Do You Know Your Rights as an Independent Contractor?

Do You Know Your Rights as an Independent Contractor?

If you’ve been hired by a company and will receive a 1099 instead of a W-2 form for tax purposes, then you’re legally considered an independent contractor, rather than an employee. As an independent contractor, you have certain rights and responsibilities that make you significantly different from an employee. It’s essential to know what the company hiring you can and can’t expect of you as a 1099 worker, as well as to understand the things that you are responsible for providing yourself. This will help ensure that you’re getting treated fairly and not putting yourself at risk for financial disaster.

Right to Control Your Work

If you are an independent contractor, the company hiring you cannot legally tell you how to do your job, the way they could if you were an employee. Outside of what is agreed upon in the contract, you can work when and how you like. You can also work with whom you like if you feel the need to hire subcontractors to help you. As an independent contractor you were hired in the role of an expert: you are in charge of your workflow and process. Generally, you’re also responsible for acquiring and maintaining the tools and supplies you will use, without expecting company reimbursement (unless otherwise agreed upon beforehand in the contract).

Right to Work for Others

A company that hires you can’t forbid you from working for anyone else. You can have as many contracts with different people at a time as you can responsibly handle. Those who hired you also don’t have a say in how you market yourself or to whom.

Right to a Contract

This may seem too obvious to be worth mentioning, but as an independent contractor you have the right to a signed contract. The contract needs to spell out everything about the job you want to be legally binding. Unlike a W-2 employee, you are not automatically protected from unemployment discrimination, entitled to overtime or paid leave, or eligible for severance pay. You do not have to sign a contract that is missing essential elements like termination rights, expected time frames, and payment conditions. Always expect and demand a thorough contract before starting work on a 1099 job. You will not be protected legally for anything not spelled out in the contract.

Responsibility to Manage Your Business Affairs

A W-2 employee doesn’t have to worry about paying health insurance, workers’ comp, or payroll taxes. As an independent contractor, you are responsible for any insurance you and your family need (liability, unemployment, health, etc.). You are also obligated to pay your own taxes, including the self-employment tax, as the hiring party will not have sent any money to the IRS on your behalf.

Being an independent contractor can offer a lot of freedom, but there are many responsibilities that come with managing your own business affairs. If you’re considering working for a company that wants to hire you as a 1099 independent contractor, make sure you understand all of your rights so that you’re prepared with a solid contract, proper insurance, and a thorough understanding of what the hiring company can and can’t ask of you.

We’d love to hear from you. Are you a 1099 or a W-2 worker? Do you prefer one over the other? Let us know in the comments!