One of the biggest challenges that a contractor faces on a job site involves the status of independent contractors. Understanding the difference between an "employee" and an "independent contractor" can help you to avoid becoming the legal employer of a contractor's or a subcontractor's workers. The best way to deal with this problem is by requiring that all contractors carry Workers Compensation insurance and taking reasonable steps to verify that coverage is in place. You should also:

  • Check state law for the definition of independent contractors; if needed, seek legal advice for clarification.
  • If the law requires independent contractors to register, check the state's online portal to verify that the contractor in question is registered.
  • Have a written contract with every independent contractor that outlines the relationship and does not restrict the contractor's freedom to work for others.
  • Make sure that the contractor provides their own tools and equipment.
  • To avoid the appearance that an independent contractor is drawing a paycheck, provide payment based on completion goals, rather than weekly or bi-monthly -- and require invoices for payment.

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