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Are Your Contract Attorneys 'Independent Contractors'?

By Betty Wang, JD | Last updated on

Are you thinking about hiring your first (or next) contract attorney? How can you be sure that he or she is actually an independent contractor and not an employee? The IRS has compiled a list that can help.

Misclassifying your worker as an independent contractor can lead to some dire consequences. In one case, a law firm had to pay $160,000 when it failed to prove that its so-called "contract" attorneys were truly independent contractors, according to the Oregon State Bar.

So, while hiring a contract attorney may seem like a good idea in these penny-pinching times, you'll want to be careful in how you treat and classify them:

IRS Says: Focus on Control

The IRS has compiled a list of 20 factors derived on a case-by-case basis over the years in determining what type of relationship exists among the employer and worker. While the list is not exhaustive, it does focus on one key factor: control.

The more control an employer has over a worker, the more likely it is that the worker is an employee. In other words, the more control you have over your contract attorney, the more likely he or she might have grounds to claim employee status (and all the benefits that come with it).

Here are some factors that the IRS thinks are relevant:

  • Continuing relationship. Despite all the benefits contract attorneys may bring to your firm, a continuing relationship with them may suggest more of an employee status. If you want them to continue working for you after a specific project, think this one through carefully.
  • Doing work on the employer's premises. If the case or workload that you assign your contract attorney can be done remotely, you may want to suggest this. When work is performed on the premises of your firm, this suggests more of an employee relationship.
  • Payment of business and/or traveling expenses. Alongside other possible benefits like overtime, the perk of having an expense account is usually reserved for employees, rather than independent contractors. If you're allowing your contract attorney these perks, you may want to reassess your decision.
  • How many firms he or she is working for. Contract attorneys are free to float around and work for more than one firm or agency at the same time. Also, another indicator of an employee is if the contract attorney is working for you full-time, thus leaving no time for work at other firms. In such a case, you may want to reduce the contract attorney's workload, or risk misclassification.

These are just a few of the many factors that the IRS considers when figuring out if a contract attorney is really an independent contractor, so use your best lawyerly judgment. The IRS can come after anyone, whether you're hiring contract attorneys or lap dancers, so make sure that you're careful with your contract hires.

Have questions about your workers' legal classification? Tweet it to us @FindLawLP.

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