Idaho Business Law Do I have Employees or Not

By Lane V. Erickson, Idaho Business Attorney

We don’t expect our business clients to be experts at business law. We understand that the reason our clients hire us is because we are the experts and we can provide our clients with the knowledge they need to help their business succeed. When it comes to operating a business we often find that our clients are confused about whether or not they have employees working for them. We find that most of the confusion comes down to whether the person working for them is an independent contractor or an actual employee. This is an important thing to determine because if you do have employees there are a number of additional steps you must be doing for your business to be operating correctly. These could include withholding state and federal income taxes, providing workers compensation insurance, providing unemployment benefits insurance and so forth. The good news is, we can help.

For over 70 years the premier team of Idaho business lawyers at the Racine Law Office have been helping clients in the creation of their business and in the continued operation of that business so that everything is moving forward in compliance with all applicable laws. In other words, we try to help our clients and avoid any legal landmines that could be waiting for them out there that they are unaware of. Our team of business lawyers consists of partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Our attorneys have decades of experience, knowledge, and skill in helping business clients deal with all of their business needs.

It may seem unlikely that a person who operates a business doesn’t know whether they have employees or not. However, this question is more common than you would think. This question can come up when a business owner believes they are dealing with an independent contractor but then later find out that this person is actually an employee under existing Idaho law. So how can you tell the difference? Below are four specific things that Idaho law considers in determining whether the person working for you is an employee or not.

The first factor that is considered by applicable law is whether you have control of the time, manner, and method of the work that is being done by the person working for you. To analyze this factor Idaho Courts will look at the course of dealing between the supposed employer and the person working for them. In other words courts will look at what has actually happened between the business and the person doing the work.

As an example, suppose your business is selling newly built homes. If your business hired a person to build the home for your business to sell, you typically would not be providing details about the time, manner, and method of work that is to be done for the home to be completed. Rather, you would likely enter into a contract that would explain the type of home you want to have built, how much you are willing to pay for that home to be built, and when the home should be completed. Other than that, you are leaving it up to the person doing the building to determine the time, manner, and method of work that will be completed in order to finish building the home. In this instance, the person building the home is an independent contractor and not an employee.

Alternatively, if part of your business is involved in actually building the home, your business may be hiring individuals to help. If the business requires the people working for it to clock in and clock out, and it gives them a specific schedule about what needs to be built and when, and it is overseeing the work on a regular basis, it’s likely that the people your business hired are employees of your business rather than independent contractors.

The second factor that courts look at to determine whether the person working for you is an employee or an independent contractor is how your business pays them. If your business pays the person hired every two weeks, and income taxes and other withholdings are deducted, then your business is treating this person as an employee rather than as an independent contractor. However, if your business is making payments based on terms and conditions that are specifically outlined in a written contract, such as quarterly payments or half at the beginning and half when the home is completed, then the person you hired looks more like an independent contractor and not an employee.

The next factor has to do with who furnishes the items of machinery and equipment that are used for the job. In keeping with our example of building a home, if your business supplies all the machinery and equipment used to build the home, then the people doing the building look more like employees and less like independent contractors. However, if you were to hire someone to put in the plumbing of the home, and this individual is required to bring in their own machinery and equipment to complete the job, then they look more like an independent contractor.

The final factor that is analyzed by courts is whether the person working for your business has a right to terminate the relationship whenever they want and without any type of liability. Employees in Idaho are presumed to be at-will. Alternatively, independent contractors only have contracts. The contract would spell out the rights of the parties to end the contract. In other words, an employee can quit at any time and for any reason. However, someone who is operating under the terms and conditions of a written contract usually cannot quit the contract without breaching the contract. As a result, if a person cannot terminate the relationship at will, then they look more like an independent contractor and less like an employee.

If you have questions about whether the people working for you are employees or not, we are confident that we can help. We have assisted numerous business clients in dealing with both employees and independent contractors and determining which the business is associated with. We are confident that we can help you too!

Our team of Idaho lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.