Independent Contractor Agreements May Not Tell Whole Story

Independent Contractor Agreements May Not Tell Whole Story

By Malorie A. Alverson, Esq.

An ongoing trend in businesses, including within the health care industry, is the use of independent contractors to provide services instead of through employees. Generally speaking, a professional corporation that hires an independent contractor is not vicariously liable for the negligent acts or omissions of the contractor. This is one of the reasons that a professional corporation may use a written independent contractor agreement with a professional to render services on behalf of that business. A common misconception associated with the execution of an independent contractor agreement, however, is that this contract alone is conclusive of an independent contractor relationship between the parties. Instead, an employer-employee relationship creating vicarious liability may still be found if a court determines that the professional corporation exercised enough control over the manner and means by which that professional (who’s accused of such negligence) performs his or her services.

In evaluating whether an individual is an independent contractor or a misclassified employee, a court will look at several factors including, but not limited to: (1) the source of instrumentalities and tools; (2) the location of the work; (3) the duration of the relationship between the parties; (4) the extent of the purported employer’s discretion over when and how to work; (5) the provision of employee benefits by the purported employer; (6) the tax treatment of the purported employee; and, (7) the method of payment. As with most issues in the law, determination of independent contractor status is typically dependent upon the specific facts of each relationship. Professional corporations and similar business entities that use independent contractor professionals should routinely evaluate these various factors with their legal counsel to prevent findings of misclassification and/or vicarious liability.