By Michael Billok
So you’ve invented the next “fidget cube,” found a way to home-deliver hot French fries without a hint of sogginess, or developed the cure for the common cold. The problem is, of course, you are now too successful.
You and your partners don’t have enough hands or time in the day to get done everything that needs to get done, and the few employees you may have are extremely overburdened. You need more workers, yesterday, but of course you have to limit your expense in order to make a profit.
So what are your options?
Option 1: The intern.
I have had this conversation with several entrepreneurial friends of mine. “We have so much work to do,” they have said, “I think I’ll need to bring on an intern.” Now, if this is an intern that will be paid at least the minimum wage (currently $9.70 in our area, or $10.75 for fast-food establishments). My response is to tell them to go for it.
But that is usually not the case—unfortunately, there is a common misconception that “intern” is a word that means “free grunt work”—and they were thinking about bringing on unpaid interns to handle the increased workload. And that is where I steer my friends away from the precipice.
In order for an internship to be unpaid, there are a number of factors that need to be met. But the key point is that for someone to be an unpaid intern, and not an employee, the primary beneficiary of the relationship must be the intern, not the organization.
Thus, the intern must receive educational benefits from the relationship, and generally should not be displacing paid employees. An unpaid intern can do some work that benefits the organization, but again, this work should be work that furthers the intern’s education, and complements—not replaces—the work done by other employees.
Option 2: The independent contractor.
“Fine,” say my friends when I deliver the news that they can’t bring on unpaid interns to handle their increased workload. “I’ll just bring on some 1099 contractors to handle the work surge.” At which point, I am wondering when my friends will need to hire a lawyer or human resources professional into their organization.
There is nothing intrinsically wrong with entering into agreements with independent contractors to perform work, but an issue arises when the independent contractors are performing the same work done by other, paid employees.
Other common pitfalls include not actually having a written agreement with the independent contractor or utilizing a person that claims to be an independent contractor. But, when the curtain is pulled back, the person has no independent business, no business cards, no other clients, and derives his or her income only from your organization.
Both the U.S. and New York state departments of labor would consider that person to be an employee. If you’ve been treating an employee as an independent contractor, there will be a number of agencies waiting in line to get the required back payments of payroll taxes.
Option 3: The employee.
If you are looking to have a large amount of work performed to further the business of your organization, and want control over the work performed, chances are your only option is the one behind door number three: hiring more employees. And, as you have probably guessed, this is nowhere as easy as it sounds. The hiring process is full of landmines for unwary employers. For example:
It is almost common knowledge that employers cannot discriminate based on age, race, gender, and a number of other protected classes—but it is the number of other, lesser-known protected classes that trip up employers. An employer cannot refuse to hire someone simply because they have a criminal conviction. Likewise, while an interviewer may think it polite to ask about an applicant’s spouse or children, he is opening up the company to a family-status discrimination claim.
Entrepreneurs need to ensure they are up on the latest changes.
For most entrepreneurs, Googling a name and looking at a LinkedIn profile for someone they are considering working with, are practically second nature. But, if the applicant is notified that you’ve looked at his or her LinkedIn profile (or other sites), they may become aware that you know their age, their race, or possibly other information that has no relevance to the hiring process. And if they are not hired, they may claim such information was the reason.
If you perform background checks, have you complied with the disclosure requirements of the Fair Credit Reporting Act? When an employee begins work, do you give the required wage notice with all required information on the form? Those are only two examples of the myriad of disclosures that must be given to employees upon hire, and available to employees in the workplace.
The sheer number of legal requirements when bringing on interns, contractors, or employees can cause entrepreneurs to wonder why they even considered going into business in the first place.
Billok is a member of Bond, Schoeneck & King, where he is resident in the firm’s Saratoga Springs office.