Tips for Hiring an Independent Contractor

Employee or Independent Contractor

Do you have an independent contractor working for your company? The law establishes clear distinctions between employees and independent contractors, and it is important to ensure that your personnel are classified correctly.  In California, there isn’t a set definition of “independent contractor,” and the determination of whether a worker is an independent contractor or employee depends on the facts of the situation.  Historically, the primary factor to consider has been to what degree the hirer retains the right to control the worker’s means and methods of performance along with the outcome of the work.  Employers often try and use independent contractors for roles traditionally performed by employees, but misclassification of an employee as an independent contractor can be a costly mistake for a business. 

how to hire an independent contractor

The New “ABC” Test

A recent California Supreme Court case, Dynamex Operations West, Inc. v. Superior Court, established new guidelines for whether a worker can be considered an independent contractor with the “ABC” test.  Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes:

  1. that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
  2. that the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

If an employer is challenged, the presumption is that the worker is an employee unless the employer can meet all three parts of the test.

Independent Contractor Do’s and Don’ts

Along with the new 3-part ABC test, here are some tips for hiring an independent contractor.

DODON’T
Do execute a written independent contractor agreement clearly establishing the independent contractor relationshipDo not hire independent contractors without clearly identifying the independent contractor relationship and scope of engagement
Do ensure that independent contractors customarily engage in an independently established trade, occupation or business (ex. independent contractors are in the business of providing certain work on a contract by contract basis)///
Do have the independent contractors use their own tools, equipment, supplies, etc. to perform the workDo not require that independent contractors use your tools, equipment, supplies, etc. to perform the work
Do report your independent contractors to the EDD and timely file and issue 1099s.Do not hire independent contractors to do work that is within your usual course of business (ex. T-shirt design company hiring independent contractor to work as T-shirt designers)
Do ensure that independent contractors submit invoices for payments ///
Do hire independent contractors for a definite period of time (ex. per project or by set period of time)Do not require independent contractors to come to your “office” or set their work hours (ex. 9am-5pm)
///Do not control or direct the manner of work performance (ex. “how” the work should be done)
Do preferably work with independent contractors that are a corporate entity (ex. work with Jane Doe Corp or Jane Doe LLC instead of Jane Doe, an individual)Do not require exclusivity from independent contractors (ex. let them work for other clients)
Do ensure that independent contractors have liability insurance (especially if independent contractors are professionals)Do not provide independent contractors any employment benefits
Do ensure that independent contractors’ licenses, if any, are currentDo not pay or withhold any taxes for the independent contractors

Legal Disclaimer: The information in this article is provided for general informational and educational purposes only. It is not intended to be legal advice and does not create an attorney-client relationship.

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David Kim| PARTNER

David Kim is a Partner at Parsus LLP. He specializes in corporate and technology transactions, with an emphasis on intellectual property. David has represented a variety of clients from start-ups to Fortune 500 companies in mergers and acquisitions, cross-border investment, financing, and licensing. His clients do business in a range of industries including entertainment, financial services, consumer products, gaming, software, and technology services.

Prior to returning to Parsus LLP, David served as an in-house intellectual property counsel for NBCUniversal, advising on technology and mergers and acquisitions for the various business units of the company. He assisted the company’s corporate development teams in assessing acquisition targets and negotiated NDAs, vendor service agreements, software and hardware licenses, and trial agreements for experimental and prototype technology. David was also one of the company’s primary resources on open source software-related matters.

Before joining NBCUniversal, David co-founded and served as a Partner of Parsus LLP, worked as in-house counsel for start-ups, and was an associate at Winston & Strawn, where he represented clients in intellectual property matters including patent assessment and analysis, IP licenses, and various phases of patent and copyright infringement litigation. At Winston, David also represented clients in general business and securities litigation concerning commercial disputes and business torts.

David received his A.B. degree from Harvard University and his J.D. degree from UCLA School of Law. 

Kristen Lee
Kristen Lee
| ASSOCIATE ATTORNEY

Kristen Lee is an associate attorney at Parsus  LLP.  Her practice is focused on commercial transactions and the various day-to-day legal needs of businesses of all sizes, including business formation, corporate governance, commercial contracts, and mergers and acquisitions. Prior to joining Parsus, Kristen represented corporate clients in high-stakes litigation involving breach of contract, fraud, unfair competition, and other business torts.  

Kristen is a member of the Korean American Bar Association of Southern California.

Kristen received her B.A. degree from the University of Texas at Austin and her J.D. degree from Pepperdine School of Law.  Kristen is fluent in Korean. 

EVELYN SHIMAZAKI
| OF COUNSEL

Evelyn Aguilar Shimazaki is Of Counsel at Parsus LLP. Her practice is focused on the representation of technology companies in intellectual property licensing and commercial transactions, including joint development, manufacturing, procurement, strategic alliances, outsourcing and other services arrangements. Prior to joining Parsus LLP, Evelyn was a Senior Counsel at Apple in Cupertino, California for fourteen years. After Apple, she joined Tesla in Palo Alto, California as Chief Counsel and more recently, Oculus VR, a division of Facebook in Menlo Park, California as a Consultant.  

Evelyn is a Founding Board Member of UCLA Law Women LEAD, an Advisory Board Member of the Lowell Milkin Institute of Business Law and Policy at UCLA School of Law, and a past President and Advisory Board Member of the Philippine American Bar Association of Los Angeles.

Evelyn received her B.A. degree from the University of California, Berkeley and her J.D. degree from UCLA School of Law. A native of the Philippines, Evelyn speaks Tagalog, Spanish and some Japanese.

Ju Park
| MANAGING & FOUNDING PARTNER

Ju is a corporate lawyer by training and an entrepreneur at heart.  After attending the United States Military Academy at West Point for a year where she gained essential life skills including throwing grenades and applying a tourniquet, she graduated from McCombs Business School at the University of Texas majoring in finance.  Ju then graduated from UCLA School of Law where she focused her studies on International Business Law.  After law school, she practiced corporate law and litigation in the Los Angeles and Hong Kong offices of an international renowned law firm, Latham & Watkins, where she advised domestic and foreign clients, including Fortune 500 companies, on various corporate matters including general commercial contracts, corporate finance, IPOs and mergers and acquisitions.

Ju co-founded Parsus in 2009 with a vision to transform the legal services industry to make quality legal advice more available to and affordable for businesses of all sizes while improving the lifestyle and overall happiness of lawyers.  Over the years, and particularly since recently becoming a mother, Ju’s vision for Parsus has expanded to transform our extended community by committing a part of the firm’s profits and resources for charitable purposes.

In her role at Parsus LLP, Ju serves as outside transactional and general counsel to clients of all sizes and across a broad range of industries.  Her clients include domestic and foreign companies to whom she provides practical and cost-effective solutions to their general day-to-day business legal matters as well as major transactions such as mergers and acquisitions, corporate finance and cross-border transactions.  Ju combines her legal expertise with her business acumen to provide practical solutions to her clients’ legal issues without “over-lawyering” their contracts or deals.  Ju’s recent clients have included foreign and US companies acquiring and/or investing in US companies or assets, US companies receiving foreign and domestic investments, US subsidiaries of foreign companies going public, and foreign companies with ongoing US operations.  Ju also enjoys working with like-minded entrepreneurs and start-up executives.