by Grooming Business in a Box® www.groomingbusinessinabox.com
In most instances when hiring a pet groomer as an independent contractor (IC), the law does not require a written contract. In the absence of a contract you may meet with a worker and agree on terms of employment as an IC, and have an oral contract or agreement that is legally binding. Of course misclassifying a worker can result in serious financial penalties from your state or Internal Revenue Service (IRS).
Put it in Writing!
Oral agreements are open invitations to expensive misunderstandings. Without a written (even signed) agreement detailing what the IC agreed to disputes rest on fertile ground. Misunderstandings may be innocent arising from either party remembering things differently. Then again, one party may take a hostile approach with intent. Where does that leave the parties involved? It will be the word of one against the other. Can you really predict whom a judge or jury will believe? Wouldn’t you rather rely on a written document detailing what was agreed to?
Sail in safer waters with a written independent contractor agreement. Pet care is an enjoyable occupation but caring for living creatures involves plenty of stress factors. Why add more stress from needless misunderstandings?
Contracts Are Not Magic Bullets
A written IC contract should clearly establish a worker’s independent contractor status by showing the authorities (IRS and state) that both you and the worker intended to create a solid independent contractor relationship, not an employer/employee relationship.
Your IC agreement could be considered worthless if it describes your treating the IC as an employee. Under scrutiny by the IRS we predict IC pet groomers will be related to a similar occupation for which there has been plenty of previous IRS review, hairstylists for people.
IRS Publication 4902 describes their typical “take” and that is, unless a hairstylist is renting a table the hairstylist is an employee. Therefore, if renting a table is not the core arrangement for your IC groomer, your written agreement must strongly state why your hired pet groomer is an IC in order to avoid the repercussions of classification problems. A written independent contractor agreement should contain at least the following terms:
- Description of the services the IC will perform including grooming and customer service if applicable
- Description of how much and when you will pay the IC
- Description of who is responsible for expenses (ICs usually pay their own expenses)
- Description of who provides materials and equipment (ICs typically provide some or many)
- Statement that you and the worker agree to an independent contractor relationship
- Statement that the IC has all of the permits and licenses that the state requires to do the work
- Statement that the IC will pay state and federal income taxes
- Statement by the IC acknowledging no entitlement to any benefits you provide employees
- Statement by the IC confirming a requirement to carry and provide proof of liability insurance
- Description of the term of the agreement (days, months, years)
- Description of the circumstances under which you or the IC can terminate the agreement
- Description of how you and the IC will resolve any disputes
- Description of how you determine who “owns” customers referred by the business, or developed by the IC and what happens with records upon termination of the agreement
- Description of who is responsible for managing the IC, such as the owner, manager, or supervisor
Excerpts from IRS Publication 4902
Who is an employee?
Simply stated, an employee is an individual who works at the control and direction of another…you simply have to have the right to control. The following questions are helpful in determining if someone is your employee or I.C:
- As the owner, do you establish the hours the shop is open?
- Do the workers purchase their own supplies with their own money?
- Who determines the prices charged?
- Do the workers set their own appointments?
- Who is responsible for expenses, such as insurance, advertising, etc.?
These questions are not inclusive. If you give extensive instructions as to how, when, or where to do the work and where to purchase the supplies, then more likely you are the employer and the worker is an employee.
As a booth renter, or I.C. you are responsible for your own record keeping and timely filing of returns and payments of taxes related to your business. Indications that you are an I.C. include, but are not limited to:
- Having a key to the establishment
- Setting your own hours
- Purchasing your own products
- Having your own phone number and business name.
- Determining the prices to be charged.
If these factors are not present, and others, then you are likely an employee.
IRS Form SS-8
Complete this form and the IRS will assist you to determine the worker status, employee or I.C. for you. See also I.R.S. Publication 1779, Independent Contractor or Employee?
We suggest consulting with an employment contract attorney, or their contract software. ♦