There are many advantages for employers to hire workers as independent contractors as opposed to employees. Typically, employers want to limit their liability and streamline their business operations. Hiring individuals as independent contractors serves both these needs. However, employers must be aware of certain aspects of employment that distinguish a person as either an independent contractor or an employee. Here are five factors to consider:

1. Control: This is the most important factor for employers to be cognizant of. The less control exercised over the individual, the more likely they will be considered independent contractors. Employers should try to have these individuals file 1099’s as opposed to W2’s. Also, limit supervisory powers of the company over the independent contractors as much as possible. It would also be wise to ask the independent contractors to self-incorporate.

2. Have Independent Contractors Use Their Own Tools and Resources: Employers should avoid providing the means and location for independent contractors to perform their work. If it is impracticable for the independent contractors to work from home or their own space, have them pay rent for using the business’s property and resources.

3. Put it in the Contract: Specify in a work contract that the individual is an independent contractor. Be wary, because this is NOT dispositive! Also, be careful when drafting the contract that it does not identify an excessive amount of control over the individual.

4. Allow the Independent Contractor to Take on Other Work: Although it is always a concern that a person you hire may divulge business secrets or aid competitors, safeguarding against this must be done with scrutiny. Independent contractors are “independent,” meaning they are not exclusively an agent for your business. So you can include a reasonable “non-compete” agreement that identifies certain activities that may be prohibited by the independent contractor, but this must still allow the individual to take on other work besides your operations.

5. Limit the Amount of Training: Training is indicative of an employer-employee relationship. Despite the necessity to fully train and educate newly hired individuals, employers must try to avoid doing this within reason. Independent Contractors should possess their own skills and should not need full training as an employee would.

Overall, employers need to take every step they can to limit their control over independent contractors. Each factor relates to the operational control the employer possesses. Despite the pressing need to oversee business operations, employers must resist the urge to fully orchestrate and determine the activities of independent contractors.