As the global market grows seemingly smaller, more and more companies are expanding their reach around the world. Some companies send U.S. employees overseas, while others hire locally, or even utilize local independent contractors. As in the United States, companies must be mindful of the risks involved when hiring independent contractors in their international operations.
While different countries have different levels of scrutiny when it comes to determining who is an independent contractor and who is an employee, many of the principles remain the same. The main questions deal with the company’s control over the person’s work. Thus, if you are considering hiring independent contractors overseas, or already do, these are some questions to consider:
Misclassifying a worker as an independent contractor can have serious and costly consequences. It will be important to assess the local laws of the country in order to determine the necessity for permits, contract requirements, language requirements, how to best structure payments, what type of entities to best enter into a contract with (a company versus an individual), indemnity provisions, tax implications, and other implications.
Below are a few examples of independent contractor considerations in other countries:
It is of course always important to be mindful of U.S. laws when employing independent contractors overseas. A company’s tax responsibilities in the United States will be determined on whether the international independent contractor is properly classified. The company will also need to be familiar with its state’s requirements regarding the classification and/or misclassification of independent contractors. For example, in California, all “California businesses” must report their use of independent contractor if it pays the contractor $600 USD or more for services performed “in or outside California.” This includes independent contractors outside of the U.S. if the company is headquartered in California. There are also reporting obligations for companies simply operating in California. Accordingly, the proper classification of independent contractors versus employees is critical in ensuring both U.S. and international law compliance. Companies should keep these considerations in mind in order to develop an effective international independent contractor relationship.
Original title: Independent Contractors for Global Organizations
Annie Lau, Associate
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Annie Lau is an associate in the Houston office. She advises employers on all aspects of labor and employment law including charges of discrimination, sexual harassment, retaliation, wage and hour, breach of contract, and other employment-related claims.
She counsels employers on preventive strategies, compliance matters, drafts employee handbooks, policies and procedures, and training material.
Annie's experience includes defending management in complex litigation, class actions, and represents employers before federal and state courts, as well as various administrative agencies.
Before completing law school, Annie was a Human Resources Manager at a Fortune 500 company and interned at the Equal Employment Opportunity Commission.
During law school, Annie served as an Articles Editor on the SMU Science and Technology Law Review.
Full Bio (www.laborlawyers.com/alau)
Fisher & Phillips LLP
Our founders I. Walter Fisher & Erle Phillips started a law firm committed to taking a practical, businesslike approach to solving labor and employment problems. Seventy years later, Fisher & Phillips (www.laborlawyers.com) has grown to become a national law firm with 300 attorneys and 31 offices, and we still share that commitment of our founders.
We are national and local, with attorneys admitted in just about every U.S. jurisdiction. We represent a wide range of public and private employers. Our clients include employers in the agriculture, automotive manufacturing, automobile dealership, banking, broadcasting, casino and gaming, construction, health care, hospitality, insurance, legal and professional services, manufacturing, mining, real estate, retail, technology, transportation, and wholesale and distribution industries, as well as state and local government entities, non-profit organizations, schools, colleges and universities.
Material in this work is for general educational purposes only, and should not be construed as legal advice or legal opinion on any specific facts or circumstances, and reflects personal views of the authors and not necessarily those of their firm or any of its clients. For legal advice, please consult your personal lawyer or other appropriate professional. Reproduced with permission from Fisher & Phillips LLP. This work reflects the law at the time of writing in 2014.
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