Basics of Independent Contractor Law Law Offices of Matthew S. Johnston, LLC 122 E. Patrick Street, #103 Frederick, MD (240) October 29, 2015 © Matthew S. Johnston, 2015

Law Offices of Matthew S. Johnston, LLC Services  Small Business Focus  Contracts, Drafting and Advising  Small Business Operations Counseling  Outsourced General Counsel Services  Dispute Resolution  Intellectual Property Law © Matthew S. Johnston, 2015

Topics in This Session  Scaring the crap out of you  The economic situation vs. regulatory environment  Six (non-exclusive) factors to consider  How Employers can protect themselves  How Contractors can help Employers  What Ifs (because no one asks lawyers a question without a “What if”) © Matthew S. Johnston, 2015

The CMB Slide  This session is designed for informational and educational purposes only. The subject matter is not intended to be legal advice.  The discussions should not be construed as legal advice.  No discussions between attendees and I are considered to be privileged communications.  NO attorney client relationship is created as a result of your attendance at this session.  If you need confidential legal advice you should consult an attorney. Like this Guy © Matthew S. Johnston, 2015

The Scary Stuff © Matthew S. Johnston, 2015 When talking about independent contractors, really talking about employee misclassification liability Improperly classifying workers as ICs rather than employees means liability to workers AND Gov’t Employees get back wages/benefits, Gov’t gets back taxes, UI, and Worker’s Comp premiums, + fines Even if you settle with the employees, the Gov’t can still pursue its claims and get triple damages for willful violations

The Scary Stuff © Matthew S. Johnston, 2015 End Result is Employee Misclassification can mean tens of thousands, hundreds of thousands, or even millions of dollars—effectively putting you out of business. However it is not all doom and gloom Proper consultation, due diligence, advance planning, and a good independent contractor agreement can still work.

Why Does this Matter?  Workers in “gig economy” want freedom/independence  Some workers accept the consequences of their choice, others have had little or no choice in the past.  Government was to protect the latter, but often go overboard on the former  Government is starting to look hard a on-demand services, temporary agencies, and some licensed professions  Maryland law, explicitly regulates landscaping and construction industries.  Maryland may be looking soon at home healthcare and home maintenance/cleaning industries © Matthew S. Johnston, 2015

Why Does This Matter?  Governments want to ensure employee protections  Overtime  Unemployment protection  Worker’s Comp  Tax payments  LABELS DO NOT MATTER  It is the relationship between the employer and worker that matters.  Key question: “Is the worker Economically Dependent on the employer?” © Matthew S. Johnston, 2015

Independent Contractor Law  Burden of proving independent contractor status is on the employer NOT the contractor.  Case law is evolving but generally looks at the economic realities of the relationship  No longer a simple matter of control of ways & means of working  EACH case is very fact dependent and general rules are difficult to draw, but the courts/Gov’t have a list of non-determinative factors. © Matthew S. Johnston, 2015

Six (Non-Exclusive) Factors to Examine  Integral part of employer’s business  Worker’s managerial/entrepreneurial skill affects profits not just time  Worker’s investment vs. employer’s investment in materials/equipment/software  Work requires special skills not otherwise available  Nature of relationship between worker & employer  Nature and degree of employer’s control © Matthew S. Johnston, 2015

Guidance for Independent Contractor Status  No one factor is determinative  Gov’t and Courts look primarily at these factors, but also at the “totality of the circumstances” in the relationship  Remember the bias of government is to find employee status, all parties should act accordingly © Matthew S. Johnston, 2015

Guidance for Employers  1 st Red Flag: significant number of ICs doing the same work, particularly if ICs outnumber regular employees.  2 nd Red Flag, ICs with multi-year engagements and no other clients  If work is integral to your business and you need lots of labor, consider a class of short-term employees  Do and document your due diligence efforts, get EIN numbers, client references, marketing efforts, and revisit for long term ICs  Document, document, document and then when all else is done, document some more © Matthew S. Johnston, 2015

Guidance for Contractors  1 st Red Flag: more than 90% of income from one client over a long period of time.  2 nd Red Flag, Any Exclusivity Arrangement  Provide Employer with EIN, Client references, marketing efforts, show you are an independent business  Have a solid, clear, unmistakable independent contractor agreement and FOLLOW IT.  Document, Document, Document and then when all else is done, Document some more to show you are an independent business, help the employer. © Matthew S. Johnston, 2015

The Law Offices of Matthew S. Johnston, LLC For more information, contact: The Law Offices of Matthew S. Johnston, LLC 122 E. Patrick Street #103 Frederick, MD (240) © Matthew S. Johnston, 2015

The Law Offices of Matthew S. Johnston, LLC The preceding presentation is intended for educational and informational purposes. The presentation should not be construed as legal advice. No attorney client relationship is created through the presentation or reading of this presentation. This presentation may be excerpted, reprinted, or redistributed under the Creative Commons Attribution-No Derivatives 4.0 license (CC BY ND 4.0). No changes may be made to this presentation without the written consent of the author. Creative Commons Attribution-No Derivatives 4.0 license (CC BY ND 4.0) All other rights reserved. © Matthew S. Johnston, 2015