Should You Re-evaluate Your Independent Contractors?

Over a project lifecycle, the once “qualified” Independent Contractor (IC) can begin to resemble an employer/employee relationship. There are many reasons for this. One example is the manager changes the scope of the work to that of an employee’s. Another example I’ve seen is that workers obtain the required amount of business insurance just to be able to provide it during the evaluation, only to cancel that insurance once they start their project. I’ve also come across some companies that keep their Independent Contractors continually on engagement for years at a time. You may be wondering if that’s a risk.

It’s complicated.

Whether a worker qualifies as an independent contractor or not is a complicated issue. There is no single, uniform test, let alone a single factor, that can be used to determine who qualifies. Federal agencies and state agencies use different criteria. There are a lot of rules that companies must follow to classify a worker as an Independent Contractor in the eyes of the government. Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor.

Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination, but rather the collection of facts about the relationship. Also, factors which are relevant in one auditing agency may not be relevant in another. The burden of proof is on the organization engaging the worker.

Re-evaluate Your IC?

Typically, best practices recommend that a company re-evaluate each Independent Contractor after some period on a project to verify and determine if anything has changed from when the manager and worker took the original surveys. There is no hard rule on the time period for a re-evaluation, as this will depend on your threshold of business risk. We suggest 12 months but encourage you to discuss with your IC-compliance-trained attorney. At the very least you should be tracking the IC’s expiring supporting documents, such as their business insurance and business license, if applicable. We recommend a re-evaluation solution that is diligent and systematic in your re-evaluation process and that it is applied consistently to all your ICs.

Independent contractors can remain a viable operating option when properly classified. If your organization needs some help ensuring your ICs are re-evaluated appropriately, ClearPath Workforce Management has an IC re-evaluation process and risk mitigation services that bridge the gaps to enable compliant engagement of this highly skilled talent and to expand your talent supply chain. ClearIC™ can automate and simplify the Independent Contractor evaluation process while mitigating your risk via our full-service IC vetting process. Contact ClearPath for a complimentary 1:1 review of your current worker status.

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