Legal Question in Employment Law in Alabama

Re: Independent Contractor

You do not �hire� independent contractors; you enter into contracts with them. You are not liable to customers or other persons who are injured or damaged by acts of independent contractors, but you could be liable for such acts by your employees. Therefore, avoid anything which might make it appear that the relationship of employer/employee exists between you and the contractors. Have written contracts with the contractors which clearly states that you are not their employer and they are not your employees. Furnish them with nothing except sales contracts and sales literature. The sales contracts should clearly tell the customers that the salespersons are not your employees, and should contain an arbitration clause. Do not furnish the contractors with business cards or withhold taxes from their earnings. Pay them by the unit sold, not an hourly wage or a salary. Background checks are probably okay; you might require them to provide background information on themselves as a condition for you deciding whether to enter into a contract with them. Require in your contract that they carry their own liability insurance and worker�s compensation insurance; do not purchase insurance for them. Even if these contractors could somehow be considered employees, you must have five employees before you are required to furnish worker�s compensation in Alabama.

Sales training is fine as long as you do not control the details of the way the contractors do their work. Turn them loose and let them generate the sales themselves and do not try to manage their activities. Imagine that you signed a contract to purchase a Ford pickup truck that was to be built and delivered within a certain time-frame. You would not dream of calling up the Ford factory and telling the employees building your truck when they could leave for lunch or asking whether they are wearing their safety goggles! Your contract can provide that if the contractors do not generate a certain level of sales within a certain time-frame their contract will be terminated. Be careful about requiring and monitoring how closely they follow the sales training, because if you control the details of the way they do their work you will be considered their employer by customers and by the IRS.

This discussion is general in nature and is not intended to give legal advice based upon a particular circumstance. Please contact an attorney and discuss your situation in detail. Also, be aware that each state has different laws and a general discussion of the law in one state will probably not be sufficient to cover all contingencies. Therefore, you will need to consult an attorney in each state in which you plan to do business.