How do I determine whether to classify my workers as employees or independent contractors?

The classification of a worker as an employee or independent contractor will depend upon the legal context. The most critical legal contexts for small businesses generally include federal employment taxation (FICA and FUTA), federal discrimination laws (Title VII, ADA, and ADEA), the Fair Labor Standards Act, the Employees Retirement Income and Security Act, and state workers' compensation acts. Certain industries, such as health care, may have further issues relating to the classification of workers.

Each context brings its own classification analysis, and in each context the standards for classification are highly subjective, and will depend upon facts and circumstances. A common thread among the contextual analyses is the ability of the employer to control the worker's duties, time of work, etc. (so-called "right to control"). There are no hard and fast answers to the classification question, and it is recommended that employers perform an analysis through legal counsel to document the basis for the determination, which takes into account the particular context.

Does my business need an employee manual or handbook?

In Pennsylvania, employers with as few as four employees are subject to the Pennsylvania Human Relations Act, which prohibits discriminatory and harassing treatment of employees based on gender, race, age or disability. The federal laws prohibiting such conduct apply to employers with as few as fifteen employees. Both the state and federal laws create a defense to certain types of discrimination and harassment claims if the employer has in place a procedure for making complaints about such conduct that has been distributed to employees.

Having policies and procedures published in a manual or handbook for the most common employment issues will save time and money, and prevent any claims of unfairness. If your employee handbook is prepared by a lawyer, you will have the added reassurance of knowing that your responses to these issues are consistent with the variety of federal and state laws that affect the employment relationship. Your employee handbook will allow you to avoid waste of time or resources, and will ensure fair treatment of valuable employees. This is true regardless of the size of the employer.