When operating a farmed animal sanctuary, there will likely be many occasions where hiring outside workers will be necessary in order to get things done, such as providing transportation for a resident, hiring a qualified compassionate shearer or farrier, bringing in hay orders, hiring contractors for new construction, and to fill a myriad of other roles as the need arises. It’s easy to presume that these people are independent contractors, not employees of your sanctuary.
In the United States, this distinction can provide many financial benefits for your organization since you are not required to cover minimum wage, payroll, or employee taxes for independent contractors (the latter two can be quite costly, estimated at up to 30% of an employee’s cost to the organization), and complicated to keep track of. However, if someone is regularly showing up at your sanctuary to do work for you, it’s very important that you review what you’re asking of them and ensuring that you haven’t been incidentally treating them like an employee. In recent years, the Internal Revenue Service has been cracking down on registered nonprofits who have misclassified employees as contractors.
You may think that by virtue of not providing someone a titled job offer, or by the contract you have in place with them, or by how you’ve been paying them, that they are definitely not your sanctuary’s employee. Unfortunately, federal labor laws do not care how you’re referring to them, how you’ve decided to pay them, or what your contract states. It is not uncommon for a contractor to appeal for an unemployment claim if they feel that they deserve employee status, and audits can come at any time. If the government evaluates your business relationships and determines that a contractor is actually an employee, your organization could be potentially required to pay back wages, taxes, unemployment benefits, and a heap of other penalties!
Determining Employee Status
The standards for what constitutes an independent contractor versus an employee are more subjective than you may imagine. The Internal Revenue Service, the federal Department Of Labor, and state labor boards all have their own rules for making the call, though they all tend to deliberate based on three primary categories: Behavioral Control, Financial Control, and The Relationship Of The Parties.
If you have been controlling or are able to control how someone does their job, including:
- Providing detailed instructions
- Telling them what tools to use
- Controlling who exactly can be hired to assist them in their task
- Telling them where to purchase supplies
- Providing them extensive training in how to get the job done
- Telling someone precisely what hours they need to be working or giving them exacting regular deadlines
These are signs that the worker is more likely to be considered an employee in the eyes of the law.
If you hire someone to get the job done but don’t tell them how to do it, and they can bring on whoever they choose to get the job done, and they have their own tools and background to fall upon, they are more likely to be considered an independent contractor.
If you have been or are able to significantly control the financial elements of a person and their work, including:
- Providing this person with the majority of their weekly work or pay
- Providing them with the tools necessary to do their job
- Offering to pay some of their taxes
- Reimbursing their business expenses frequently
- Being responsible for their financial well-being
These are signs that they are more likely to be considered an employee.
If they have many other clients, a non-exclusive contract with you, have their own business standing with a business bank account, federal tax ID number, and insurance in their own name, and could either profit or take a loss based on their work, they are more likely to be considered an independent contractor.
Relationship Of The Parties
Perhaps the most subjective of the three categories, this covers how your organization and the worker perceives their relationship to each other. For instance:
- If you are providing employment benefits like insurance, pension, or paid leave
- If you have given the contractor business cards or an email address that align them with your sanctuary
- If you treat them in very similar ways to your employees
- If you provide them with their own exclusive office space at the sanctuary
- If you expect them to provide ongoing services that are instrumental to your sanctuary’s ongoing operation
These are signs that they are more likely to be considered an employee.
If they are very clearly a separate entity from your sanctuary, never refer to you as an employer, have separate branding or business cards designating their duties, and have a signed contract or statement of work that clearly states a non-employee relationship, they are more likely to be considered an independent contractor.
There are many roles that need to be filled at a farmed animal sanctuary as it grows. How you expect someone to perform their duties and manage their schedule can be highly variable and could put many positions into either category of worker.
If you’ve been hiring somebody on occasion to come by and provide hoof trimmings for your equine residents every few months, they provide their own equipment, and they get it done in a generous window of time provided, it’s very likely that this person is an independent contractor. They do not rely solely upon your sanctuary for employment, and beyond the task they’ve been hired for, they do not have much of a relationship with your organization, so it’s unlikely that they’d be considered an employee.
Veterinarians tend to be independent contractors, as they tend to have many clients outside of your sanctuary, have extensive training that you do not provide for them, and typically work as part of a clinic. Although they are very important to your residents’ well-being, they are not likely to be employees of your sanctuary. However, if you hire a veterinarian to be on call for your residents, expect them to exclusively work at your organization, or expect them to provide special services that are instrumental in how your sanctuary operates, they might be arguably an employee of your sanctuary.
A Social Media Coordinator
If you’ve hired someone to manage your social media, depending on how you’ve set expectations for them, they could be either an independent contractor or an employee. If you provide strict hours, content expectations, and equipment for them, they might arguably be considered an employee of your sanctuary. If you give them broad latitude to use their own creative discretion, equipment, and hours, they are more likely to be considered an independent contractor.
A Resident Caregiver
If you’ve hired someone to exclusively provide care for your residents, it’s likely that you have set exact expectations for how they do their job, what tools they use, when they must report to you, and you may possibly even require that they live on site. Due to their highly important role and time spent at your sanctuary, it’s very likely that this person should be considered an employee of your sanctuary.
If You’ve Definitely Hired A Contractor
If you’ve gone through all this and determined that yes, a contractor is indeed a contractor, your responsibilities are relatively few! All you must do is issue the contractor a W-9 tax form and issue them a 1099 tax form at the end of the year if they aren’t a registered as a corporation type which is exempt from 1099 filing. It’s that simple!
If You Need To Reclassify
If you’ve read through this and concluded that you’ve been treating a de facto employee as an independent contractor, you should convert them into a bonafide employee when possible. This will require offering them a formal offer of employment, making them fill out an I-9 employment eligibility form, a W-4 tax form, determining their exemption status, and paying the required employment taxes for them. It may be more financially challenging in the short term to properly classify a contractor, but it will ultimately protect both your organization and your employee in many valuable ways!