employee protections (which is true for the state of Washington in many instances) than federal laws.  An employer should also include relevant municipal ordinances.

6.  Being too specific.  A handbook should be a set of guidelines for the employees to follow.  If a handbook includes lists or examples of behavior, it should be made clear that they are for illustrative purposes and are not exhaustive.

7.  Ineffectively communicating the handbook to employees.  An employer should never assume that employees will become familiar with the handbook on their own.  Employers should set aside some time to discuss its contents with employees and answer any questions they may have.  A review of the handbook should be included during the new employee orientation.

8.  Failing to obtain an employee’s acknowledgment.  An employer should have employees sign an acknowledgment to ensure that all employees have received, read and understand the handbook.  The acknowledgment should contain language that employment is at-will and the employer retains the right, in its sole discretion, to modify, alter or amend the handbook at any time.  The signed acknowledgment should then be placed in the employee’s personnel file.

9.  Including language and buzzwords that are ticking time bombs.  Policies should avoid words such as “only,” “always,” “shall” or “will” or phrases such as “termination only for cause,” promises of job security (”permanent” employee).  An employer should use more flexible words such as “may,” “usually,” “generally” and “typically.”  These words give more flexibility in interpreting and applying policies.

10.  Not having the handbook reviewed by a lawyer.  An employer should have an attorney who is well-versed in employment law review its employee handbook.  An employment lawyer may identify areas that are not currently in the handbook but should be included, identify changes in current verbiage to make the handbook legally compliant, and pinpointing policies that should be eliminated.

Remember, a well-crafted and up-to-date employee handbook can be used as an effective tool to minimize both litigation and liability.

Related posts:

1. Avoiding Mistakes in Performance Evaluations

1.  Waiting for the Performance Evaluation to Give Feedback

Performance management is a daily supervisory responsibility and integral to management.  It is a mistake for a supervisor to perceive the performance evaluation process as an isolated event rather than an ongoing process.  If proper goal setting, coaching and feedback are done periodically, then the results of the performance evaluation will not be a surprise to the employee.

2.  Over Emphasizing Recent Performance

A superivsor should not allow a recent event to color the perception of the employee’s performance for the entire period.  Over emphasizing recent performance can lead to an inaccurate and unfair assessment.  Instead, a supervisor should take notes throughout the performance period so that s/he is not relying on a faulty memory.

3.  Too Subjective

A supervisor should focus on specific employee behaviors, rather than on general personality traits.  For example, do not describe the employee as “angry and emotional.”  Instead, focus on the workplace behavior that is the problem and state “you have been insurbordinate on two occasions in the past three months.  This behavior is unacceptable and must stop.”

4.  Being Too Positive or Too Negative

Some supervisors rate higher or lower than the employee deserves because s/he wants to motivate them to do better or because they think there is always room for improvement.  Some supervisors also may inflate a performance evaluation to avoid having a confrontation.  Supervisors should be sure to give bad news even if it is uncomfortable.  If a supervisor avoids telling an employee about performance problems, the employee won’t know that s/he needs to improve and the problem will persist.

5.  Being Critical Without Being Constructive

If the supervisor does not explain how the employee can improve, the employee is likely to miss the validity of what the supervisor is saying.  This does not help the employee or the supervisor.  Instead the supervisor should give specific examples of where the employee is lacking and suggestions on how the employee can improve.

6.  A One-Sided Conversation

Good supervisors remember to listen and promote two-way communication.  It is a good idea to ask employees for their comments on the performance evaluation.  If the process is interactive, employees are more likely to understand their evaluations and supervisors are more likely to understand the employee’s perception of the evaluation.

7.  Failure to Set Specific Goals and Expectations

Clarifying and discussing the performance goals for the coming year is a valuable use of a supervisor’s time and will help to ensure that there is no miscommunication and there are no suprises.  Performance goals should be set jointly by the employee and the supervisor.  Goals should be both short- and long-term.  Additionally, goals should be precise and quantifiable where possible.  For example, completing a specific project within a set time period.

The bottomline is that a performance evaluation is a tool a supervisor can use to help enhance the efficiency of the work unit.  This tool is a means to help ensure that employees are being utilized effectively.  Employees can use it as a clear indication of what is expected of them before the supervisor tells them how well they are doing, and then as feedback of how well they did.  The performance evaluation doesn’t have to be feared or looked upon as a negative experience if it is done with avoiding these common mistakes in mind.

Related posts:

1. 10 Common Employee Handbook Mistakes to Avoid