Wondering if an independent contractor, also known as a 1099 can actually be fired? Learn the difference between contractors and employees, along with the policies that you should follow.
What is an Independent Contractor?
An independent contractor is a self-employed worker who contracts with other businesses to provide services, usually found on a contractor job board, click here for an example. They are not considered employees and therefore are not protected by most labor laws. This includes laws that protect workers from wrongful termination.
There are a few things to keep in mind when working with independent contractors:
– Contractors should be classified as such from the beginning of the relationship. If an employer tries to later reclassify an employee as a contractor, they can be subject to fines and be penalized by the IRS.
– Contractors should always have their own insurance and should not rely on the business they are contracted with to provide coverage.
– Contractors should be paid on time and in full according to the terms of the contract.
– The contract should state that either party can terminate the agreement at any time, for any reason.
RELATED: What To Know Before Paying Freelancers
When can an independent contractor be fired?
An independent contractor can be fired at any time, for any reason. You should have a contract in place that either party can terminate the agreement for whatever reason at anytime. However, if the contract does not state this explicitly, it is still implied.
If you’ve never had a lawsuit filed against you, learn early to leave nothing implied! Reach out to your personal attorney for the best way to create new contracts and amend your old ones to reflect this.
Overall, independent contractors can be fired just like any other worker. The main difference is the labor laws do not cover them, so there is no risk of wrongful termination.
If you have a contract with an independent contractor, you will want to make sure that you follow the terms of that contract when terminating their services. Otherwise, you may be opening yourself up to a legal challenge. This is specifically true if you have been finding talent through an agency that offers temporary workers.
It’s also important to remember that even though an independent contractor is not an employee, certain laws still protect them. This means that you cannot fire them for discriminatory reasons, such as their race, religion, or national origin.
If you are considering firing an independent contractor, make sure that you understand the difference between employees and contractors, as well as the rules and policies that apply. This also includes making sure they have been classified correctly.
What if your contract doesn’t discuss termination?
If your contract doesn’t mention termination, you can still fire the contractor. However, you should make sure that you follow the same rules and procedures as if you had a written agreement. This includes making sure that you have a valid reason for firing them and are not discriminating against them for any reason.
How do I end an independent contractor contract?
When it comes time to end a contract with an independent contractor, there are a few things you need to keep in mind.
Have a record of communications.
Before you let them go, can you honestly say the person knows you are unsatisfied with their work? Obviously, this is not required, but sometimes mistakes are only a miscommunication. Records like texts and emails should be kept on file in case there was anything to come up later.
Classification.
We mentioned earlier, you need to make sure the contractor is correctly classified. If you were to answer yes to any of the questions or statements below, that could make them an employee.
You determine when you pay the contractor.
You tell your contractors when to be at work, what time they can leave, and they are using your tools and/or supplies to complete the job.
For the full details, read the terms and definitions on the IRS’s website. They can also give you guidance on the steps moving forward if you need to reclassify – this goes for both parties.
This is important because most of the time contractors cannot file lawsuits against your company. They are not employees and there’s nothing they can do if you are following the terms outlined in the contract.
However, if the IRS deems that your contractor has been misclassified, not only does this open the door for tax penalties and obligations, your “contractor” can indeed sue and be entitled to other benefits.
Other benefits include back pay of wages, health benefits, worker’s comp, and others you may offer. You will also have to cover the cost of their legal fees as well as yours during the lawsuit!
In short, make sure there is a termination clause in your contract that both parties have agreed to, and follow the same rules and procedures as if the contractor was an employee. This includes having a valid reason for firing them, and not discriminating against them in any way. If And finally, always make sure to stay up-to-date on the latest changes with labor laws. Times are constantly changing, and what may have been true last year may not be the case today.
