Probably the main reason you became an independent contractor (aka
consultant, freelance and IC) or want to, is to be your own boss. Unfortunately,
some U.S. companies don't fully understand the difference between independent
contractors and employees. Even among companies that do understand the
difference, there are those that attempt to exploit the relationship, because
it's clearly to their advantage to do so.
Companies don't have to withhold federal, state and Social
Security (FICA) taxes, or pay unemployment or workers'
compensation insurance for independent contractors. They also don't need to
offer benefits like paid sick leave,
vacation, health insurance and
stock options, as they do to attract and retain employees. In fact, companies
don't have to offer much of anything to independent contractors, except that for
which they've agreed by contract (independent
contractor agreement). That saves tons of paperwork and big bucks, giving
dishonest companies lots of incentive to cheat independent contractors of their
rights. The cheaters (and naive) misclassify workers as independent contractors,
but still attempt to control them as employees. In doing so, they reap the
benefits of both worlds, while depriving independent contractors of the very
reason they became independent contractors in the first place: to be their own
bosses.
Many misclassified independent contractors don't fully understand the
difference either, which helps to perpetuate the problem. Here's how it's
supposed to work when you are correctly classified as an independent contractor:
- Companies are not your employers per se, but your clients. As such, they
are not entitled to direct you in your work.
- Of course, your clients have a right to say what they expect for the rates
they're paying you, but only as it relates to the outcome of the project.
- It's your right to decide when, where and how to get the project done.
Natch, it's wise for you to satisfy your clients at the project level, if you
wish to get paid and receive favorable referrals for landing more contract jobs.
But that doesn't mean you must allow a client to control you as an employee.
That's against the law.
In other words, by U.S. law, an employer cannot classify you as an
independent contractor, then dictate when, where and how you work, as though you
are an employee. It's all about degree of control and independence.
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