Who you choose to hire affects your business—likely in more ways than you realize.
As leading business and transaction law attorneys in Seattle, we understand that the small choices you make now can have big effects down the line. We’re here to make sure you lay the best possible foundation for future success. Schedule a free consultation online to learn more.
Entrepreneurs and self-starters are some of the most tenacious individuals around, and they have to be. That’s because building a profitable business from the ground up is never easy, especially in competitive markets like Seattle.
As experienced business law attorneys in Seattle , we’ve represented all sorts of entrepreneurs, and regardless of how different the sectors they work in are, they tend to make the same handful of mistakes. One of the most frequently made mistakes is failing to understand the implications of their hiring practices.
More specifically, many employers fail to research the legal implications and obligations of hiring a contractor as opposed to hiring a full-time or part-time employee. As a result, some of them run into unforeseen issues with employee classifications, compliance with state laws, tax liability and more. Luckily, they don’t have to untangle them alone.
If you’re a business owner in Washington State, you need to have a thorough understanding of how hiring a contractor can impact your business. This article will provide an introductory legal guide to working with contractors in Washington State and offer you tips on how to make the most advantageous decisions possible.
At By Design Law , we believe that each client is deserving of a legal approach as unique as their specific situation. When you need a legal strategy designed around your individual needs and goals, we’re here for you. Call our law office at (206) 593-1519 to learn more.
Understanding the Contractor Relationship
As a business owner, your relationship with a contractor isn’t the same as your relationship with other types of employees. In contrast to full-time or part-time employees, contractors are typically hired on a project-by-project basis and commissioned to complete a specific task or service. When their commitments are fulfilled, they move on.
Despite what most people think, contractors aren’t only construction workers. They also exist in a wide range of other industries, from landscaping to marketing to IT and more. Hiring these workers offers several potential advantages to employers, including the ability to scale up or down as needed without having to navigate long-term contracts.
However, this flexibility comes at a price. There are certain legal responsibilities that come with hiring contractors, and failure to understand them can negatively impact your business in more ways than one.
Legal Considerations When Hiring Contractors
The legal considerations in regard to contract work are a matter of perspective. While this article outlines the major considerations affecting a business owner, it does not evaluate the situation from the contractor’s point of view. That being said, there are many factors that you—the business owner—need to assess before hiring this classification of worker.
Employee Classifications
Employers have an obligation to accurately classify their workers as employees or contractors, and when they misclassify them, they may suffer serious legal consequences, including fines and penalties. If you’re unsure about a particular worker’s status, it’s a good idea to consult the guidelines provided by the Washington State Department of Labor & Industries .
Contract Agreements
Before hiring contractors (or any employees), it’s important to draft comprehensive contract agreements. Contracts should address a variety of contingencies and expectations, including the scope of the work, the terms of payment and work deadlines. High-quality contracts and legal documents can go a long way in resolving any disputes that may arise in the course of the work.
Compliance with State Laws
Each state has specific laws and regulations governing employer-contractor relationships. For example, many types of contractors in Washington State require licensure, including contractors in the construction, electrical and plumbing industries. It’s your responsibility as an employer to verify that applicants hold the necessary licenses before hiring them.
Additionally, many contractors need to have industry-related insurance coverage (such as liability insurance) to ensure they are protected in the event of an accident. Washington also has a number of strict laws about paying contractors, especially those in the construction industry. It’s critical to familiarize yourself with these wage laws, regardless of which type of contractors you’re planning to hire.
Tax Implications
Hiring contractors instead of employees can offer a number of tax advantages to a business owner, as individual contractors typically have a larger personal tax burden than employees. However, it’s still important to promptly provide contractors with the appropriate tax documentation when necessary.
Worker Safety
If your project involves potentially hazardous work, you’ll need to ensure your contractors are complying with the pertinent safety regulations and requirements. Doing so not only helps protect them from injury but also helps protect you from liability claims.
The considerations detailed above do not represent a comprehensive list of concerns. As a business owner, you’ll also need to think about dispute resolution, termination clauses, IP and confidentiality, environmental regulations, subcontracting and more. Ultimately, you’ll need to anticipate and account for every possible contractor-related scenario, which is a challenging task without top-tier legal assistance.
By Design Law: Trusted Business Law Attorneys in Seattle
When you’re a successful entrepreneur in your community, it falls upon you to make sure every part of your business is being handled according to best practices and legal compliance. However, finding time to do so on your own can feel next to impossible, which is why the most effective entrepreneurs know how to delegate.
As top business and transaction law attorneys in Seattle, we know that small business owners and self-starters are the lifeblood of our economy. That’s why we’re committed to providing individualized, full-spectrum legal strategies to each and every client. Schedule a free consultation online or call our law firm at (206) 593-1519 to learn more.